market impact

OPEC+ meeting brings deeper Saudi cuts It hasn't been an easy OPEC+ meeting for members. The group failed to come to an agreement on deeper cuts, but production targets have been set for 2024 and voluntary cuts were extended. The Saudis have also decided to make further voluntary cuts.     What was agreed? The OPEC+ meeting was eventful. Heading into the meeting the expectation was that the group would announce further supply cuts – which was easier said than done. As Saudi Arabia struggled to convince other members to make deeper cuts, the group instead agreed to put in place a production target of 40.46MMbbls/d for 2024. This is lower than the 41.86MMbbls/d production target set back in October last year, which runs from November 2022 to December 2023. In addition to setting production targets for next year, members who announced voluntary supply cuts amounting to 1.66MMbbls/d back in April made the decision to extend them through to the end of 2024. The action taken by OPEC+ does little to help solve immediate concerns over demand. As a result, Saudi Arabia announced that it would make a further voluntary supply cut of 1MMbbls/d for July, which would leave Saudi output at around 9MMbbls/d. There's also potential for this additional voluntary cut to be extended if needed.     What does it mean for the market? In the lead-up to the meeting, Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman built expectations for further supply cuts – and it was therefore crucial that the group came away from the meeting with a cut of some sort. The extension of supply cuts through until the end of 2024 should not change the outlook drastically. However, the supportive factor in the immediate term is the further voluntary cut from Saudi Arabia. This should provide some limited immediate upside for the market, and it should also reinforce Saudi Arabia’s commitment to try to put a floor under the market. We're leaving our price forecasts unchanged for now and still expect ICE Brent to average US$96 over the second half of this year. The macro outlook continues to be a more important driver for prices than fundamentals at the moment.     Why are the Saudi's cutting? Our balance sheet continues to show a tight oil market for the remainder of 2023 with a deficit of almost 2MMbbls/d through the latter part of the year. From a fundamental point of view, the Saudis do not need to cut supply further. But it's clear that they're trying to push prices higher, and we expect that they'd like to see Brent trading above US$80/bbl. Given the increased spending we've seen from the Saudi government as it looks to diversify its economy, the fiscal breakeven oil price has edged higher in recent years. Saudi Arabia needs a little over US$80/bbl to balance its budget – and we believe this is the level they will target.  

The global tourism industry has faced unprecedented challenges during the COVID-19 pandemic and companies in the sector have suffered significant losses. However, as the world recovers and travel restrictions finally come to an end, the industry is now poised for a resurgence. A successful summer season on the horizon brings new hope to the afflicted industry. As travel resumes, equity prices in the tourism and travel sector are expected to show positive momentum. The market reaction to the reopening of borders and the resumption of international travel is likely to be reflected in the share prices of companies in the industry.   While the industry is on track to recover, it is important to note that reaching pre-pandemic levels may not happen immediately for all companies. The losses incurred during the pandemic have had a significant impact on the financial position of many tourism enterprises. Some companies are still striving to recover losses and restore financial stability, but here’s a look at the prospects for individual sectors of the tourism industry:   Airlines: Companies such as Lufthansa and other major airlines have been hit hard by the pandemic. As demand for travel increases, airline shares are expected to rise. However, the recovery of airline inventories will depend on various factors, including vaccination rates, travel regulations and consumer confidence in air travel.   Online booking platforms: Platforms such as Airbnb and Booking.com are likely are likely to benefit from the resurgence of the travel industry. As travelers start planning their trips, the demand for online booking services is expected to increase. Hence, these platforms may see their stock prices rise as they gain momentum.    Hotels: The hospitality sector has faced major challenges during the pandemic. As travel resumes, hotels are expected to reopen. However, the pace of recovery may vary depending on factors such as location, travel restrictions and the ability to meet changing consumer preferences, such as an increased focus on hygiene.    In terms of the impact of inflation on the travel industry, rising prices have the potential to affect both the market and share prices. Higher prices may lead to higher spending on travel-related services, which may affect consumer behavior and demand. Companies operating in the travel industry will need to carefully manage their pricing strategy to balance profitability and affordability for customers.   When it comes to investment opportunities, it is extremely important to do a thorough research and consider various factors before making an investment decision. While the share prices of some travel companies may have risen significantly, there may still be room for growth. Further development of stock prices in the near future will depend on factors such as the pace of the global recovery, travel trends, company performance and market dynamics against the backdrop of Fed policy.

