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

The Reserve Bank of Australia (RBA) will likely revert to heftier rate hikes, while PMI reports from across the region could indicate differing growth outlooks In this article Regional PMI reports out in the coming days RBA to revert to heftier rate hikes Early returns from Japan’s reopening Korea weighed down by slowing trade activity Retail sales from Singapore and Australia Inflation in the spotlight Other key data releases: India’s budget figures Source: Shutterstock Regional PMI reports out in the coming days China will release PMI data next week and we expect slight gains for both manufacturing and non-manufacturing activity. Given the start of the export season, factories should be busier than during the previous month. Meanwhile, the Golden Week in early October – a seven-day holiday when tourists and shoppers flock to sites and shops – should bring some temporary recovery for retailers and restaurants. For Taiwan, manufacturing activities should continue to be weak due to a fall in demand for semiconductors, laptops and smart devices. Soft demand should keep the manufacturing PMI well below 50. For the same reason, capital outflows from the Taiwan stock market will likely lead to a mild fall in foreign exchange reserves. RBA to revert to heftier rate hikes The coming week also features Australia’s November central bank rate meeting, where after the big upside miss to 3Q22 inflation, we think the bank will have to return to 50bp of tightening after it dropped to just 25bp at the October meeting. Early returns from Japan’s reopening Japan’s activity is expected to continue recovering due to the reopening and revitalisation of the auto industry. Both industrial production and retail sales are expected to grow. Improved economic activity should keep respective PMIs above 50, suggesting positive momentum for the nation’s recovery in the near term. Korea weighed down by slowing trade activity In Korea, activity data should be soft due to slowing trade data, although the projected dip should be partially offset by gains in the automobile sector. This trend should be reflected in September’s industrial production data. Industrial production in September will likely record a contraction for the third consecutive month with persistent inventory stocking. Korea’s services sector should continue to recover but at a slower pace than during the previous months. Meanwhile, investments are expected to remain positive, as suggested in solid equipment imports. On the other hand, exports could record a small gain in October, but the trade deficit will likely still widen. We are now concerned as exports next year will likely turn negative with unfavourable base effects. Retail sales from Singapore and Australia Australian retail sales for September may reflect the high prices of many food items as shown in the recently published inflation numbers for 3Q22. This could bias the month-on-month figures higher, though adjusted for inflation we would expect to see spending growth beginning to slow down. In Singapore, retail sales are expected to slow on a month-on-month basis as fast-rising prices weigh on purchasing power. The return of foreign visitors may provide some support, but overall momentum is clearly slowing.    Inflation in the spotlight Inflation in Indonesia and the Philippines will likely heat up further. Indonesia’s recent price increase for subsidised fuel is expected to push transport costs higher. Meanwhile, Philippine inflation will likely move past 7% after food prices rose sharply due to crop damage from recent typhoons. In Korea, we can expect to get CPI inflation and the October MPC meeting minutes. Headline inflation is expected to accelerate again in October mainly due to the rise in utility rates and the weak Korean won, but October’s number should still be below the July peak of 6.3%. Other key data releases: India’s budget figures India releases deficit figures for September. The numbers have been running a little on the high side on a cumulative basis, so a figure equal to or lower than last year’s number for September (INR 58,842 Crore) would help to put India’s public finances back on track to meeting the 6.4% deficit target for the fiscal year. Asia Economic Calendar   Source: Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics     Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    

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

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

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

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

On November 1, the Reserve Bank of Australia will summarize the results of its next, penultimate meeting this year. According to the forecasts of most experts, the central bank will raise the rate by 25 points, continuing to implement a moderate pace of tightening monetary policy. This time there are no "hawkish illusions", so the Australian dollar is most likely to react not to the fact of a 25-point hike, but to the subsequent rhetoric of the head of the RBA and the tone of the accompanying statement. Despite the predictable nature of the November meeting, there is still some intrigue here. Let me remind you that during the last two weeks, key macroeconomic data on the labor market and inflation were published in Australia. If the "Australian Nonfarm" turned out to be very contradictory, then inflation indicators turned out to be in the green zone, surprising market participants with a breakthrough growth to 32-year highs. Thus, according to published data, the consumer price index in the third quarter jumped to 7.3% YoY (with growth forecast to 7.0% and the previous value of 6.1%). In quarterly terms, the indicator rose to 1.8% with a growth forecast of up to 1.6%. On a monthly basis, the CPI also came out in the green zone, reaching 7.3%. All components of the published report exceeded the expectations of most analysts. The general outlook As for the labor market in Australia, the situation here is as follows. Unemployment remained at the August level of 3.5% (that is, in the area of 50-year lows), as well as the share of the economically active population (66.6%). While the number of people employed last month increased by only 900 people. You should also pay attention to an important point: the rate of price growth is almost three times higher than the rate of wage increases. In general, the market is increasingly concerned that Australia will not escape the recession. Actually, amid these concerns, the RBA has reduced the pace of interest rate hikes in order to reduce the impact of side effects. And in my opinion, to date, the RBA has no reason to reconsider its position on this issue. Here it is necessary to recall the main theses of the minutes of the October meeting of the members of the Australian central bank. The published document clearly made it clear that the RBA will raise the rate at a moderate pace in the coming months. This is eloquently evidenced by the wording of the minutes: "the members of the central bank recognized that the tightening of monetary policy has hit housing prices and household welfare, and over time may lead to a decrease in consumption (...) At the same time, the current situation requires a further increase in interest rates in the coming period." Inflation As for inflation, it is necessary to recognize that the CPI is growing at a faster pace. But, on the other hand, it should also be remembered that, according to the RBA's forecasts, the index should reach 7.8% by the end of the year (YoY). Therefore, the current growth of inflation indicators can only cause "excessive concern" of RBA members, but no more. Expectations  Thus, in my opinion, the RBA is expected to raise the interest rate by 25 basis points at tomorrow's meeting and voice the already familiar rhetoric, despite a significant increase in inflation in the third quarter. The Australian central bank is likely to make it clear that a similar 25-point scenario will be implemented at the last meeting this year. Given the latest inflation release, such restrained results of the November meeting may disappoint AUD/USD traders. It is also worth noting that the RBA will announce its verdict ahead of the announcement of the results of the next Federal Reserve meeting (November 2). Therefore, the market will react to tomorrow's events with an eye to this circumstance. If the RBA confirms the moderate pace of monetary policy tightening, while the Fed maintains its aggressive attitude (including in the context of the December meeting), the aussie will be under significant pressure. In my opinion, this is the most likely scenario, despite the increasing skepticism about the "hawkishness" of the Fed. AUD/USD Summarizing the above, we can assume that the downward trend of AUD/USD has not been exhausted. Therefore, it is advisable to use corrective bursts as an excuse to open short positions (but only after the announcement of the results of the Fed's November meeting). From a technical point of view, the AUD/USD pair is currently located between the middle and upper lines of the Bollinger Bands indicator on the daily chart. However, if the bears push the price below 0.6360, the aussie will be between the middle and lower lines of the Bollinger Bands, and the Ichimoku indicator will form a bearish Parade of Lines signal. In this case, the main bearish target will be the 0.6200 mark – this is the lower line of the Bollinger Bands on the D1 timeframe.   Relevance up to 04:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325792

AUD/USD is down for a third straight day. The Australian dollar is trading at 0.6395, down o.24%. Will RBA deliver a 0.50% hike? The RBA kicks off a busy week of central bank decisions when it meets on Tuesday. This will be followed by the Federal Reserve on Wednesday and the Bank of England on Thursday. The RBA has delivered a steep rate-tightening cycle this year and the upcoming meeting will be live, as it remains unclear what the RBA has in store for the markets. The markets have priced in a second-straight 25-basis point hike, which would bring the cash rate to 2.85%, its highest level since April 2013. There is, however, a 20% chance that the RBA will hike by a steep 50 basis points, given that the Bank’s focus is on curbing inflation and the battle remains far from over. Headline inflation jumped to 7.3%, up from 6.1% in Q2, while core inflation hit 6.1%, up from 4.9%. The RBA expects headline inflation to peak at 7.5%, but other views have inflation rising as high as 8.0%. RBA Governor Lowe has caught the markets wrong-footed before – the 50 bp move in June was larger than expected, and the 25 bp in October was a surprise dovish pivot. This makes it tricky to predict the extent of the rate hike on Tuesday –  the markets are leaning heavily towards a 25 bp increase, but a 50 bp move should not be discounted. For the Federal Reserve, inflation is also a key concern. The Fed’s preferred inflation gauge, the PCE core index, rose to 5.1% in September, up from 4.9% a month earlier. That cements a 75 bp rate hike on Wednesday, even though there has been talk of the Fed easing up due to concerns about the economic outlook. . AUD/USD Technical AUD/USD is testing support at 0.6403. The next support level is 0.6283 There is resistance at 0.6532 and 0.6652 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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