In the dynamic world of financial markets, the interplay between macroeconomic data and central bank decisions can significantly impact various asset classes. We had the opportunity to speak with an FXPrimus expert to gain valuable insights into the current market situation and the influence of these factors on currency quotes, particularly the Turkish lira (TRY) and the British pound (GBP), as well as the broader effects on the US and European stock markets. FXMAG.COM: How will Thursday's (22.06) Turkish central bank's decision on interest rates affect TRY quotes? FXPrimus expert: The past rate cuts by Turkish President Erdogan led to a dramatic decline in the price of the Turkish lira, inflation hit 85.5% last year and as a result the overall cost of living of the country had dramatically increased . In a big U-turn, the central bank of Turkey is expected to increase interest rates to 20% to target the negative impacts of a rising inflation and attract investors to its currency.   FXMAG.COM: How will Thursday's (22.06) Bank of England interest rate decision affect GBP quotes? FXPrimus expert: The Market is already pricing in an interest rate hike from the Bank of England and given that CPI data on the 21st of June was higher than expected and at 8.7%, the BoE has no other choice but to act. More interest rate hikes will be expected after this one to target inflation but this will have negative effect on other aspects of the economy i.e. Bank crisis   FXMAG.COM: In the mid-term, how will last week's Fed and ECB decisions affect the US and European stock markets? FXPrimus expert: As interest rates increase, stock investors become unwilling to trade stock prices as the value for future earnings becomes less attractive against bonds which have a higher yield today, the FED have paused interest rate hikes but it remains to be seen in the upcoming economic data releases whether they will change course. The ECB has slowed the pace at which the interest rates where increased however they have indicated that more hikes are yet to come.

Russia’s weekend mutiny cast doubts on Putin’s grip on power. No major impact on markets but keep a lookout on Gold, which bounced off the key support zone of US$1,913/1,896 per ounce. Stern FX verbal intervention from Japan’s top currency official. Watch USD/JPY key near-term support at 142.50/25. US banking stocks tumbled ahead of annual key Fed’s banks’ stress test results Before the start of this new trading week, market participants were being jolted from their weekend leisure activities to shift their focus to the internal coup in Russia that may put President Putin’s power grip in jeopardy. Yevgeny Prigozhin, leader of the Wagner Group, a Russian key independent military contractor that has played a significant role in the ongoing Russia-Ukraine territorial conflict voiced displeasure with Russia’s top leadership in handling the Russia-Ukraine situation, took over two Russian cities and order his mercenaries to march towards Moscow on Saturday.   Russia’s weekend mutiny started fast and ended fast Upon reaching 200 km within Moscow, Prigozhin’s troops halted and made a U-turn back to their field camps. In addition, Putin dropped earlier treason charges on the Wagner Group and allowed Prigozhin to head to Belarus, Russia’s western neighbour for exile. In less than 48 hours, the mutiny in Russia is over without any clear details on what has transpired that led to Prigozhin’s retreat as Putin has not made any official speech or press conference yet. US Secretary of State Blinken commented that the weekend’s uprising by Prigozhin, a former Putin royalist has posed a direct challenge to Putin’s grip on power in Russia and provided a battlefield advantage to Ukraine. On the other hand, several geopolitical commenters have analyzed the situation to be in favour of Putin in which Wagner Group’s mutiny may be used as a cover for Putin to remove the top brass in Russia’s Ministry of Defence; Shoigu, the defence minister and Gerasimov, chief of the general staff as they posed a threat to Putin’s rule. Thus, the change of Russia’s military leadership may be part of the “deal” package that the Kremlin and Prigozhin agreed on.   No significant movements in markets but watch gold In today’s Asian session, both the S&P 500 and Nasdaq 100 e-mini futures were up slightly by around +0.20% after posting their worst weekly losses last week in three months. Major Asian stock indices were mixed at this time of the writing, Nikkei 225 (-0.24%), Kospi 200 (+0.60%), Hang Seng Index (-0.14%), Hang Seng China Enterprises Index (+0.13%), and CSI 300 (-0.70%). The US dollar is almost unchanged on average with the US Dollar Index inching down by a meagre -0.1%. Gold, a traditional safe haven asset that tends to benefit in light of major geopolitical risks upheaval in the past has exhibited some interesting price actions movement from a technical analysis perspective.     Gold’s decline has managed to bounce off from a key support zone of US$1,913/1,896 per ounce   Fig 1: Gold (XAU/USD) medium-term trend as of 26 Jun 2023 (Source: TradingView, click to enlarge chart) Last week’s decline seen in Gold (XAU/USD) has led its price actions to hit a crucial medium-term pivotal support zone of US$1,913/US$ 1,896 per ounce (printed an intraday low of US$1,910 last Friday, 23 June) which is being defined by a confluence of elements; the lower boundary of the medium-term ascending channel in place since 3 November 2022 low, 38.2% Fibonacci retracement of the prior medium-term up move from 3 November 2022 low to 4 May 2023 high, and approximately the downside price objective of recent “Descending Triangle” bearish breakdown. Momentum has also improved as the daily RSI oscillator has managed to stage a bounce off the key corresponding support at the 36 level. Watch the US$1,896 key medium-term pivotal support and a clearance above US1,940 intermediate resistance sees the next resistance coming in at US$1,990 (also the 50-day moving average).   FX verbal intervention from Japan After a strong upside movement seen in the USD/JPY that recorded a weekly gain of +1.3% last week which outperformed other major USD crosses, the US Dollar Index only rose by +0.56% over the same period, Japan’s Vice Finance Minister Masato Kanda, a top currency official that has oversight over foreign exchange market matters has sounded the alarm in today’s morning Asian session. Based on a Reuters report, Kanda said that the authorities will respond to any excessive moves in the foreign exchange market, warned that the recent yen moves were rapid and will not rule out any chance of an FX intervention. He said, “Regardless of the direction, it’s generally not good for the economy if exchange rates move excessively in a way that deviates from economic fundamentals.” Today’s verbal intervention was the most pronounced made by any of Japan’s finance ministry officials in the past month when USD/JPY sailed past the prior 141.00 and 142.00 psychological levels “effortlessly”. USD/JPY has shed -0.2% intraday and broke key near-term support at 143.45 at this time of the writing, the next support to watch will be at 142.50/25 (former swing highs of 11/21/22 November 2022).     Fed’s annual banks stress test results out on Wednesday The US Federal Reserve will unveil the results of its annual stress tests on the 23 biggest US banks on Wednesday, 28 June. The key focus will be on a section of the test, labelled as “exploratory market shock”, this is the first time such a test is being conducted on the trading books of the largest US banks. The urgency and significance of the “exploratory market shock” stress test come after the US regional banks’ turmoil. Hence, monitoring of fixed income duration risk is paramount now given that the latest Fed’s hawkish monetary policy guidance is to keep interest rates higher for a longer period. Last week, the US banking stocks shed by -6.80% as indicated by the SPDR S&P Bank exchange-traded fund, its worse weekly performance in seven weeks and underperformed the S&P 500.     Fig 2: S&P 500 major trend with VIX as of 26 Jun 2023 (Source: TradingView, click to enlarge chart) If the “exploratory market shock” stress test results come in unfavourable, it may put more downside pressure on US banking stocks which in turn may trigger a volatility upside breakout in the VIX, a measurement of implied volatility on the S&P 500 as it has compressed to a low level of 13.44 not seen since early February 2020 before the pandemic. A sudden spike in VIX may dampen the current bullish mood for US stock indices.  