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

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

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

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

Summary:  Higher-than-expected US job openings data and a still-strong ISM manufacturing print pushed the US yields higher as terminal Fed pricing topped 5% again. This saw equity markets on the backfoot ahead of the Fed meeting scheduled for later today, and mixed earnings results from AMD and Airbnb also underpinned, while Sony jumped higher as FX effects supported better than expected results and improved guidance. Shares of Asian mining companies tied to nickel and copper may move after the metals rallied on speculation Beijing will make preparations to ease China’s stringent Covid rules. NZ jobs gains may support more RBNZ rate hikes but NZD remained cautious. What is happening in markets? The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) fall on solid labor market data, which supports an aggressive Fed hike path The US major indices fell on Tuesday, with the S&P500 ending 0.4% lower, after erasing the 1% earlier gain, while the Nasdaq 100 met a similar fate before ending 0.9% lower. Two-year Treasury US yields , which are most sensitive to imminent Fed moves, topped 4.5% after sliding as much as eight basis points earlier in the day. The added volatility and risk-off mode came after US job openings unexpectedly rebounded in September amid low unemployment. This will likely fuel further wage gains (inflation), and it means the Fed will likely hike by 75-bp (0.75%). But keep in mind, any hint of a dovish pivot on Wednesday could perhaps prompt an outsized market reaction and risk on rally. Big tech weighed on equities, with Apple (AAPL) down almost 2%, and Amazon (AMZN) falling 5.5%, taking its value below $1 trillion for the first time since 2020. On the upside, investment banks did well include JP Morgan (JPM) up 1.8% and Goldman (GS) up 1.2%. While in the S&P500 Abiomed (ABMD) shares rose 50% with Johnson & Johnson, announcing it will takeover the firm for $17.3 billion, building on its portfolio of technology assisting heart function. After market, Advanced Micro Devices (AMD) shares rose almost 5% after its profits beat expectations and it signaled that inroads in the server chip market will continue to bolster its finances. The Dow Jones traded near a resistance level, that saw the index halt a few rally attempts, in the past few months.  China/HK stocks surge on unofficial reports that China may be looking to exit Zero Covid The CSI300 surged over 3.5% on Tuesday and the HSI rose by over 5% on speculation that Beijing is preparing to phase out Covid Zero policies, even as the country’s Foreign Ministry said it was unaware of such a plan. Unverified social media posts circulated online on Tuesday showed a committee was being formed to assess scenarios on how to exit Covid Zero. Internet giants Meituan and Tencent were some of the biggest gainers. While the reports may be unconfirmed for now, it gives a signal on how strong a recovery can come through if China alters its Zero Covid policy stance at some point. Australia’s ASX200 (ASXSP200.1) futures suggest a flat start, but focus will be on copper and nickel giants, and companies with USD exposure Focus will be on nickel and copper companies including Nickel Mines (NIC), Oz Minerals (OZL), and BHP (BHP), which are expected to gain attention and possibly move higher after the commodities prices rallied on speculation Beijing could make preparations to ease China’s stringent Covid rules, which have kept commodities prices underwater. BHP shares rose 3.7% in New York, and the listed entity in Australia is expected to likely follow. Focus will also be in Amcor (AMC) which has just reported financial results, declaring a stronger dividend that expected, stronger EPS than expected, but weaker than expected income, weighed down by the strength of the US dollar. The global packaging giant sees its full year financial results being negatively impacted by the US dollar by 5%, up from its prior 2% estimate. NZDUSD brushes off a broadly positive employment report NZ jobs data for Q2 was rather mixed with unemployment rate still near record lows, while rising slightly to 3.3% and wage growth of 2.6% YoY much higher than last month’s 2.3%. Employment change slowed slightly to 1.2% YoY but was far better than expectations of 0.3%, and also up 1.3% QoQ. While these numbers underscore a case for still-higher inflation and the need for further rate hikes from the RBNZ, NZD remained largely unchanged in early Asian trading hours after the release. NZDUSD eased from overnight highs of 0.5900 to trade around 0.584, while AUDNZD is testing the downside at 1.094 after breaking below 1.10 yesterday following a dovish RBA. While NZDUSD will continue to focus on what the Fed path brings, there may be more downside in store for AUDNZD amid the policy divergence of the RBA and RBNZ, unless one of the two things change: 1. RBNZ pivots to a pace of smaller rate hikes, or 2. China sends signals of opening up. This will bring the focus back on current account differentials which favour the AUD over the NZD. RBNZ’s financial stability report also highlighted some concerns from higher interest rates on consumption and new residential construction. Metals run higher on China speculation Copper and nickel led a surge in base metals on unconfirmed speculation Beijing is preparing to ease Covid rules, even as these reports were later denied by Chinese Foreign Ministry official. This also brought the focus back on supply issues in Copper, with inventories running low on exchanges. LME Nickel was over 8% higher as well, along with Zinc and Aluminium as well. Iron ore (SCOA) moved up slightly as a result, adding 0.3% to $78.35. Gold (XAUUSD) rose back towards $1650 but higher bond yields continue to haunt especially ahead of the critical Fed meeting. Silver, enjoying a trifecta of support from rising gold and copper as well as the weaker dollar, traded up to once again challenging resistance at $20/oz. A break may bring the key $21.14 back into focus. Crude oil (CLX2 & LCOZ2) Oil prices also gained on the China news, while a weaker USD up until the release of the US job openings or the ISM data also supported gains in oil. OPEC+ production cuts continue to keep the supply outlook tight for the oil market, but the overall sentiment is muddled by weakening global demand concerns and also the EU sanctions on Russian crude that are set to begin in December. WTI futures were seen rising towards $89/barrel while Brent futures were close to $95.   What to consider? US job openings and ISM manufacturing complicate Fed’s message US job openings saw an unexpected rebound in September amid low unemployment, suggesting more wage gains could be in store. JOLTS job openings came in higher at 10.7 million in September from a revised 10.3 million in August. This likely thrashes expectations of any material downshift from the Fed after today’s widely expected 75bps increase. Meanwhile, October's ISM manufacturing index also remained in expansion at 50.2, albeit falling from last month’s 50.9. However, disinflationary trends were emphasised as the index of prices paid fell to an over 2-year low. Still, sticky shelter and services inflation remains materially high suggest still-higher interest rates remain on the horizon. Terminal rate pricing for Fed funds futures has picked up again to 5% levels, and it would be hard for the Fed to push it any higher at this point, but what it can clearly hint at today is pushing out of the rate cut expectations for next year. Read our full FOMC preview here for further insights. Lack of insurance halted UN Black Sea shipments, but progress being made The UN halted grain shipments from Ukraine's Black Sea ports on Wednesday, after Russia warned ships weren't safe using the route and demanded guarantees from Ukraine. However, reports suggested early on Wednesday that an agreement had been reached and ships will start to sail again from Thursday, as pressure on Russia continues to build. We continue to watch crop and fertilizer prices, as a meaningful reversal could come through if we see improving shipments across the Black Sea region. RBA ups inflation forecasts, downgrades GPD, remains dovish. Possibly market implications if rate hikes stop early, as they have historical The RBA hiked the cash rate by 25bps (0.25%) as expected to 2.85%, maintaining its dovish stance and bordering on restrictive, as it again acknowledged tighter financial conditions are yet to be felt in mortgage payments, but higher rates and inflation has put pressure on household budgets and caused a small amount of loan arrears and insolvencies. The RBA’s rate hike cycle since May, has been the second fastest in history and we also note the RBA was the first major central bank to under-deliver on rate hike expectations (last month). Also consider, what’s ahead. The RBA has a history of stopping rate hikes early, before CPI peaked in YoY terms. Over the last 30 years the RBA started easing ‘early’ and cut rates despite headline CPI staying above its 2-3% target. So, could the RBA replay this trend? We think so. The RBA rose its 2022 CPI forecast to around 8%, up from 7.8%. Meaning, the Q4 CPI read could print between 7.75% and 8.25%. The RBA downgraded its GDP forecasts, only expecting 3% this year and 1½ per cent in 2023 and 2024. If the RBA makes any hint of a becoming even more dovish at their next meeting, it could perhaps prompt an outsized market reaction in the ASX200 and fuel a risk on rally. Imminently, in FX, the AUDUSD is on watch ahead of the Fed’s hike on Wednesday, and could succumb to further selling if the Fed hikes by 0.75%. Another pair under pressure is the AUDNZD.  AMD earnings supported by servers despite weak PC sales Advanced Micro Devices rose in the after-hour trading as it reported better than estimated Q3 earnings, although issuing guidance that missed analysts’ expectations. EPS came in $0.67 vs estimated $0.65, revenue $5.57B vs estimated $5.62B. Guidance suggested AMD is expecting strong growth in its server chip business in the coming quarters. Q3 results were in-line with a warning issued by AMD on October 6 which helped to reset expectations, as weak PC sales continued to underpin. Airbnb drops on disappointing guidance Airbnb reported its highest revenue and most profitable quarter but a muted Q4 outlook as consumer preferences are shifting back to cities which tend to have lower rates based on smaller sized spaces. Q3 revenue rose 29% to $2.88B, estimated $2.84B. Net profit rose 45.6% to $1.21B. But the company said it expected bookings to moderate after a bumper third quarter. Sony surges on profit beat Weak yen propped up revenues for Sony and also nudged up the fiscal year profit outlook, pushing shares higher in early trading. Q2 sales came in at 2.75tr yen, est. 2.67 tr yen while operating income was 344bn yen vs. 280.66bn yen expected. Operating profit beat was broad-based, except in games.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-2-nov-02112022

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

Economists at Goldman Sachs offer their outlook on the Reserve Bank of Australia's (RBA) monetary policy for the next two years. Key quotes "Against the backdrop of such a large and protracted inflation overshoot, we were surprised by the RBA's October decision to slow the pace of rate hikes - particularly before the policy rate had reached the lower bound of their 3.00-4.50% nominal 'neutral rate' estimate." "Looking forward, the RBA's more frequent Board meetings (compared to peers) do provide it greater optionality, but we do not expect the RBA will risk falling too far behind a synchronized global tightening cycle." "We also suspect that the Review of the RBA due in March 2023 will heighten pressure on the RBA to achieve its inflation mandate and make it uncomfortable for the RBA to stand pat on policy through H123 while inflation is likely be so far above-target." “All considered, we now expect 25bp rate hikes each month to May 2023 (inclusive) - to a terminal rate of 4.10% (prior: 3.60%) - followed by 110bp of easing over 2024 to 3.0%."

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

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

Two central bank meetings will be the highlight for the region next week In this article Bank Indonesia to hike rates as growth beats estimates BSP governor to make good on his promise China to leave rates untouched Japan’s GDP and inflation Other important releases: China’s activity data and Australia's jobs report Source: Shutterstock Bank Indonesia to hike rates as growth beats estimates Bank Indonesia will likely hike rates by 50bp to help steady the Indonesian rupiah, which has been under some pressure of late. The third-quarter GDP growth report was better than expected, giving the central bank some room to be aggressive with its tightening now that core inflation is moving higher. BSP governor to make good on his promise In the Philippines, Bangko Sentral ng Pilipinas (BSP) will increase policy rates by 75bp next week. Governor Felipe Medalla pre-announced his intention to match any rate hike by the US Federal Reserve and will likely make good on that promise to push the policy rate to 5.0% next week. China to leave rates untouched China's central bank, the People's Bank of China, should keep the 1Y Medium Lending Facility rate unchanged at 2.75% and rollover with no change for the net injection of liquidity. Put simply, we expect no change in monetary policy in terms of interest rates and liquidity. The economy has weakened with the rising number of Covid cases and the relaxing of restrictions since August will not have helped the economy much as the main weakness stems from the partial lockdowns of some cities. Japan’s GDP and inflation Third quarter GDP in Japan is expected to grow 0.5% quarter-on-quarter, seasonally adjusted, which is a slower pace than the previous quarter. Reopening effects still led the overall growth but higher inflation and the weak yen partially offset the recovery. Meanwhile, CPI inflation should rise to 3.5% year-on-year in October with utilities and other imported goods prices rising. Other important releases: China’s activity data and Australia's jobs report China will also release activity data next week and we expect almost no growth in retail sales in October despite a long holiday for the month, as shown by the recent PMI numbers. Industrial production should also be slower than the previous month due to soft orders from the external market. Investment activity should speed up slightly due to a pickup in infrastructure investment. However, property investment activities should continue to be in contraction. Meanwhile, October is a quiet month for the job market, and therefore we expect no change in the surveyed jobless rate at 5.5%. Lastly, Australia releases its jobs report for October. The market consensus expects the unemployment rate to remain at 3.5%.   Asia Economic Calendar Source: Refinitiv, ING Tags Emerging Markets Asia week ahead Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