Here, get more stimulus!  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The Federal Reserve (Fed) Chair Jerome Powell's Jackson Hole speech was boring, wasn't it? Powell repeated that inflation risks remain to the upside despite recent easing and pointed at resilient US growth and tight US jobs market, and reiterated the Fed's will to keep the interest rates at restrictive levels for longer. The US 2-year pushed above 5%, as Powell's comments kept the idea of another 25bp hike on the table before the year end, but the rate hike will probably be skipped in September meeting and could be announced in the November meeting instead, according to activity on Fed funds futures. The US 10-year yield is steady between the 4.20/4.30%. The S&P500 gained a meagre 0.8% last week, yet managed to close the week above the 4400 mark and above its ascending trend base building since last October, while Nasdaq 100 gained 2.3% over the week, although Nvidia's stunning results failed to keep the share price above the $500 mark, even though that level was hit after the results were announced last week. And the disappointing jump in Nvidia despite beating its $11bn sales forecast and despite boosting its sales forecast for this quarter to $16bn, was a sign that the AI rally is now close to exhaustion.   What's up this week?  This week will be busy with some important economic data from the US. We will watch JOLTS job openings tomorrow, Australian and German CPIs and US ADP and GDP reports on Wednesday, to see if the US economy continues to be strong, and the jobs market continues to be tight. On Thursday, Chinese PMI numbers, the Eurozone's CPI estimate and the US core PCE will hit the wire, and on Friday, we will watch the US jobs report and ISM numbers. Note that the US dollar index pushed to the highest levels since May after Powell's Jackson Hole speech. The EURUSD is now trading a touch below its 200-DMA, even though the European Central Bank (ECB) chief Lagarde repeated that the ECB will push the rates as high as needed. Yet, the worsening business climate, and expectations in Germany somehow prevent the euro bulls from getting back to the market lightheartedly, while the yen shorts are comforted by the Bank of Japan (BoJ) governor's relaxed view on price growth – which remains slower than the BoJ's goal, but the possibility of a direct FX intervention to limit the USDJPY's upside potential keeps the yen shorts reasonably on the sidelines, despite the temptation to sell the heck out of the yen with the BoJ's incredible policy divergence versus the rest of the developed nations.   Here, get more stimulus!  The week started upbeat in China and in Hong Kong, after the government announced measures to boost appetite for Chinese equities. Beijing halved the stamp duty on stock trades, while Hong Kong said it plans a task force to boost liquidity. The CSI 300 rallied more than 2% and HSI jumped more than 1.5%. But gains remain vulnerable as data released yesterday showed that Chinese company profits fell 6.7% last month from a year earlier. That's lower than 8.3% printed in June, but note that for the first seven months of 2023, profits declined 15.5%, and that is highly disquieting given the slowing economic growth and rising deflation risks, along with the default risks for some of the country's biggest companies. Evergrande, for example, posted a $4.5 billion loss in the H1.  Therefore, energy traders remain little impressed with China stimulus measures. The barrel of US crude trades around the $80pb level, yet the failure to break below a major Fibonacci support last week – major 38.2% Fibonacci retracement on the latest rally, keeps oil bulls timidly in charge of the market despite the weak China sentiment. Oil trading volumes show an unusual fall since July when compared to volumes traded in the past two years. That's partly due to weakening demand fears and falling gasoline inventories, but also due to tightening oil markets as a result of lower OPEC supply. We know that the demand will advance toward fresh records despite weak Chinese demand. We also know that OPEC will keep supply limited to push prices higher. Consequently, we are in a structurally positive price setting, although any excessive rally in oil prices would further fuel inflation expectations, rate hike expectations and keep the topside limited in the medium run.    

The pound traded higher on Monday. And even though the growth was hardly impressive, it was still tangible. This is in the absence of influential economic releases and generally impersonal results from the Jackson Hole symposium. In general, all this growth can be seen as a blatant rebound after the pair sharply fell at the beginning of the previous week. Speaking of today, the only thing worth paying attention to is the number of job openings in the United States, which is expected to fall by 12,000.   There are two possible explanations for this figure. Firstly, there are no more available workers in the job market, and employers can't find new employees required for business expansion and development. The second explanation is that businesses are swiftly creating enough new jobs to meet the labor market's needs. As we can see, both explanations are diametrically opposed to each other. Therefore, we shouldn't expect this report to have an impact on the market. In general, this report typically goes unnoticed. So, the market situation will generally remain unchanged.     During a technical pullback, the GBP/USD pair returned to the lower band of the 1.2650/1.2800 sideways channel. Afterwards, it traded near the base of the bearish cycle. On the four-hour chart, the RSI is moving in the lower area of the indicator, thus reflecting bearish sentiment among traders. On the same time frame, the Alligator's MAs are headed downwards, which is consistent with the current movement. The MAs are not intertwined. Outlook Falling below the 1.2650 level may favorably impact the volume of short positions. However, a downtrend will only start once the price stays below the 1.2550 mark. The bullish scenario will come into play if the price holds firm above the 1.2650 level. In this case, the pair will move sideways again. The complex indicator analysis points to a pullback in the short-term and intraday periods.

EUR: Spain and Germany release inflation figures The first round of inflation figures out of the eurozone will see the release of Spanish and German CPI this morning. In Spain, headline inflation should rebound marginally from low levels (2.3%), but all eyes will be on core inflation, which remains elevated. The consensus is for a slowdown from 6.2% to 6.0%. German’s figures will likely have the largest market impact: consensus is also centred for a deceleration from 6.2% to 6.0%. It is a crucial juncture for the euro. Markets approach the key risk event pricing in just slightly below 50% implied probability of another rate hike in September and 15bp in total. The EUR curve appears to largely agree with our view that if the ECB skips the September meeting, it will find it increasingly hard to raise rates again at all given the deterioration in the eurozone economic outlook. We expect markets to be very sensitive to even the smallest deviations from consensus, especially in Germany’s figures and the eurozone-wide numbers released tomorrow. We admit it’s a very close call, but our economists expect this week’s inflation reports to signal that core inflation remains too high for comfort and lead the ECB to one last rate hike in September. In our base case scenario, we see EUR/USD rally into the 1.0900-1.0950 area into the US payrolls on Friday.