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

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

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

The Australian dollar continues to gain ground and hit a two-month high earlier today. In the European session, AUD/USD is trading at 0.6756, up 0.85%. RBA to limit forward guidance The Reserve Bank of Australia minutes noted that the use of forward guidance had been useful during the Covid pandemic, but it would no longer remain a tool unless “appropriate”. The RBA said that rates “are not on a pre-set path” and it will determine the size and timing of future hikes based on incoming data and the outlook for inflation and employment. The takeaway from the minutes is that the RBA will not always provide forward guidance on interest rates, as it wants the flexibility to determine rate policy based on incoming data rather than be tied to its guidance. The RBA has eased its tightening, with two straight hikes of 0.25%, and is signalling to the markets that it could pause its rate-hike cycle or resume oversize rates, depending on the data. The RBA’s rate cycle has been steep, with 250 points in tightening since May. Despite this, inflation remains stubbornly high, and the RBA has revised upwards its inflation forecast for the end of 2022 to 8.0%, up from 7.8%. The central bank had expected inflation to slow to 3%, the top of its inflation target range, by December 2022, but that has been revised to 2025. The Federal Reserve is also looking at easing its tightening, as the markets have priced in a 0.50% increase at the December meeting. Fed Vice Chair Brainard said on Monday that she favored slowing the pace of rate hikes, but that further hikes were required in order to bring down inflation. Brainard’s stance was echoed by Fed member Waller, as Fedspeak remains hawkish, despite the unbridled euphoria in the financial markets after last week’s soft US inflation report. The Fed remains committed to curbing inflation, and a dovish pivot would make its rate tightening less effective.   AUD/USD Technical AUD/USD is testing resistance at 0.6729. Above, there is resistance at 0.6821 There is support at 0.6603 and 0.6490 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Nasdaq 100 and S&P 500 ended higher, being lifted by softer-than-expected producer inflation. Walmart and Home Depot beat in earnings and topline. Chinese stocks surged on additional financial support to the property sector and a conciliatory tone from the Biden-Xi meeting. Hang Seng Index rose 4% to 18,343, more than 25% higher from its October low. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) gained on softer-than-expected US PPI Investors got a lift from the softer-than-expected PPI data which added to the post-CPI optimism that the US inflation may have peaked. S&P 500 gained 0.9% and NASDAQ 100 rose 1.5%. Stocks pared gains in the afternoon when the news of Russian missiles landing in Poland, a NATO member, hit the wires. Stocks nonetheless managed to recover from the missile news and finished the session higher.  Nine out of 11 S&P 500 sectors gained, with communication services, consumer discretionary, information technology and real estate led. On earnings, retail bellwether Walmart (WMT:xnys) surged 6.7% after reporting earnings and revenue beats and raising full-year outlook guidance. Home Depot (HD:xnys) gained 1.7% on earnings beating estimates and reaffirming full-year guidance. US  treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on PPI prints, with the 10-year yield falling 8bps to 3.77% US treasuries rallied, with yields falling 5-9 basis points across the curve. The 10-year yield fell 8bps to 3.77%. The market surged in price after the growth in PPI, both in headlines and core measures, slowed more than expected. A stronger Empire State manufacturing index, returning to the expansionary territory and Fedspeak from Bostic, Barr, and Harker reiterating the slower pace but still additional work to do message, did not tame market sentiment. Adding to the fuel was some safe-haven buying of treasuries after Russian missiles hit Poland and killed two people. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) on fire as risk-on sentiment returned Hong Kong and China’s equity markets surged for the third day in a row, with Hang Seng Index soaring 4.1 % and CSI 300 climbing 1.9%, as optimism returned to the markets due to favourable policy shifts in China regarding pandemic control and property developers’ access to funding and goodwill gestures shown by China’s President Xi and the US’ President Biden at their first face-to-face meeting after President Biden took office. In addition, the Chinese authorities announced that they will allow developers, after meeting some requirements in their financials and supports from their banks, to tap into some of the presale deposits now placed in escrow accounts. China Internet stocks and semi-conductor names were among the top gainers. Commodities lift; Crude oil (CLZ2 & LCOF3) rose more than 1% after Russian rockets hit, iron ore (SCOA,SCOZ2) extended its gain and wheat whipped up 1% Crude oil (CLZ2 & LCOF3) rose more than 1% after the EIA published a report saying inventories in developed nations sunk to an 18-year low of less than 4 billion barrels. The EIA says a potential EU ban on Russian supply will add further pressure, and its output may drop below 10 million b/d next year, from about 10.7 million so far this year. For the next technical indicators and levels to watch in oil, click here. Moving to metals, the Iron ore (SCOA) price rose 1.7%, continuing its rebound and has now risen 25% this month on the back of fresh China stimulus, however the iron ore price is still down 13% from its high. The question is, if China continues to ease restrictions, will the iron ore price continue its rebound, and support affiliated iron ore equities. Meanwhile in crop markets, wheat trades higher on concerns there could be a potential escalation of the war. What to consider Fed collects more evidence inflation is easing; US producer prices cool more than expected, clocking smallest gain in a year Investors got another piece of evidence the inflationary pressures are easing, with US producer price growth rising 8% Y/Y in October (below the 8.3% Bloomberg consensus expected and down from the 8.5% Y/Y in September), with prices rising 0.2% M/M (which was less than the 0.4% expected). Excluding volatile food, energy, and trade services, the core PPI grew 6.7% Y/Y in October- while the market expected the growth remains unchanged from the September level of 7.2%. After peaking in March at 11.7%, producer price growth has moderated from improving supply chains, softer demand, and weakening commodities prices. This means, following the softer-than-expected CPI print last week, the Fed has garnered more catalysts to slow its pace of hikes, which also provides further support to the equity market and bond market rallies. However, the next important data sets the Fed will be watching are due early next month; US jobs, and November CPI, which are ahead of the Fed’s next meeting (in the third week of December). RBA meeting minutes signal food and energy prices to rise, and property prices to fall Australia’s central bank sees food price inflation rising, along with energy prices, while the Unemployment rate is expected to rise as well off its lows. The RBA downgraded its outlook for the property market, expecting property prices to continue to fall, as they have in history when the RBA is in a rising cycle. It also sees housing loan commitments further falling. Yet the RBA affirmed it will keep rising rates till inflation is within its targets as the central bank wants underlying inflation to be within 2-3%. The RBA also hinted it may be close to its target, "in underlying terms, inflation was a little over 6% with most components of the CPI rising at annualized rates of more than 3%”. What are the investor takeaways from the RBA minutes? It could be worth looking for potential opportunities in investing in Food stocks, food ETFs, and the as well as wheat and corn. Secondly, it could be worth looking for potential opportunities in energy, like crude oil, or oil stocks such as Woodside Energy and Occidental Petroleum to name a few. And with property prices falling, along with lending, keep an eye on bank shares. Consider looking at CommBank (CBA) as a proxy. Will CBA continue to rally off its low on the back of the RBA's dovish stance, or will CBA and big banks take a haircut as banks’ profits are shrinking? Walmart and Home Depot earnings beat estimates Peter Garnry, Head of Equity Strategy wrote in his notes that Walmart showed a positive surprise on its operating margin and an upward revision to the FY results and Home Depot is delivering a decent Q3 result,= as well.  Walmart, the largest US retailer reported FY23 Q3 (ending 31 October) revenue of $152.8bn up 9% y/y beating estimates and adj. EPS of $1.50 vs est. $1.32 while announcing a $20bn buyback programme. The third quarter result is so strong that Walmart is increasing its FY outlook on adj. EPS to -6% to -7% y/y from previously -9% to -11%. The 12-month trailing revenue figure eclipsed $600bn for the first time in its history. As we have seen throughout this Q3 earnings season, retailers and consumer industries have been able to either preserve or expand operating margins. Walmart is valued at a 12-month forward EV/EBITDA of 11.6x compared to 12x for the S&P 500 Index.  The largest US home improvement retailer Home Depot reports FY23 Q3 (ending 31 October) revenue of $38.9bn vs est. $37.9bn up 6% y/y and EPS of $4.24 vs est. $4.13 as the US consumer remains in good shape despite inflation and higher cost of living. Home Depot is confirming its fiscal year guidance. Tencent (00700) is scheduled to report earnings on Wednesday Tencent is scheduled to report Q3 results today. Bloomberg survey shows the street is expecting revenues to edge down around 1% Y/Y with both advertisements and gaming down Y/Y. On adjusted EPS, the consensus is calling for an 8% year-on-year decline. For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-16-nov-2022-16112022

Summary:  Equity markets were in for a wild ride yesterday as the melt-up continued in early trading, only to violently reverse on an apparently errant missile killing two in a Polish town bordering Ukraine. The price action has since stabilized, with risk sentiment still strong in Asia on hopes for incoming stimulus from China. Important incoming US data up today includes the October Retail Sales data.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Big rejection in S&P 500 futures yesterday with the index futures coming off 1.3% from the intraday highs to close below the 4,000 level. Yesterday’s upside driver was a lower than estimated US PPI print and then later the downside move was triggered by news that a rumoured Russian missile had hit Polish territory killing two persons. This morning S&P 500 futures are attempting to push above the 4,000 level again, but we want to emphasize cautiousness here as geopolitical risks remain high and markets that seem fragile and trading on thin liquidity across many markets. Today’s key earnings event in the US is Nvidia reporting after the market close. Hong Kong’s Hang Seng (HSIX2) and China’s CSI300 (03188:xhkg) Hong Kong and China stocks consolidated and took a pause on the strong rally since last Friday, with Hang Seng Index losing 1% and CSI 300 Index sliding 0.7%. Chinese property names retraced. Leading private enterprise developer Country Garden (02007:xhkg) plunged 14% following the placement of new shares. Chinese EV makers underperformed, with leading names dropping by 2% to 6%. New Covid cases in mainland China went above 20,000 for the first time since April. FX: USD volatile on risk sentiment swings yesterday The US dollar was pummelled yesterday as the risk sentiment melt-up initially continued yesterday in early trading in the US before a missile hitting a Polish town (more below) sharply reversed sentiment. The situation has since stabilized, but the reversal of the spike put a considerable dent in tactical USD downside momentum. GBPUSD traded the most wildly ahead of today’s CPI and tomorrow’s Autumn Budget Statement, squeezing from 1.1750 early yesterday to all the way north of 1.2000 briefly before trading back to 1.1800 and closing the day south of 1.1900. The USD volatility was less pronounced elsewhere, particularly against Asian currencies. The incoming US data and risk sentiment swings around that data (or as we saw yesterday from other sources) will likely drive the next USD move. Crude oil (CLZ2 & LCOF3) Crude oil ended lower on Tuesday following a volatile trading session that briefly saw prices spike on news a Polish border town had been hit by a Russian-made but probably Ukrainian fired missile (see below). Overall, the crude oil market remains rangebound with demand worries currently weighing a touch harder than supply concerns driven by OPEC+ production cuts and from next month, EU sanctions against Russian oil, a development that according to the IEA may drive a 15% reduction in Russian output early next year. In China the number of virus cases have surged to near 20,000 thereby testing local authorities' appetite for maintaining the covid-zero restrictions. Focus on EIA’s weekly stock report after the API reported a 5.8m barrel drop in crude and smaller increases in fuel stocks. Gold (XAUUSD) Gold touched resistance at $1788 on Tuesday as the dollar hit a fresh cycle low after US PPI showed the smallest increase since mid-2021. Later in the day, a brief safe haven bid quickly fizzled out after Biden said the rocket that hit Poland was unlikely to have been fired from Russia. Demand from ETF investors – net sellers for months – remain elusive with total holdings falling to a fresh 31-month low and with that in mind expect continued consolidation and potentially a recheck of support at $1735. Resistance at $1788, the 38.2% retracement of the 2022 correction and $1804, the 200-day moving average. US treasuries (TLT, IEF) US treasuries punched to new local lows yesterday, with the 10-year treasury benchmark dipping below 3.80% after a likely errant missile hit a Polish town bordering Ukraine and on slightly softer than expected PPI data. But yields have rebounded today and are back to slightly below the close from last Thursday after that day’s surprisingly soft October US CPI release. Key levels are 3.50% to the downside, the pivot high around the June FOMC meeting when the Fed hiked 75 basis points for the first time for this cycle, while 4.00-4.10% is perhaps the upside swing area. What is going on? UK October CPI was out at 11.1% YoY, a new cycle high This was vs. 10.7% expected and 10.1% in September. Core CPI matched the cycle high from September at 6.5% YoY, versus 6.4% expected. Sterling trades a bit weaker after the initial reaction to the data point, as higher inflation will likely require more fiscal and monetary tightening that will make the coming UK recession deeper, a sterling negative. Missile comes down in Poland town bordering Ukraine, killing two The source of the missiles is a mystery, with US President Biden saying after an emergency meeting with other leaders that the missile was “unlikely” to have been launched in Russia, while Poland claimed that the missile was “Russian made” and convened an emergency security meeting yesterday afternoon. Markets reacted strongly to the development initially, as Poland is a member of NATO. Russian officials said that claims of an intentional missile firing are a “deliberate provocation with the goal of escalating the situation.” Donald Trump declares third bid for the White House in 2024 Trump was widely seen as the chief liability in a very poor Republican showing in the mid-term elections last week, with candidates strongly denying the results of the 2020 election losing badly in almost every case. The Democrats are set to gain a slightly larger majority in the Senate and the Republicans will only eke out the narrowest of majorities in the House of Representatives. As Trump still enjoys an unmatched “base” of personal popularity, it will be difficult for any Republican profile to rise up to challenge Trump, just as it is likely impossible that Trump can win independent voters and those that are not his base. It’s ideal ground for the formation of a new party. Apple set to shift to US-based chip production Apple shares rose over 2.1%, moving to their highest level since early November after the Apple CEO unveiled the company will be using US-made Chips from Arizona in 2024, as part of reducing its reliance on Asian chip manufacturers and shifting to producing its own. CEO Tim Cook also told staff Apple plans to expand its chip supply into European markets. The moves underscore the necessity for technology companies to reshoring semiconductors from Asia to reduce supply chain risks. These types of moves will add to inflationary pressures in the future. US earnings recap: Walmart, Home Depot, and Sea Ltd Yesterday’s earnings releases from these three consumer retailing companies were all better than expected with Walmart lifting guidance and beating on revenue growth. Home Depot had the most downbeat reaction from investors as the home improvement retailer’s revenue growth beat was only due to inflation and not higher volume. The biggest positive reaction was in Sea Ltd shares as the Southeast Asia gaming and e-commerce company posted a narrower operating loss and beat on revenue growth; however, the company took down guidance in its gaming division. Read more details in our earnings review note from yesterday. US producer prices cool more than expected, clocking smallest gain in a year Investors got another piece of evidence inflationary pressures are easing, with US producer price growth rising 8% Y/Y in October (below the 8.3% Bloomberg consensus expected and down from the 8.5% Y/Y in September). Excluding volatile food, energy, core PPI rose 6.7% Y/Y in October- when the market prices to rise 7.2%. After peaking in March at 11.7%, producer price growth has moderated from improving supply chains, softer demand, and weakening commodities prices. The Fed has therefore garnered more catalysts to slow its pace of hikes, which also provides further support to the equity market and bond markets. However, the next important data sets the Fed will be watching are due early next month; US jobs, and November CPI, which are ahead of the Fed’s next meeting (in the third week of December). Arabica coffee (KCc1) dropped 4.4% on Tuesday … thereby extending a rout that has seen the price retrace almost 61.8% of the 2019 to 2022 surge to a multi-year high above $2.50 per pound. Fast forward nine months and the global economic slowdown has led to a reduction in away-from-home consumption at a time where the production outlook from South America has improved. Stocks at ICE monitored warehouses have risen for the past seven days from a 20-year low and could more than double soon with more than half a million bags awaiting assessment. A new LNG exporter is born Mozambique is now officially a new LNG exporter after the first shipment on Monday left the Coral South floating liquefaction unit, which has a 4.4 bcm annual export capacity. This is positive news for Europe who is desperately looking for new energy suppliers since the Ukraine war has started. It was a long-decade process for Mozambique to get its first LNG supply out of the country. Based on official estimates, this is one of the largest LNG offshore fields in Africa. What are we watching next? Fed hawk Christopher Waller to speak on Economic Outlook tonight Waller is an FOMC voter as he sits on the Board of Governors and is widely considered one of the most hawkish Fed members and may unleash a blast of hawkish rhetoric, although it seems the market is more likely to listen only to Fed Chair Powell himself and more importantly, at incoming data. US October Retail Sales data today An interesting data release is up today, the US Retail Sales for October. This data series suggests rather sluggish US growth and is reported in nominal month-on-month terms, not real- or inflation-adjusted terms. The last three months of the headline data have averaged almost exactly 0.0%, while the “ex Food and Energy” series has averaged +0.36%. Today’s headline number is expected at +1.0% MoM and +0.2% for core sales. Earnings to watch Today’s US earnings focus is Nvidia which is expected to deliver a 18% decline in revenue y/y to $5.8bn and EPS of $0.70 down 31% y/y as the market for GPUs is cooling down as crypto mining is becoming less profitable from lower prices on cryptocurrencies. Tencent is expected to report earnings today following a new round of layoffs announced yesterday as revenue growth is expected to be down 1% y/y in Q3. Today: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com Economic calendar highlights for today (times GMT) 0900 – ECB Financial Stability Review 1300 – Poland Oct. CPI 1315 – Canada Oct. Housing Starts 1330 – US Oct. Retail Sales 1330 – Canada Oct. CPI 1330 – US Oct. Import & Export Prices 1415 – US Oct. Industrial Production 1450 – US Fed’s Williams (Voter) to speak 1500 – US Nov. NAHB Housing Market Index 1500 – US Fed’s Barr (Voter) to testify before House Panel 1530 – EIA's Weekly Crude and Fuel Stock Report 1935 – US Fed’s Waller (Voter) to speak 0030 – Australia Oct. Employment Change / Unemployment Rate Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source:https://www.home.saxo/content/articles/macro/market-quick-take-nov-16-2022-16112022

There was a time when a 3%+ wage inflation rate might have mattered for the Reserve Bank's rate-setting decisions. Right now, data does not appear to be a very important input for their decision-making process  3.1% 3Q22 YoY% Wage price index  Higher Its all about where you are, not what's happening At 3.1% in 3Q22, the latest wage price index result is finally consistent with what the Reserve Bank of Australia once thought was a necessary condition for achieving their 2-3% CPI inflation target. With CPI inflation actually at 7.3%YoY currently, this particular metric ceased to have much relevance a long time ago.  Even so, 3.1% wage growth is a long way below 7.3% price inflation, indicating that in real terms, wage growth remains strongly negative. Even if the RBA were paying much attention to the run of data in its rate-setting deliberations, this latest wage data print is still innocuous.  Annual wage and price growth Source: CEIC, ING Steady as she goes At 2.85%, the current cash rate target is probably just slightly in a neutral to restrictive policy setting. Here, any further increases in rates are likely to weigh on growth a little bit more than previously. And this, rather than the run of data, seems to be what is driving Reserve Bank (RBA) policy setting. The RBA expressed concern in their latest statement about overdoing the tightening, and for this reason alone, they seem to be content to slow the pace of monetary adjustment right down to help them finesse the end game in this tightening cycle.  Consequently, even with the last inflation and now wages data surprising on the upside, we don't believe they will shift back to their previous 50bp pace of tightening and will continue at a 25bp pace at coming meetings, with the peak for cash rates likely to come in 1Q23 as the cash rate hits 3.6%.  The RBA will also be keeping a weather eye on the AUD. The recent spell of weakness has been abruptly shattered as thoughts of a US Fed pivot have gained ground, and the Reserve Bank will be keen not to encourage the AUD to rise much faster due to their actions.    TagsRBA rate policy Australian wages Australian inflation AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  The hotter-than-expected US retail sales data and hawkish-leaning comments from Fed officials weighed on equities but boosted buying of long-dated bonds as investors focused on the likelihood of Fed overdoing in monetary tightening and triggering a recession. Target disappointed with Q3 miss and weak Q4 sales guidance, highlighting the pain of the US retailers and consumers. Nvidia's results beat expectations, moving its shares up after hours. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on strong retail sales and hawkish Fedspeak The Good news is bad news phenomenon persists. The hotter-than-expected 1.3% rise in October retail sales, followed by several hawkish-leaning comments from Fed officials triggered concerns that the Fed would overdo monetary tightening and bring about a recession. The fall in yields at the long end of the US treasury curve did not lend support to the equity market as in recent months as stock investors took it as a sign of bond market pricing in a higher recession risk. Nasdaq 100 fell 1.5% and S&P500 declined 0.8%, with 68% of S&P 500 companies and 9 out of 11 sectors closing lower. Energy, consumer discretionary, and information technology led the benchmark index lower while the defensive utilities sector and consumer staples sector managed to finish the session with modest gains. Target (TGT:xnys) fell 13% following the retailer reported a large miss on earnings and cut its outlook for the current quarter far below analyst estimates. Lowe’s (LOW:xnys) gained 3% after reporting better-than-expected comparable sales and raising full-year earnings guidance. Micron (MU:xnas) dropped 6.7% as the chipmaker said it was cutting DRAM and NAND wafer production. After the market closed, Nvdia (NVDA:xnas) and Cisco (CSCO:xnas) reported earnings beating analyst estimates. Nvida rose 1.3% and Cisco gained 3.9% in the extended hours trading. US  treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied with yields in the long end of the curve falling most on recession concerns The US treasury yield curve bull flattened, with the 2-year yield edging up 2bps to 4.35% while the 10-year yield fell 8bps to 3.69%. The much-watched yield curve inversion between the 2-year and the 10-year widened to 67bps, the most invested since February 1982, and heightened the growth scare among investors. The market has largely priced in a 50bps hike in December but is unwinding some of the post-CPI optimism that the Fed may do less next year, after Fed’s George, Daly, Waller, and Williams pushed back on the notion of pausing. The strong results from the 20-year bond auction on Wednesday helped supported the outperformance of the long ends.  Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) on fire as risk-on sentiment returned Hong Kong and China stocks consolidated and took a pause on the strong rally since last Friday, with Hang Seng Index losing 0.5% and CSI 300 Index sliding 0.8%. Chinese property names retreated, following new home prices in the 70 major cities of China falling 1.6% Y/Y in October, the largest decline in seven years, and Agile (03383) announced that the developer will sell new shares at an 18% discount. Agile tumbled 23%. Country Garden (02007:xhkg), which also announced share placement earlier, plunged 15%. Investors also became increasing concerned about the rising trend in new Covid cases in mainland China, which having gone above 20,000 for the first time since April. In New York hours, the ADRs of Tencent (00700:xhks) rose 3.4% versus their Hong Kong closing level after reporting earnings beating estimates while Meituan (03690:xhkg) dropped 6.7% from Hong Kong closing as Tencent said it would disburse its stake on Meituan to shareholders. What to consider U.S. Retails hotter-than expected U.S. headline retail sales grew by 1.3% M/M in October (consensus:  +1%, Sep: 0%). The control-group retail sales increased by 0.7% M/M (consensus: +0.3%, Sep: +0.4%). U.K. headline CPI jumped to 11.1% in October, the highest in 41 years U.K’s October headline CPI came in at 11.1% Y/Y (vs consensus 10.7%), the highest in 41 years. Core CPI remained at 6.5%. Australia’s unemployment falls, employment rises more than expected in October, following Australian wage growth growing more than expected; AUDUSD trades flat Australia’s jobless rate fell to 3.4%, from 3.5% last month, which supports the RBA continuing to rise rates, and not pause on rate hikes at their next meeting in December. Australian employment rose by 32,200 month-on-month in October, almost double the 15,000 jobs expected to be added to the economy. Job growth is also up markedly from the tiny 900 jobs that were added the month prior. The AUDUSD is staying range bound for now. Target reported Q3 earnings miss and full-year guidance reduction Target’s Q3 adjusted EPS fell to USD1.54, nearly 30% below the median of analyst estimates. The retailer is predicting a drop in comparable sales for the first time in five years and estimating operating margins will shrink to about 3%, which is half of its previous forecast. Target is looking to axe $3 billion in costs, but says there will be no mass layoffs. This highlights the pain of the US retailers and also the consumer – who is reluctant to spend on non-essential items in the face of rising interest rates and inflation. Nvidia earnings beat Software graphics giant Nvidia (NVDA) reported revenue for the third quarter that beat analyst estimates. Revenue fell 17% y/y to $5.93 billion, beating the expected drop of 18% y/y to $5.84 billion. NVIDIA’s outlook for the fourth quarter was a bit vague though, but more or less points to improvements in revenue, citing revenue is expected to hit $6.00 billion, plus or minus 2%. Nvidia said Microsoft will use its graphics chips, networking products, and software in Microsoft’s new AI products. Nickel Miners could be under fire Profit taking in oil equites is likely with the after the oil price fell on reports the Druzhba pipeline carrying Russian oil to Europe had restarted, WTI Crude Oil fell 1.9%. Elsewhere, Nickel miners shares could be under fire today move after Nickel futures fell 9% on Wednesday. LME is said to be stepping up surveillance of sharp swings earlier in the week on supply fears. Keep an eye on Australia’s Nickel Mines (NIC) and IGO, Japan’s Pacific Metals, Sumitomo Metal Mining, and Indonesia’s Vale Indonesia, Aneka Tambang. For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-17-nov-2022-17112022

Against some expectations that labour supply constraints could begin to slow the pace of hiring and push the unemployment rate higher, October's labour market data shows that there is still room for solid gains in full-time jobs in Australia  Source: Shutterstock 32,200 Total employment gains understates full-time employment gains  Better Despite labour shortages, employment growth is still happening On casual inspection, Australia is running out of available labour. Retail outlets and F&B establishments uniformly display "we are hiring" signs, and it looks very much as if the economy is hitting labour supply constraints. But despite this, it still appears that there is enough labour available, not only to fill more jobs than there is growth in the population of working age, but that those jobs are also predominantly, full-time, and typically higher quality and better-paid jobs.  In terms of the numbers: The total gain in employment in October from the previous months was 32,200. but this understates the boost to household spending, as the full-time employment gain was 47,100, which must have included some conversion of part-time jobs to full-time. Part-time employment fell by 14,900.  The total number of unemployed broadly mirrored the employment gains, falling 20,500, though there was also a very small drop in labour force participation which helped to bring the unemployment rate down to 3.4%, equal to its previous record low.  Australia's unemployment rate and forecasts Source: CEIC, ING Labour market probably close to its maximum tightness It is difficult to see how the labour market is going to tighten significantly further from here. This month may be one of the last to show solid employment gains, though we may need to wait until early 2023 for softening to become more apparent and for the unemployment rate to start nosing higher.  In the meantime, we don't expect today's data to have any material bearing on how the Reserve Bank of Australia conducts its monetary policy in the coming months. We still anticipate further tightening and at a moderate 25bp per meeting pace now that rates are already at 2.85%, with the RBA signalling that they can take more measured approach from here on. We still anticipate rates rising into the early part of 2023, with the cash rate target peaking at 3.6% in 1Q23 amidst signs of inflation topping out and growth beginning to slow.  TagsRBA rate policy Australia unemployment Australia employment AUD   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Australian dollar is considerably lower on Thursday. In the European session, AUD/USD is trading at 0.6671, down 1.02%. Employment data shines Australia’s tight labor market got even tighter in October. Total employment jumped by 32,200, up from just 900 in September. The numbers were especially encouraging as full-time employment jumped by 47,100, up from 10,900 prior. The unemployment rate of 3.5%, which was already running at a 50-low, inched lower to 3.4%. The excellent numbers are unlikely to change the Reserve Bank of Australia’s rate policy. The RBA has eased the pace of rate hikes considerably, with two straight increases of a modest 0.25%. The markets have priced in another 0.25% hike at the December 6th meeting, which would bring the cash rate to 3.10%. With rates expected to peak in early 2023 around 3.5% or 3.6%, the end appears in sight for the current rate-tightening cycle. The robust labour market has put upward pressure on wages, which burst higher on Wednesday with a gain of 3.1% YoY in the third quarter, its strongest quarterly gain since 2013. The Reserve Bank of Australia will be wary of a spectre of a wage-price spiral if wages continue to accelerate, which would greatly complicate efforts to curb inflation. US retail sales for October pointed to consumer resilience, despite high interest rates and stubbornly sticky inflation. The headline and core releases both came in at 1.3%, above expectations and a strong rebound from the September data (0.0% headline, 0.1% core). This indicates that the US economy can handle additional rate hikes, with the Fed expected to raise rates to 5.0% or slightly higher. With the benchmark rate sitting at 4.0%, investors would do well to keep in mind that there is still some life left in the current rate-tightening cycle.   AUD/USD Technical 0.6603 and 0.6490 are providing support There is resistance at 0.6750 and 0.6821 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