EUR: Focus on the eurozone August CPI Flash August CPI data for the eurozone is released at 11:00 am CET today and is expected to show a gradual decline in both headline and core YoY readings to 5.1% and 5.3%, from 5.3% and 5.5% respectively. However, the decline is proving gradual and we are actually starting to see expectations of one more rate hike from the European Central Bank firm up a little. These peak at around 21bp of tightening priced in for January next year. Our macro team feels that the chances of a September rate hike are under-priced (now a 43% probability) meaning that EUR/USD could get a little support from the ECB story over the coming weeks. Today, also look out for a 09:00 am CET speech from ECB hawk Isabel Schnabel, speaking at a conference on 'Inflation: Drivers and Dynamics'. We will also see the ECB minutes for the July policy meeting released at 1:30 pm CET. EUR/USD has turned a little more bid over the last few days as US jobs data has softened the front end of the US yield curve and sticky inflation has kept EUR short-dated interest rates supported. Our short-term Financial Fair Value model sees EUR/USD fairly priced near 1.0900 - suggesting a probably range-bound session into tomorrow's US NFP release. Elsewhere, we note that Switzerland is planning some new large-scale Anti Money Laundering measures for 2024. This may be a slow-burn story, but one which may ultimately weigh on the Swiss franc in 2024.

Beyond Apple...  When a tech giant like Apple, with a market cap of nearly $2.8 trillion sneezes, the whole market catches a cold. The S&P500 fell for the third day to 4451 yesterday, while Nasdaq 100 slipped below its 50-DMA. Apple selloff also affected suppliers and other mega cap stocks. Qualcomm for example fell more than 7%, while Foxconn remained little impacted by the news.   Zooming out, the US small caps were also under pressure yesterday, the Russell 2000 fell below its 100-DMA and came close to the 200-DMA, as the latest data showed that the US jobless claims fell to the lowest levels since February, defying the latest softness in jobs data. Other data also showed that the labor unit cost didn't fall as much as expected in Q2. But happily, the US treasuries were not much affected by the latest jobless claims data. The US 2-year yield fell below 5%, although the US dollar index extended its advance toward fresh highs since last March.   The selloff in the Japanese yen slowed against the US dollar. The USDJPY pushed below the 147 mark this morning despite a slower than expected GDP print in Japan in the Q2. Capital expenditure fell 1%, private consumption declined 0.6%, making the case for a softer Bank of Japan (BoJ) more plausible. But the Japanese officials dared traders to continue buying the USDJPY to 150, saying that they would intervene.   The EURUSD sees more hesitation into the 1.07 mark, and into next week's European Central Bank (ECB) meeting. The base case is a no rate hike, and yesterday's morose growth figures came to cement the no change expectation. But the economic weakness may have little impact on inflation. Any bad surprise in German inflation due this morning could convince some ECB doves that the European policymakers may announce another 25bp hike when they meet next week.  

ECB cheat sheet: Is a hike hawkish enough? Markets are torn. Will the ECB hike this week or not? We think it will, but we look at how different scenarios can impact rates and FX. Even in our base case, we suspect that convincing markets that this is not the peak will be very hard, and dovish dissenters may get in the way. The upside for EUR rates and the euro may not be that big and above all, quite short-lived.       As discussed in our economics team’s European Central Bank meeting preview, we narrowly favour a rate hike this week. The consensus of economists is slightly tilted towards a hold, and markets also see a greater chance of no change (60%). In the chart above, we analyse four different scenarios, including our base case, and the projected impact on EUR/USD and 10-year bunds. We expect to see a more fragmented than usual Governing Council at this meeting. Whichever direction the ECB decides to take, the debate will likely be fiercer than in previous meetings, as lingering core inflationary pressure is being counterbalanced by evidence of rapidly worsening economic conditions in the euro area. Accordingly, expect the overall messaging by the ECB to be influenced not only by the written communication but also by: a) how much President Christine Lagarde manages to conceal growing division and disharmony within the Governing Council during the press conference and; b) any post-meeting “leaks” to the media, which could be used by dissenters to influence the market impact.        