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

Summary:  With FOMC meeting minutes out and two Fed speakers to stand up, the USD is on watch along with equities that could be at risk of taking a haircut. Any hint of more hawkish comments could spark a knee-jerk reaction to the upside in the USD, which means equities could move into a risk-off mode. Focus is also on NZD with RBNZ poised to hike by 0.75%. The NZDAUD is worth watching given the RBNZ is hiking harder than the RBA can, which theoretically supports NZDAUD. In China, attention will be on how local authorities respond to outbreaks and how commodities respond. Companies that make most of their revenue from China are also in focus like Fortescue Metals (FMG). Plus why buy now pay later equities are again on notice. And the Saxo Strats 2022 World Cup Predictions are here. FOMC minutes and more Fed speakers to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this message hawkishly at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. We have heard multiple Fed speakers over the past week, after a significant downside surprise in US CPI prompted a move lower in Fed’s terminal rate projections and fuelled significant easing of financial conditions as equity and bond markets rallied and the US dollar weakened. Waller and Bullard have tilted on the hawkish side, while the usual-dove Brainard remained more balanced as she repeated the message on cumulative tightening and being data-dependent. Daly, Mester, George and Bullard will be on the wires this week. In China, attention will be on how local authorities respond to outbreaks and implement pandemic control measures. Watch how commodities respond The economic calendar in China is light this week. However authorities may respond to China’s first Covid-related death in almost six months and the surge in new cases, which have hit their highest levels since April last year. There is concern there could be tighter restrictions, while China implements its new 20-point tweaking covid restriction plan, aimed at minimising disruptions to people’s daily lives and the economy, while adhering to zero-Covid. Officials will find it difficult to balance this, as well as the surge in cases. As such, commodities pegged to Chinese demand are front and centre again this week. The iron ore price is lower on Monday down 4% on fears China could increase restrictions, but the key steel ingredient holds onto a gain of 23% this month. This means stocks that make most of their revenue from China are also in focus like Fortescue Metals (FMG) which is up 30% this month, after China announced a somewhat property rescue package. Oil prices will continue to remain volatile as well as global growth and China lockdowns remain on watch, and the deadline for European sanctions on Russia crude also looms. Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. RBNZ’s hawkishness to continue to outperform while Riksbank to play catchup The monetary policy decision from the Reserve Bank of New Zealand (RBNZ) will be key on Wednesday to determine the direction of NZD, which has seen strong gains over the past month from higher hawkishness. After a series of 50bps rate hikes, there are some expectations that RBNZ could deliver a 75bps rate hike this week, as inflation and labour market conditions support the case for further front-loading. Inflation has reached 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target. Most members of the RBNZ shadow board also supported a 75bps rate hike. Meanwhile, the Riksbank has been lagging other G10 central banks in tightening policy and is now playing catch up after delivering a 100bp hike in September. The Riksbank is expected to deliver a 75bps hike on Thursday while another 100bps hike can’t be ruled out. Key earnings to watch this week; from Virgin, to Dell to two Chinese companies  Virgin Money, which is one of the UK’s biggest banks reports earnings this week, as well as the agricultural giant Deere & Co and the PC juggernaut, Dell. Separately, as discussed in Peter Garnry’s note, the highlight may be from Kuaishou Technology and Xioami, as Chinese equities have recently rallied amid the country’s fine-tune pandemic control measures. Nonetheless, increasing regulation in the private and technology sectors have still caused headwinds. The two Chinese earnings results are not expected to be blockbusters, but their outlooks may give investors a glimpse through the curtain. Buy now pay later equities again on notice Buy now pay later (BNPL) companies could be further bruised this week, with the Australian government considering policies that could see BNPL firms subject to the same rules as credit card providers. This could not only affect Australian firms but global companies which operate in Australia, such as Block (SQ, SQ2) - which owns Afterpay and Affirm (AFRM). The Australian government is weighing up options to strengthen the BNPL Industry Code, and perhaps introduce an affordability test or put the BNPL companies under the Credit Act. Such a move would ensure BNPL companies that operate in Australia, would work within the guardrails as other credit providers. Companies to watch include Zip, Block and Affirm. Sentiment could also flow to other BNPL companies including Japan’s GMO Payment Gateway and India’s Paytm. Saxo Strats 2022 World Cup Predictions: the Netherlands has the highest probability of being the champion In this article, Peter Garnry, Saxo’s Head of Equity Strategy shows how Saxo Strats used quantitative analysis to predict the winner of the 2022 World Cup and came up with a non-consensus result: expecting the Netherlands to win.   Key economic releases & central bank meetings this week Monday, Nov 21 Germany Producer Prices (Oct) Taiwan Export Orders (Oct) Tuesday, Nov 22 New Zealand Trade (Oct) Eurozone Consumer Confidence (Nov, flash) Wednesday, Nov 23 Japan Market Holiday Australia S&P Global Flash PMI, Manufacturing & Services UK S&P Global/CIPS Flash PMI, Manufacturing & Services Germany S&P Global Flash PMI, Manufacturing & Services France S&P Global Flash PMI, Manufacturing & Services Eurozone S&P Global Flash PMI, Manufacturing & Services US S&P Global Flash PMI, Manufacturing & Services New Zealand Cash Rate (23 Nov) Singapore Consumer Price Index (Oct) United States Durable Goods (Oct) United States Initial Jobless Claims United States UoM Sentiment (Nov, final) United States New Home Sales (Oct) US Fed FOMC Meeting Minutes (Nov) Thursday, Nov 24 US Market Holiday Japan au Jibun Bank Flash Manufacturing PMI South Korea Bank of Korea Base Rate (Nov) Japan Leading Indicator (Sep) Germany Ifo Business Climate (Nov) Friday, Nov 25 US Market Holiday (Partial) New Zealand Retail Sales (Q3) Singapore GDP (Q3, final) United Kingdom GfK Consumer Confidence (Nov) Germany GDP (Q3) Germany GfK Consumer Sentiment (Dec)   Key earnings releases this week Monday: Virgin, Compass, Agilent Technologies, Zoom Video, Dell Technologies Tuesday: Kuaishou Technology, Medtronic, Analog Devices, VMware, Autodesk, Dollar Tree, Baidu, HP, Best Buy Wednesday: Xioami, Prosus, Deere Friday: Meituan, Pinduoduo Source: https://www.home.saxo/content/articles/macro/saxo-spotlight--21-nov-2022-no-video-21112022

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

AUD/USD is aiming to stabilize above the 0.6760 hurdle for further gains. The US Dollar is displaying a subdued performance as the overall market mood is extremely bullish. Australian Retail Sales data is expected to decline to 0.3% vs. the former release of 0.6%. The AUD/USD pair is displaying a lackluster performance in the Asian session amid a quiet market mood. The Aussie asset has managed to reclaim the 0.6760 hurdle after a minor sell-off in early Tokyo. Volatility in the currency market has been squeezed dramatically as trading activity is low in the United States due to Thanksgiving Day. Meanwhile, the US Dollar is displaying a subdued performance in the Tokyo session after a wild move in early trade. The US dollar has turned sideways as the economic calendar has nothing much to offer. As odds for a slower rate hike by the Federal Reserve (Fed) have strengthened, the alpha generated by US Treasury bonds is under investors selling list. The 10-year US Treasury yields have extended their losses to near 3.66%. Investors are pouring funds into the US Treasury bonds and risk-sensitive assets on the expectation that a shift to lower rate hike measures by the Fed in its December monetary policy meeting will accelerate economic projections. The dictations from the Federal Open Market Committee (FOMC) have already cleared that deceleration in the rate hike pace is necessary to reduce financial risks. On the Australian dollar front, investors are shifting their focus toward the release of Retail Sales data. The economic data is expected to decline to 0.3% vs. the prior release of 0.6% on a monthly basis. A decline in consumer demand would delight the Reserve Bank of Australia (RBA) as lower retail sales will force the producers to lower their prices to accelerate demand. This might result in a decline in inflation ahead.  

This week, the New Zealand dollar received substantial support from the Reserve Bank of New Zealand: the central bank fully justified the hawkish hopes of most experts by raising the interest rate by 75 basis points. And although the central bank implemented the base scenario, the kiwi still showed increased volatility. For instance, the NZD/USD pair updated its multi-week high to 0.6282. But in this case we cannot be sure about the success of the uptrend - the "dark horse" here is the greenback, which can significantly strengthen its positions ahead of the December FOMC meeting. That's why it is best to "monetize" the results of the RBNZ's November meeting with the help of cross-pairs that have the kiwi in it. And, in my opinion, the best option here is the AUD/NZD cross. Take a look at the weekly chart of this pair. The price has been falling steadily and consistently (though with corrective pullbacks) for the second month in a row, since early October. This means that we are dealing with a noticeable downtrend, which has a rather strong fundamental basis. It is expressed primarily (and mostly) in how the rates of the RBNZ and Reserve Bank of Australia are uncorrelated. The RBA slowed the pace of tightening back in September, complaining about the side effects of aggressive policy. And recently the RBA has been giving signals about a possible pause in the first half of next year. And although these signals are only heard in the list of hypothetical options, the market is still cautious. In my opinion, it is quite reasonable. Let's look back on the minutes of the last RBA meeting. The text of this document indicates that the central bank has no predetermined trajectory for the rate hike. Members of the central bank do not exclude two options: 1) a return to a 50 bps hike (the central bank is currently raising the rate in 25 bps); and 2) a suspension of monetary policy tightening. In my opinion, the Australian central bank will continue to raise the rate by 25 bps at the next meetings, but will end the current cycle of monetary tightening at a lower level relative to the RBNZ. The OCR rate is currently at a 14-year high (4.25%, RBA at 2.85%), with the New Zealand central bank still stating that "there is still a lot to do" as inflation remains at unacceptably high levels. At the previous (October) RBNZ meeting, the central bank raised the rate by 50 bps, as it did at the previous four meetings. However, at the final press conference, RBNZ Governor Adrian Orr admitted that 75 bps was among the options under consideration. At that time, the central bank was hesitant to accelerate monetary tightening, but the inflation data released a little later gave the RBNZ members determination in November. As a reminder, inflation in New Zealand soared again in the third quarter, well above forecast levels. The consumer price index rose 2.2% in quarterly terms (against a forecast of 1.5%) and jumped to 7.2% year over year, against a forecast of a slowdown to 6.5%. Given the inflation trends, as well as Orr's hawkish rhetoric, we can assume that the monetary policy tightening will continue to slow down next year. For example, currency strategists at the UOB have revised their earlier forecasts and moved the current cycle ceiling to 5.5%. In their view, the RBNZ will reach this target in the third quarter of 2023, after which the process of monetary policy tightening will be paused, followed by a rate cut in 2024. The RBA, for its part, is relaying softer language, while not ruling out dovish decisions. For example, at the end of its last meeting, RBA Governor Philip Lowe said that members of the central bank "considered it appropriate to raise rates at a slower pace." At the same time, he noted that the members discussed the implications and costs of not raising rates, since the central bank "takes into account the pressures of higher rates and inflation on household budgets." Thus, Lowe allowed a pause in the process of tightening monetary policy. Thus, the current fundamental background contributes to the further decline of the AUD/NZD cross-pair. The bearish scenario is also evidenced by the technical picture: the pair is between the middle and bottom lines of the Bollinger Bands indicator on the daily chart, as well as under all the lines of the Ichimoku indicator, which shows a bearish Parade of Lines signal. It is better to use any corrective surges to open short positions to the first support level of 1.0750 (the bottom line of the Bollinger Bands indicator on the daily chart). The main bearish target is 1.0700 (lower limit of the Kumo cloud on the one-week timeframe).       Relevance up to 01:00 2022-11-27 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328219

US Wall Street returns after the Thanksgiving holiday and what a week we have in store. The jobs report on Friday is the obvious highlight, with Fed policymakers keen to see further signs of inflationary pressures easing and less tightness in the labour market. There’s a whole host of other data due next week as well including the core PCE price index – the Fed’s preferred inflation measure – GDP, income, spending, jobless claims, and more. We’ll also hear from Fed policymakers throughout the week including Chair Jerome Powell on Wednesday. EU An action-packed week for Europe, with a plethora of key economic data and ECB policymaker appearances. In the run-up to the ECB rate decision on 15 December, that commentary is going to provide crucial insight into which way the committee is leaning, with another 75 basis points currently heavily priced in. With that in mind, the flash CPI release stands out as the one to watch on Wednesday. UK The UK has repaired some of its tarnished reputation in recent weeks but the economy is still likely in recession and it won’t be an easy road back. There isn’t much data next week to support or refute that but there are appearances from various BoE policymakers that will be of interest. Russia A few economic numbers of note next week include GDP, retail sales, unemployment, real wages, and the manufacturing PMI. Unemployment is expected to tick higher again to 4.1% from its September low of 3.8%. South Africa The SARB continued its aggressive tightening cycle in November with another 75 basis point hike, taking the repo rate to 7%. The central bank expects inflation to remain above its 3-6% target range until the second quarter of next year and only return to the mid-point in the second quarter of 2024. Next week brings the release of unemployment data on Tuesday. Turkey As expected, the CBRT cut rates by 1.5% in November and ended its easing cycle, leaving the policy rate at 9%. Next week its quarterly GDP and the manufacturing PMI on offer as traders look for clues as to the cost of the monetary policy experiment on the economy. Switzerland A data-heavy week that includes the PMI survey and inflation on Thursday – which the SNB has repeatedly stressed is too high – GDP on Tuesday, and KOF and ZEW surveys on Wednesday.  China Official Chinese manufacturing and non-manufacturing PMIs for November will be released on Wednesday as well as the Caixin Manufacturing PMI.  As these figures have been fluctuating above and below the 50-the threshold separating contraction from expansion for the past few months, they suggest that the Chinese economy is still hovering between contraction and expansion. However, the long-term positive fundamentals of the Chinese economy remain unchanged. Industrial profits figures are also released over the weekend. India A number of interesting economic releases next week including GDP on Wednesday and the manufacturing PMI on Thursday. Australia & New Zealand Inflation in Australia and New Zealand remains high, and the new Governor of the Reserve Bank of Australia, Philip Lowe, has said in a speech that he is determined to ensure that the current high inflation is temporary, while the RBA is expected to raise interest rates further in the future.  The RBNZ’s 23 November central bank rate meeting hawkishly raised rates by 75 basis points to 4.25% to continue the fight against inflation, and the market now expects the RBNZ’s terminal rate may rise to 4.75%.    Next week, the focus will be on Australian retail sales and CPI for October on Monday and the speech by the new RBA Governor Philip Lowe on Wednesday. Other data released throughout the week will also be of interest. Japan Coming up next week is data on unemployment, retail sales, and industrial production for October as well as the latest manufacturing PMI for November.  Singapore At the 29th APEC Economic Leaders’ Meeting on 17 November, President Xi Jinping met with Singaporean Prime Minister Lee Hsien Loong in Bangkok. The China-Singapore relationship is forward-looking, strategic, and exemplary, Xi said. Lee Hsien Loong said Singapore sees China’s development as positive, wishes the GDI well, and will explore ways to participate. Both countries expressed their willingness to continue to deepen their cooperative relationship and work together to promote new progress in the all-around partnership between the two countries as they move with the times. According to Caixin Global, on 22 November, Singapore police said it was investigating Binance. This comes after the Monetary Authority of Singapore noted that Binance was being investigated as it may have violated the Payment Services Act. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  The risk-off mood at the onset of the new week is mostly driven by protests in China over the zero covid policy. This comes after China’s announcement to cut the reserve requirement ratio by 25bps on Friday, which is unlikely to be enough to offset demand weakness. US equity futures gapped lower, and the US dollar got a safe-haven bid as well. Commodity markets are likely vulnerable to this risk aversion and dollar gains, with crude oil prices testing lows as Russian oil price cap discussions resume today. The key week ahead for US data and Fed as Powell takes the stage on Wednesday, but the focus today will be on China and a likely hawkish tilt in the comments from Fed’s Bullard. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished the holiday-shortened week with modest weekly gains In a shortened session with thin trading, the S&P 500 Index finished flat and the Nasdaq 100 Index slid by 0.7%. Over the week, S&P 500 gained 1.6% and Nasdaq 100 was up 0.7%. Among the S&P 500 sectors, real estate, utilities, and healthcare gained while communication services, and information technology were the laggards. Activision Blizzard (ATVI:xnas) dropped 4.1% on reports that the U.S. antitrust regulator might file a lawsuit to bar Microsoft (MSFT: xnas) from acquiring the video games developer. Manchester United (MANU:xnys) surged for the third day in a row, up 13% on Friday or 65% for the week, as the controlling shareholder is exploring a sale. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) advanced with yields falling during the week on the dovish-leaning FOMC minutes U.S. treasuries gained in price and lower in yields last week. The 10-year yield dropped 15bps to 3.68%. The market is increasingly pricing in a recession as the 3-month treasury bills vs 10-year treasury notes spread went to minus-64bps, a level usually seen within 12 months preceding the onset of a recession. For a detailed discussion of our take on the outlook of bonds, please refer to this note we published last Friday. We are having a busy and important calendar this coming week with several potentially market-moving data and events. The JOLT report on Wednesday and the jobs report on Friday will tell us about the state of the U.S. job market. The PCE scheduled to release on Thursday is the Fed’s key inflation gauge. Fed Chair Powell will speak at the Brookings Institute about the economic outlook and the labor market. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Investors were weighing new government measures to support the property sector against the alarmingly explosive uptrend in daily new Covid cases and the reports that megacities returning to the practice of movement restrictions and lockdowns. On Friday, Hang Seng Index declined 0.5% while CSI 300 climbed 0.5%. Over the week, Hang Sang Index fell 2.3% and CSI 300 edged down 0.7%. Chow Tai Fook Jewellery Group (01929:xhkg), tumbling 15.5%, was the biggest loser in the Hang Seng Index on Friday. The jeweller lowered mainland China same-store-sales growth (SSSG) to a high-single-digit year-over-year decline over the half-year from Oct 2022 to Mar 2023. The Australian share market is just 5% off its all-time high; but seems vulnerable The Aussie share market has gained 12% from its October low, after rising 1.5% last week; with Virgin Money up the most, about 23%, on upgrading its outlook, while gold company Ramelius Resources rose 15% on maintaining its production outlook. This week stocks exposed to China are vulnerable of a pullback given forward earnings are likely to be downgraded following further China lockdowns and protests. It also means commodities, oil – iron ore, copper, lithium may see demand slow down and their prices fall – that’s important as its underpin some of our largest’ s companies profits. Fresh data on Friday showed the major iron ore companies, BHP, Rio, Fortescue, will be shipping almost 6% less than last year in the final quarter of this year. So the risk is the situation in China worsens, and iron ore shipments could continue to fall and hurt Fortescue, BHP and Rio. Early Monday AM, iron ore trades 0.6% lower. Be mindful investors could be looking to take profits or write options for downside protection in case markets fall on China concerns. Inversely; stocks not exposed to China could likely continue to rally given its first Christmas with no global lockdowns (excluding China). Consider looking at retailers doing well following Black Friday sales and ahead of the likely Santa rally; Shares in JB Hi Fi, Harvey Norman, Premier Investments (owner of Jay Jays and Peter Alexander) are all trading up 20% from June. FX: Dollar getting a safe-haven bid In the previous weeks, we have often argued that the USD is turning more risk-sensitive rather than being yield-sensitive with most of the interest rate story being priced in by the markets now. A confirmation of that trend was seen this morning when US 10-year yields stayed below 3.7% at the Asia open, while the USD rose higher amid a safe haven bid due to the protests in China. Biggest losers on the G10 board were the AUD and NZD, both down 0.5% with the risk-off move. The Japanese yen was more stable, depicting a risk-sensitivity as well, and USDJPY stayed range-bound around 139.30. EURUSD Crude oil (CLZ2 & LCOF3)to be weighed by China turmoil and high Russia cap As hopes of a China reopening retreated last week with a fresh surge in cases, crude oil prices fell sharply with WTI down ~5%. Meanwhile, EU talks on a cap on Russian oil have hinted at a higher price of $65-70/barrel, which suggests Russia’s supply to international markets could continue. Talks are likely to continue this week, and the protests in China mean more short-term headwinds to oil demand outlook are on the horizon. China’s central bank announced a cut in RRR, but that is unlikely to fully offset the demand weakness concerns. WTI future traded around $76/barrel in the Asian morning while Brent was below $84, and focus is likely to shift to the OPEC meeting on December 4 after we get past the cap negotiations. There were also reports that Iraq could increase oil export capacity, to add 1mn to 1.5mn barrels/day by 2025   What to consider Protests against Covid lockdowns sprang up in several Chinese cities as local governments tightened restrictions Anger over suspected delays to rescue from a deadly fire burst into anti-lockdown protests in Xinjiang. After a fire at a locked-down apartment killed 10 people, hundreds of angry residents in Urumqi, Xinjiang took to the street to protest against the Covid lockdown imposed more than three months ago. Meanwhile, daily new cases shot up to a record high of 39,506, with Beijing, Guangzhou, Chongqing, and Shanghai significantly tightening movement restrictions. Video footage and photos on social media showed that protests against Covid restrictions sprang up in several other cities over the weekend, including Wuhan, Nanjing, Beijing and Shanghai. China’s PBOC cut the reserve requirement ratio (RRR) by 25bps The People’s Bank of China (PBOC) announced a reduction of 25bps for all banks except for some small which had already had their RRR cut to 5% earlier. The weighted average of RRR across all banks falls to 7.8% from 8.1% after the latest move. The PBOC projects that the reduction in RRR will make available to banks an additional RMB400 billion. The 25bps cut this time, the same as the cut in April this year, was small by historical standards when 50bp or 100bp cuts seemed to be the norm. It helps improve banks’ funding costs but it may do little to boost the economy as the demand for loans is subdued. RBA’s Lowe still sees a strong demand; but retail sales turned negative The Reserve Bank of Australia Governor Lowe appeared before the Australian parliament's Senate Economics Legislation Committee and said that demand is still too strong relative to supply. He said he is unsure about labor market, and wage growth is consistent with inflation returning to target. He was worried about housing supply and expects to see rental pressure over the next year. Australia’s October retail sales, however, dipped into negative territory for the first time this year, coming in at -0.2% MoM vs. expectations of +0.5%.  The U.S. bans telecommunications equipment from China’s Huawei, ZTE and more The U.S. Federal Communications Commission said on Friday that the U.S. had decided to ban the import and sale of telecommunication equipment from China’s Huawei Technologies, ZTE, Hytera Communications, and surveillance equipment makers Dahua Technology and Hangzhou Hikvision Digital Technology. The U.S. regulator said these Chinese telecommunication equipment makers pose “an unacceptable risk” to U.S. communication networks and national security. Chevron gets US license to pump in Venezuela Chevron had been banned from pumping due to US sanctions against the government of Venezuelan President Nicolás Maduro. But WSJ reported that on Saturday, the US said it will allow Chevron to resume pumping oil from its Venezuelan oil fields. The shift may open the door to other oil companies that had operated previously in Venezuela, despite the near-term headwinds and the massive investments that may be needed.  Pinduoduo (PDD:xnas) is scheduled to report Q3 results on Monday After a strong beat for Q2, analysts are expecting Pinduoduo’s Q3 results to remain solid with Q3 revenue growth to come at 44% y/y and the EBITDA margin to stay at healthy levels around 21.2%. Was Q3 margin pressure the canary in the coal mine? According to the analysis done by Peter Garnry, with 97% of the companies having reported, S&P 500 earnings were down 2.5% q/q making Q3 the worst earnings season since the market bounced back from the abyss during the early days of the pandemic. European and Chinese earnings have been even worse declining around 9% q/q driven by more intense margin pressures than observed in the US. On revenue European companies did the best with revenue up 6.7% q/q compared to only 3.9%b q/q for S&P 500. The average q/q revenue growth rate in the past two years was 5.3% in Europe and 3.5% in the US. Part of the difference can be explained by the stronger USD. The key dynamic for equities next year is the evolution of operating margins and if they go down to average levels in the past then headwinds will be too much for companies, and lower earnings next year will likely follow.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-market-insights-28-nov-2022-28112022