Rates Spark: Slowly gearing up to the key events Markets are gearing up to this week’s main events. It is not just about this Thursday’s ECB meeting, but also about crucial data in the US and UK ahead of next week’s respective central bank meetings. Front-loaded issuance is helping to keep rates elevated, but we also expect hawkish risks to make a bearish case for rates this week.   Front end themes developing in a bear-steepening environment With central banks seen to be approachig their tightening cycle peaks it is only natural that the upcoming meetings are in the spotlight, kicking off with the ECB decison this Thursday.  With regards to central bank communications both the ECB and the Fed are in the pre-meeting black-out periods but we did hear from the BoE’s most hawkish member Catherine Mann yesterday, who noted that it was best to err on the side of further tightening. With regards to the market pricing of the BoE decision outcome, we have seen a notable shift towards the sense that the end of the tightening cycle is nearing. The implied probability for a hike next week had slipped below 80% at the end of last week – late last month the market was still more than fully pricing a 25bp hike.  The main focus in the US this week is still on data however, with the  August CPI release tomorrow. Our economist has flagged the risk of the month-on-month core inflation rate accelerating slightly. While that won’t move the needle for next week’s Fed decision, where a pause is widely anticipated, it would indicate hawkish risks to the broader Fed outlook. The market is attaching a 50% chance to another Fed hike by year-end.      Front loaded corporate issuance activity ahead of the events, especially in the US, is keeping upward pressure on rates. Markets will also have US Treasury supply in mind, where we saw a softer 3Y auction yesterday. The 10Y and 30Y reopenings follow today and tomorrow. It is a similar story in Europe, where we also saw the EU announcing a 7Y deal and – with greater market impact – the UK announcing a syndicated reopening of a 50Y Gilt which weighed on the long end of the curve.     10Y yields are again approaching the upper end of recent ranges

I previously mentioned that all the interesting events will start on Wednesday. Tuesday also had some interesting reports, particularly the UK unemployment or wage data. However, if these reports did influence market sentiment, they did it in a very strange way, and their values are quite difficult to interpret. For example, how can we characterize high wage growth? Is it good for the Brits or not? If wages are rising, it means inflation could start rising again (Bank of England Governor Andrew Bailey also mentioned this). Then the BoE might raise rates several more times, which are not currently taken into account in prices. But does the market believe in this, and is the BoE capable of easily and simply raising rates "several more times"? I doubt it. From this perspective, it seems that rising wages, like rising inflation, will no longer affect the central bank's actions.     The UK will release important GDP and industrial production data on Wednesday. It is estimated that in July, GDP will contract by 0.2-0.3% MoM, and industrial output will fall by 0.6-0.8%. Such reports are unlikely to support demand for the British currency. Unless the actual values turn out to be higher. However, it is very difficult to expect positive economic data from the British economy right now. The BoE's interest rate continues to rise, which means that financial conditions are deteriorating. At the same time, inflation remains high. It's a complex equation that will be very difficult for the BoE to solve. The US inflation report is much more important and it's also quite complex.   If we assume that inflation rose again in August, how might this affect the Fed's decision next week? There are reasons to believe that it won't have much impact. There are also grounds to believe that the rate might increase, although previously, the FOMC made decisions to raise rates once every two meetings. But two consecutive accelerations in inflation could persuade the monetary policy committee of the US central bank otherwise. Based on everything mentioned, there are many questions but no answers yet. I fear that the currency market may become quite active Wednesday and Thursday, but both instruments may frequently change their direction. In my opinion, it's best to use the Fibonacci level at 100.0% for the British pound as a reference point.   A successful breakthrough could pull down both instruments again. Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite feasible. Therefore, I will continue to sell the instrument with targets located near the levels of 1.0636 and 1.0483. A successful attempt to break through the 1.0788 level will indicate the market's readiness to sell further, and then we can expect to reach the targets I've been discussing for several weeks and months.   The wave pattern of the GBP/USD pair suggests a decline within the downtrend. There is a risk of completing the current downward wave if it is d, and not wave 1. In this case, the construction of wave 5 might start from the current marks. But in my opinion, we are currently witnessing the first wave of a new segment. Therefore, the most that we can expect from this is the construction of wave "2" or "b". An unsuccessful attempt to break the 1.2444 level, corresponding to 100.0% on the Fibonacci scale, may indicate the market's readiness to build an upward wave.  