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

Summary:  Dramatic scenes of widespread protests in China against Covid policies there have pulled sentiment lower, with US yields dipping to new local lows and crude oil prices pushing on cycle lows even after Friday’s drop. The USD has firmed against most currencies, but the Japanese yen is stronger still as the fall in yields and energy prices support the currency. This is a sudden powerful new distraction for markets when this week was supposed to be about incoming US data.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures failed to touch the 200-day moving average in Friday’s trading retreating slightly into the weekend. This morning the index futures are continuing lower bouncing around just above the 4,000 level. The US 10-year yield declining to 3.65% with the 3.5% level being the likely downside level the market is eyeing is naturally offering some tailwind for equities in the short-term. However, the key dynamic to get right now in the medium term is the potential earnings recession caused by margin compression as the economy slows down and wage pressures remain high. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Mainland China and Hong Kong stock markets retreated as investors were wary about the surge in daily new Covid cases across China and the outburst of anti-strict-control protests in several mega cities, including Beijing and Shanghai. The cut in reserve requirement ratio by the central bank on Friday evening did not give the market much of a boost. Hang Seng Index and CSI 300 plunged more than 2% each. The China internet space fell 2%-5%. Macao casino stocks bucked the trend and rallied following the Macao SAR Government’s announcement to renew casino licenses with all incumbent operators. Wynn Macau (01128:xhkg) jumped nearly 16%. The three leading Chinese catering chains listed in Hong Kong gained 4% to 6%. USD and JPY firm overnight as Chinese Covid protests drag on risk sentiment The US dollar was higher overnight against most currencies even as US treasury yields hit new cycle lows as widespread protests in China against the Covid policies there are weighing heavily on risk sentiment. Hardest hit among G10 currencies has been the Aussie, with AUDUSD trading back below 0.6700 after pulling above 0.6780 at one point on Friday. USDCNH jumped above the important 7.200 level. The hit to yields and perhaps lower crude oil prices are driving a strong revival in the Japanese yen, which traded higher even against the US dollar overnight, taking USDJPY back toward the recent lows overnight. This is a sudden new distraction for FX traders, when this week was supposed to be all about the incoming US economic data, including the October PCE inflation data up on Thursday and the November jobs data on Friday. Crude oil plunges as China unrest rattles markets A weak sentiment spread across commodities as markets opened in Asia with crude oil, copper and iron ore all trading sharply lower following a weekend that saw waves of unrest in China, the world's biggest consumer of raw materials. Protest and boiled up frustration against President Xi’s increasingly unpopular anti-virus curbs erupted over the weekend, raising the threat of a government crackdown. While the short-term demand outlook may take a hit and add further downside pressure to prices, the eventual reopening is likely to be supported by massive amounts of stimulus. The market is also watching ongoing EU price cap discussions, next week’s OPEC+ meeting and rollout of an embargo on seaborne Russian crude and Chevron receiving a license to resume oil production in Venezuela. Gold (XAUUSD) Gold trades unchanged with safe haven bids in bonds and the dollar offsetting each other, while silver (XAGUSD), due to its industrial metal link, trades down more than 2% following a weekend of covid restriction protests across China. After finding support in the $1735 area last week, a break above $1765 may signal a return to key resistance at $1788, but lack of ETF buying still makes it hard to confirm a major change in direction. Aside from China, the market will be watching incoming US data for any signs of a slowdown in the pace of future rate hikes (see below) US treasuries find safe haven appeal, driving new local lows in yields. (TLT:xnas, IEF:xnas, SHY:xnas) The risk-off mood overnight is driving strong safe haven flows into US treasuries, as the 10-year benchmark traded to new local lows below 3.65%, with little room left to the pivotal 3.50% level. The 2-10 yield slope hit a new cycle extreme of –80 basis points overnight, a deepening indication of an oncoming recession. The 3-month treasury bills vs 10-year treasury notes spread went to minus-64bps, a level usually seen within 12 months preceding the onset of a recession. For a detailed discussion of our take on the outlook of bonds, please refer to this note we published last Friday. This week, interesting to see how the market balances the implications of what is unfolding in China versus incoming data in the US, especially the November jobs report on Friday. What is going on? Protests against Covid lockdowns in several Chinese cities Anger over suspected delays to rescue from a deadly fire burst into anti-lockdown protests in Xinjiang. After a fire at a locked-down apartment killed 10 people, hundreds of angry residents in Urumqi, Xinjiang took to the street to protest against the Covid lockdown imposed more than three months ago. Meanwhile, daily new cases shot up to a record high of 40,052, with Beijing, Guangzhou, Chongqing, and Shanghai significantly tightening movement restrictions. Video footage and photos on social media showed that protests against Covid restrictions sprang up in several other cities over the weekend, including Wuhan, Nanjing, Beijing, and Shanghai. China’s PBOC cut the reserve requirement ratio (RRR) by 25bps The People’s Bank of China (PBOC) announced a reduction of 25bps for all banks except for some small which had already had their RRR cut to 5% earlier. The weighted average of RRR across all banks falls to 7.8% from 8.1% after the latest move. The PBOC projects that the reduction in RRR will make available to banks an additional RMB400 billion. The 25bps cut this time, the same as the cut in April this year, was small by historical standards when 50bp or 100bp cuts seemed to be the norm. It helps improve banks’ funding costs, but it may do little to boost the economy as the demand for loans is subdued. The U.S. bans telecommunications equipment from China’s Huawei, ZTE and more The U.S. Federal Communications Commission said on Friday that the U.S. had decided to ban the import and sale of telecommunication equipment from China’s Huawei Technologies, ZTE, Hytera Communications, and surveillance equipment makers Dahua Technology and Hangzhou Hikvision Digital Technology. The U.S. regulator said these Chinese telecommunication equipment makers pose “an unacceptable risk” to U.S. communication networks and national security. RBA’s Lowe still sees a strong demand; but retail sales turned negative The Reserve Bank of Australia Governor Lowe appeared before the Australian parliament's Senate Economics Legislation Committee and said that demand is still too strong relative to supply. He said he is unsure about labor market, and wage growth is consistent with inflation returning to target. He was worried about housing supply and expects to see rental pressure over the next year. Australia’s October retail sales, however, dipped into negative territory for the first time this year, coming in at -0.2% MoM vs. expectations of +0.5%. Chevron gets US license to pump in Venezuela Chevron had been banned from pumping due to US sanctions against the government of Venezuelan President Nicolás Maduro. But WSJ reported that on Saturday, the US said it will allow Chevron to resume pumping oil from its Venezuelan oil fields. The shift may open the door to other oil companies that had operated previously in Venezuela, despite the near-term headwinds and the massive investments that may be needed. Bullard and Powell speak – pushback against easing financial conditions? While the economic data continues to slow, and markets continue to cheer on that, it will key for Fed members to bring the focus back to easing of financial conditions and consider what that means for inflation. Chicago Fed national financial conditions index eased further in the week of November 18, bringing financial conditions to their easiest levels since May. Most of the Fed members that have spoken since that soft CPI release for October have pushed back against pivot expectations, but it hasn’t been enough. Further pushback is still needed if the Fed is serious about bringing inflation under control, and only the most hawkish members of the committee Bullard and Powell may be able to deliver that. Both will be on the wires this week. Bullard speaks on Monday while Powell discusses the economic outlook and labor market on Wednesday. Other Fed members like Williams, Bowman, Cook, Logan and Evans will also be on the wires. Commodity companies exposed to China are vulnerable for further pull backs This week focus is on companies exposed to China, given forward earnings are likely to be downgraded following further China lockdowns and protests. Be cautious that investors could be looking to take profits or write options for downside protection in commodity exposed equites. Also note, on Friday fresh data showed that the major iron ore companies, BHP, Rio, Fortescue, are likely to be shipping almost 6% less than last year, in the final quarter of this year, and if lockdowns worsen, iron ore shipments could continue to fall and hurt iron ore majors' forward earnings and shares. On Monday in Asia, the iron ore (SCOA) fell 1.6% dragging down shares of ASX listed BHP, and Rio Tinto, who both lost about 1%+. What are we watching next? Weighing the sudden new intrusion of the Chinese protests story versus incoming US data The recent narrative has been that markets have room to celebrate the downward shift in Fed tightening expectations and hopes that an eventual opening up of China’s economy will help boost global growth. The widespread protests at the weekend have changed the plot, driving new uncertainty on how things will develop and possibly outweighing a considerable portion of the implications of the next important data macro data points out of the US, especially the Friday November jobs report. As well, we’ll have a look at the ISM Manufacturing survey for the month on Thursday. The situation in China aside (which it won’t be), the question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Apple production risk is on the rise. The protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro which was a Morgan Stanley estimate and was published before the intensified issues at the Apple manufacturing site. Earnings to watch 98% of the S&P 500 companies have reported Q3 earnings reducing the earnings release impact from US equities. But European and Chinese companies are still reporting although the volume of earnings releases is also getting lower. Key earnings release to watch today is Pinduoduo which is expected to grow revenue by 44% y/y with EBITDA margin expanding to 21.2% as their online marketing revenue and uptake remain strong despite the slowing Chinese economy. Monday: Pinduoduo, Capitaland, H World Group Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 1400 – ECB President Lagarde to speak 1530 – US Nov. Dallas Fed Manufacturing 1700 – US Fed’s Williams (voter) to speak 1700 – Us Fed’s Bullard (voter 2022) to speak 2330 – Japan Oct. Jobless Rate/Retail Sales Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-28-2022-28112022