JPY: Markets to keep searching for new intervention level Japanese authorities are already stepping up efforts to contain the unwanted impact on rates and FX of yesterday’s Bank of Japan meeting. The BoJ announced unscheduled bond-buying operations this morning as the 10-year JGB reached a 0.97% high. The top currency official at the finance ministry said authorities are on standby to intervene in the FX market if needed after the JPY slump. The signals included in the latest BoJ announcement will probably be enough to keep markets stay on the bearish side of JGBs (i.e., 1.0% to be hit soon in 10-year JGBs). Today’s unscheduled bond operation appears more as a warning signal against excessively sharp moves in yields, but putting a hard ceiling below 1.0% would not be very consistent with the policy message. On the FX side, there is a good chance that investors will keep adding pressure on the yen despite the FX intervention threat by Japanese officials, effectively pushing them into intervening to test the new intervention level. That may be as high as 152.50 or 153.0, and with the message from the Fed unlikely to give a sustainable respite to treasuries, it seems unlikely that there will be much incentive to take bearish positions on USD/JPY positions.

Analysis of transactions and tips for trading EUR/USD Further decline became limited because the test of 1.0681 coincided with the sharp downward move of the MACD line from zero. This happened even though several Fed representatives hinted at the possible continuation of the rate hike cycle and the lesser chance of a reduction in borrowing costs. Today, CPI data for Germany and retail sales report for the eurozone will come out, but it will not have much impact on the market. Instead, the speech of ECB Executive Board member Philip Lane will generate interest, as well as the speech of Fed Chairman Jerome Powell.     For long positions: Buy when euro hits 1.0700 (green line on the chart) and take profit at the price of 1.0730. Growth will occur after protecting the support at 1.0680. However, when buying, make sure that the MACD line lies above zero or rises from it. Euro can also be bought after two consecutive price tests of 1.0681, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0700 and 1.0730. For short positions: Sell when euro reaches 1.0681 (red line on the chart) and take profit at the price of 1.0656. Pressure will increase after an unsuccessful attempt to hit the daily high, as well as weak data from the eurozone. However, when selling, make sure that the MACD line lies under zero or drops down from it. Euro can also be sold after two consecutive price tests of 1.0700, but the MACD line should be in the overbought area as only by that will the market reverse to 1.0681 and 1.0656.     What's on the chart: Thin green line - entry price at which you can buy EUR/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell EUR/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market   Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

Metals – China's steel output falls Copper, along with other major metals, edged higher yesterday following the release of strong industrial production numbers from China. China's industrial output rose 4.6% YoY in October (vs. market expectations of 4.4%), the strongest growth reported since April. Meanwhile, rising expectations of further stimulus from China provided a further boost to the complex. Recent numbers from China’s National Bureau of Statistics show that monthly crude steel production fell 1.8% YoY to hit year-to-date lows at 79.1mt in October, as domestic mills reduced output amid falling profit margins, rising raw material costs and an uncertain demand outlook. The daily run rate at domestic mills averaged around 2.55mt last month - the lowest since December 2022. However, cumulative output in the first ten months of the year is still up 1.4% YoY to total 874.7mt. Among other metals, primary aluminium production rose 6% YoY and stayed near record highs at 3.62mt in October. This leaves cumulative output at 34.5mt, up 3.7% YoY. Primary aluminium production in China has started to recover in recent months with idled capacity in Yunnan brought back.

FX Daily: No turkey for dollar bears The Thanksgiving holiday means thin volumes and no US data releases today. We expect some stabilisation in EUR/USD after strong jobless claims fuelled the dollar rebound. Still, eurozone PMIs might trigger some fresh position-squaring events. In Sweden, we are slightly in favour of a Riksbank hike today, but it is a very close call given krona strength.   USD: Stronger into the Thanksgiving holiday The dollar rose for a second consecutive session yesterday, this time helped by a surprise drop in initial jobless claims to 209k from 233k: an indication of good labour market resilience ahead of the 8 December payrolls data, which will be key in setting the tone for FX into Christmas. University of Michigan inflation expectations were revised higher, although durable goods orders came in softer than expected in October, which probably limited the scope of the market impact of jobless claims. Today, FX flows will be subdued due to the Thanksgiving holiday. Equity and bond markets are closed, and there are no data releases in the US. Part of the rebound in the dollar observed over the past two sessions (especially on Tuesday) may well be related to some profit-taking on risk-on trades and more defensive positioning ahead of Thanksgiving. We think DXY can find some stabilisation around 104.00 into the weekend amid thinner trading volumes and a lack of market-moving data releases in the US.  

EUR: PMI test for positioning Today’s PMI surveys will be a new opportunity for markets to gauge whether eurozone growth sentiment has indeed bottomed out. Consensus expectations suggest this is the case; while staying in contractionary territory, the general view is that we should see a modest rebound in both the manufacturing and services indices. From an FX perspective, the reaction to the November PMIs will tell us how much position-squaring effects are still playing a role in EUR/USD. Should a surprise in either direction be followed by an exacerbated move in EUR/USD despite thinner trading on Thanksgiving, then we would conclude positioning imbalances persist. We think, however, that some flattening around 1.0900 is more likely. We have seen some recovery in EUR/USD overnight, and it appears that the surprise win of far-right candidate Geert Wilders in the Dutch elections has not had a noticeable market impact so far. EUR/GBP rebounded modestly yesterday after the UK’s Autumn Statement, where Chancellor Jeremy Hunt announced some widely expected cuts to personal and business taxes. The implications for sterling should – in general – be positive as the tax cuts suggest a better growth outlook and potentially stickier inflation. However, it felt like the move in GBP already happened into the announcement, and there was some “buy the rumour, sell the fact” effect causing a softening of the sterling momentum.

Agriculture: Shipping disruptions from Brazil push coffee higher Arabica coffee front month contract jumped around 7% yesterday as shipping disruptions from Brazil risk tightening the market in the short term. Brazil’s ports are facing strikes by customs officers and other inspectors from 22-26 January that are likely to delay shipments originating from Brazil. The tensions around the Red Sea trade route have further supported coffee prices. The shipment disruptions from Brazil could impact other commodities as well including soybeans, corn and sugar.   According to China’s Ministry of Agriculture and Rural Affairs, soybean production in China reached an all-time high of 20.84mt in 2023 primarily due to the country’s support for food security. Meanwhile, the soybean planting area in China reached 157 million mu (about 10.47 million hectares) last year, while that of oilseed crops exceeded 200 million mu. The ministry added that it plans to further increase the planting of genetically modified corn and soybean crops in a push to boost grain output and bolster food security in the country.   The USDA’s weekly export inspection data for the week ending 18 January shows that export inspections for corn stood at 713.3kt over the week, lower than 946.4kt in the previous week and 728.8kt reported a year ago. Similarly, US soybeans export inspections stood at 1,161.1kt, down from 1,278.2kt a week ago and 1,839.2kt seen last year. For wheat, US export inspections came in at 314.5kt, compared to 242.2kt from a week ago and 349.4kt reported a year ago.

CZK: Changing our central bank call to a 50bp rate cut The blackout period for the Czech National Bank (CNB) began yesterday and we will therefore probably not hear anything more. Deputy Governor Jan Frait really moved the market when he said he was open to a larger rate cut, even more than 50bp at the 8 February meeting. We do know that the deputy governor was one of two board members who voted for a rate cut back in November when the CNB left rates unchanged. So the new statements aren't exactly a game changer, but we have confidence that at least two members will push for a 50bp rate cut at next week's meeting. In addition, the board will have a new forecast which we think should show very low inflation of below 3% for the upcoming months. Overall, this leads us to reassess our call from a 25bp to 50bp rate cut next week. The acceleration of the rate cut is bad news for the CZK. However, we believe positioning has been heavily short here for some time and should not be so damaging. Moreover, the market is already pricing in a large portion of the rate cuts. Therefore, we do not expect significant weakness from this, but of course a short trip above 25.0 EUR/CZK is likely next week.

This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 4.0.     Event: Sales and gross profit margin for October revealed. Yesterday, during the WSE trading hours, Action released preliminary sales and gross profit margin on sales for October. The Group’s consolidated revenues reached PLN 228 million (up 5% yoy) and the gross profit margin on sales in October arrived at 7.6% (-0.1 mom/ -0.1 pp yoy). For January-October cumulatively, Action’s revenues stand at PLN 2,017 million (up 5% yoy) with the weighted average gross margin on sales at 7.9% (+0.4 pp yoy). Expected impact: Neutral. We cannot preclude that the reported margin proves to be higher than the preliminary one, as it was in the previous quarters