The Australian dollar fell after the RBA governor said Australia had a better chance of a soft landing of the economy than any other developed country. First of all, Philip Lowe drew attention to a fairly successful effort to curb wage growth in the country, allowing inflation to stay well within the limits set by the regulator. Om Monday, Philip Lowe spoke before the Senate estimate hearing in Canberra. In regard to achieving a soft landing for the economy, he said, "it's not guaranteed but where I sit today, I think we have a better chance than most other countries of pulling it off." He added that the best outcome for Australia would be for wages to pick up as they have, but not go too much further. The wage growth in Australia is now at a weaker rate than in other countries, which will allow the governor to count on a quick victory over inflation once the world situation stabilizes. As Lowe explained, the difference with other countries on this issue stemmed from the fact that the RBA was the first central bank to reduce the pace of interest rate hikes to a quarter percentage point at its last two meetings. The central bank is expected to raise interest rates to 3.1% next week from the current 2.85%, as it does not want to ignore the experience of its counterparts in trying to contain high inflation and bring it back under control. Australian policymakers have created plenty of room to operate, saying they are open to resuming a half-point rate hike if it is necessary. Currently, the RBA predicts that inflation will peak at 8% this year and then decline to 3.25% at the end of 2024. When asked if markets still trust the central bank's policy, the governor said that they did trust. Lowe pointed to the expected inflation rate accounted for by the financial markets over the next five years, which shows that prices in Australia are likely to return to the RBA's 2-3% target range. "That implies the people putting money on the line do trust the RBA," he said. The RBA governor also stressed that he was closely monitoring electricity prices and the situation around the housing market, which is one of the first to respond to high interest rates and points to the possibility of a tipping point in the economy. In his opinion, the situation in the real estate market is now in perfect order and there is no reason to worry. "If we can address those two issues then that will make a substantial contribution in bringing inflation back down over the next couple of years," Lowe told the Senate. He also noted that Australia's economy with a A$2.2 trillion turnover was doing fine with rising rates and coping with high inflation, although recent data suggested that cost-of-living growth was starting to decline. According to the latest data, retail sales in Australia fell by 0.2% in October, the first drop this year, with turnover in all sectors except food also falling sharply this month. This is in addition to weakening consumer confidence and declining real estate prices. Such changes are not surprising, as inflation-adjusted wages are at their lowest level in 11 years, indicating that households are not doing as well as they used to.   Relevance up to 08:00 2022-11-29 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328298

The Australian dollar has started the trading week with sharp losses. AUD/USD is down 0.70% in Europe, trading at 0.6704. China jitters send Australian dollar tumbling Covid cases continue to rise in China despite the government’s zero-Covid policy, and the mass lockdowns have triggered protests across China. The demonstrators have clashed with police and some have even called for Chinese President Xi to step down. The scale of the unrest has sent jitters through the global markets, which are expected to cause new supply-chain issues and chill domestic demand. The unrest in China has put a damper on risk appetite and sent the US dollar higher. The Australian dollar is particularly sensitive to developments in China, as the Asian giant is Australia’s number one trading partner. The Australian dollar fell more than 1% earlier today but has pared some of those losses. Still, if there is further negative news out of China, the Aussie will likely lose more ground. Adding to the Australian dollar’s woes was a soft retail sales report for October. Retail sales fell 0.2% MoM, down from 0.6% in September and below the consensus of 0.4%. It was the first decline since December 2021 and will renew concerns that the domestic economy is slowing down due to the Reserve Bank of Australia’s steep rate-hike cycle. The RBA has eased the pace of hikes but remains wary of a wage-price spiral, and  Governor Lowe has warned that the central bank will not hesitate to return to oversize rate hikes if needed. After an abbreviated week due to the Thanksgiving holiday, it’s a busy week for US releases. CB Consumer Confidence will be released on Tuesday, with the November report expected to dip to 100.0, down from 102.5. The key release of the week is nonfarm payrolls on Friday, which could have a major impact on the Fed’s decision to raise rates by 50 or 75 basis points at the December 14th meeting. Currently, the likelihood of a 50-bp hike is about 75%, versus 25% for a larger 75-bp increase.   AUD/USD Technical AUD/USD is testing support at 0.6706. Below, there is support at 0.6633 There is resistance at 0.6820 and 0.6903 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The Australian dollar has rebounded on Tuesday after a poor start to the week. In the European session, AUD/USD is trading at 0.6737, up 1.28%. What goes down … can go right back up. This has been the story early this week for the Australian dollar, which tumbled 1.5% on Monday but has recovered most of those losses today. The Australian dollar was hit hard after a weak retail sales report and widespread unrest in China over the country’s zero-covid policy. The unrest in China has put a damper on risk appetite, as the result is likely to exacerbate supply chain disruptions and dampen domestic spending. Investors may have sensed an opportunity for profit-taking after the massive slide on Monday, which would help explain the rebound today. Fed members keep up the blitz The Fed doesn’t hold a policy meeting for another two weeks, but the Fedspeak blitz, which started after the soft US inflation report sent the markets in a tizzy, continued in earnest on Monday. Fed member Bullard said on Monday the markets could be underestimating the likelihood of higher rates and that the Fed funds rate will have to reach the bottom end of the 5%-7% range in order to curb inflation, which has been more persistent than anticipated. Fed member Williams added that the Fed needed to do more work to tame inflation, which is “far too high”. Fed member Brainard, a dove, expressed concern about inflation expectations rising above the Fed’s 2% target. The Fed has been aggressive in telegraphing the markets that its rate cycle is far from over, a message we’re likely to continue to hear in the coming weeks.   AUD/USD Technical AUD/USD is testing resistance at 0.6707. The next resistance line is 0.6829 There is support at 0.6633 and 0.6511 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Monthly inflation data not only provides a more timely look at Australia's inflation than the old quarterly series, it has also ushered in some welcome lower numbers 6.9% October inflation (year-on-year) Back to school effect?  Lower Both headline inflation and core rates fall in October Against expectations for an increase, both headline and core inflation rates for Australia's monthly inflation series fell in October. The headline inflation rate fell from 7.3% year-on-year in September to only 6.9% YoY in October. The monthly trimmed mean index inflation rate also fell slightly, to 5.3%YoY from 5.4%.  When we examine the components of the index, we can see that most of the current rate of inflation is being driven by housing components (in particular house purchase costs), food and beverages, and transport. However, this month, it was smaller increases in recreation as well as some moderation in the high rates of food price inflation that led to the lower-than-expected figure for October.  The particular recreation sub-component that provided the biggest impact to the headline rate was holiday accommodation and travel. The Australian Bureau of Statistics (ABS) says of this component "The monthly fall in holiday travel and accommodation was driven by the conclusion of the school holiday period and the end of the peak tourist season for travel to Europe and America".  Contributions to year-on-year inflation rate (pp) CEIC, ING What now for the Reserve Bank of Australia? This drop in inflation vindicates the Reserve Bank of Australia's (RBA) dovish pivot some months ago when it decided to only increase rates at a 25bp per meeting pace. At 6.9%, inflation is still way too high for comfort, but we believe that the RBA will see this as confirmation that it is on the right track, and that further declines could lead them to entertain thoughts of a pause in rates.  We are currently forecasting a fairly low peak in the cash rate target at only 3.6% in 1Q23 next year. But while there remains considerable uncertainty about the future path of both inflation and rates, today's numbers provide us with some encouragement that we are not too far off the right track.  TagsRBA rate policy Australia inflation Australia economy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Markets are in defensive mode ahead of a speech from Fed Chair Powell later today on fears of hawkish pushback against the recent easing of financial conditions and after having priced in significant rate cuts beyond the end of 2023. Economic data releases continue to roll in, with the Eurozone flash November CPI data up this morning after slightly softer inflation releases around Europe this week and US November ADP private payrolls data up today ahead of Friday’s US jobs report.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are still boxed into a tighter and tighter range between the 100-day moving average at 3,927 and the 200-day moving average at 4,051. The key event today is of course the FOMC rate decision and more importantly the subsequent press conference where all eyes are on Fed Chair Jerome Powell following the latest rally due to the recently lower US inflation print. Financial conditions have eased considerably, and Powell will likely not get away with talking about terminal rates if he wants to tighten conditions again in line with their strategy of easing inflationary pressures. After the US market call, there are key earnings from Salesforce and Snowflake which could impact sentiment in Nasdaq 100 futures. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed 0.8% and The CSI 300 gained 0.2% as optimism returned about an exit from the stringent dynamic zero-Covid policy, if not in name, at least gradually in practice in mainland China. Investors looked beyond the disappointing Manufacturing PMI data, which came at 48, weaker than expectations and further into the contractionary territory. The focus of the investors, however, was on the recent supportive measures to the real estate sector and signs of sticking to or even preparing for more relaxation of China’s stringent pandemic control restrictions even as Covid cases are on the rise. Teleco names outperformed, with China Unicom (00762:xhkg) and China Telecom (00728:xhkg) rising 6-7%. USD edging higher ahead of anticipated hawkishness from Fed Chair Powell Concerns are mounting that Fed Chair Powell is set to administer a hawkish broadside to US markets after a powerful easing of financial conditions in recent weeks and the pricing in of a significant Fed policy easing starting in late 2023 (see more below). But USD bulls have their work cut out for them if they expect to reverse the recent USD sell-off, even if we have seen a solid reversal in places. The key zone for EURUSD stretches from the 1.0223 pivot low and down to perhaps 1.0100, while the similar zone for USDJPY stretches from the 142.25 pivot high all the way to 145.00. Crude oil (CLF3 & LCOF3) volatile with large inventory drawdown ahead of OPEC The relief from continued commitment of China officials to ease zero covid restrictions helped crude oil prices gather some momentum early on Tuesday, but the cheer was short-lived as production cut expectations from OPEC+ this Sunday eased as the meeting moved online and economic data from the US and China showed weakening momentum. Focus on speech from Fed Chair Powell given its potential impact on the dollar, and EIA’s weekly report after the API reported a larger than expected crude draw, with inventories down 7.80mm b/d (exp -2.49mm b/d). WTI futures traded around $79/barrel, while Brent trades back below $84 after touching $86/barrel on Tuesday. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) Yields edged up across the yield curve with those in the long end rising the most. The 2-year yield rose 4bps to 4.47% while the 10-year rose 6 bps to 3.74%. Large supply from corporate issuance put some upward pressure on yields. There were about 11 deals with a total amount of about USD18 billion, including USD8.25 billion from Amazon, on Tuesday. Fed Chair Powell to speak later today. (more below) What is going on? Reopening optimism returned in China While the daily new cases continued to surge and anti-restriction protests sprang up across major cities, investors took comfort from the light-touch reactions from the Chinese authorities and hints of preparing to ease the pandemic control measures further. A Party-controlled newspaper in Beijing published a long article reporting the stories of people having recovered from Covid, which seemingly aimed at easing people’s worries about the disease. The National Health Commission issued a memo pledging to increase the vaccination rate of the country’s senior population. In a press conference later in the afternoon, health officers again emphasized increasing the senior population’s vaccination rate as a priority and highlighted the Omicron variants as being less severe than the original virus. Officials and the state-controlled media have taken a light-touch approach to the recent protests and have largely refrained from putting any political stigma on the incidents. Putting these together, investors are taking the development as hints of the Chinese authorities to prepare for further easing in its Covid policy. Apple criticized by possible 2024 presidential hopeful DeSantis, also in the anti-trust spotlight Florida governor Ron DeSantis, a potential rival of Donald Trump for the 2024 presidential nomination, inveighed against Apple for providing “aid and comfort to the CCP” by turning off access in China to the AirDrop app that could be used to organize protests. As well, he warned against Apple’s monopoly powers after Twitter CEO Elon Musk complained that Apple had pulled virtually all advertising from the platform and threatened to remove it from their app store. “Don’t be a vassal of the [Chinese Communist Party] on one hand and then use your corporate power in the United States on the other to suffocate Americans and try to suppress their right to express themselves” DeSantis said. US Senators also weighed in against the company on the issue as anti-trust efforts are afoot in Congress. Crowdstrike beats estimates The US cyber security company reported Q3 revenue of $581mn vs est. $574mn and adj. EPS of $0.40 vs est. $0.31 as the underlying structural growth is still strong in the industry. The Q4 outlook on earnings was much better than expected but the Q4 revenue outlook at $620-628mn vs est. $635mn spooked investors, sending shares down 19%. Management said that the lower guidance was due to increased macroeconomic headwinds. Commodities see November gains on China optimism and Fed Pivot The Bloomberg Commodity Index trades up 2% on the month with strong gains among industrial and precious metals offsetting minor declines in energy and grains. The sector has been supported by a 4% drop in the dollar and sharply lower US bond yields on speculation the FOMC will soon slow its pace of rate hikes. The industrial metal sector trades up 12% on optimism that China may shift away from Covid Zero policies and provide additional stimulus to boost demand in the top metal-consuming economy. Copper, up 8%, is heading for its best month since April 2021 while gold and silver has been supported by the change in direction for the dollar and yields.  Wheat prices in Chicago and Paris scrap the bottom with ample supply, especially from the Black Sea region adding downward pressure. What are we watching next? OPEC+ weekend meeting goes virtual Instead of meeting in Vienna as planned earlier, OPEC+ has now moved its December 4 meeting online which is downplaying expectations of any significant policy change after production cut expectations gathered hopes this week with crude oil prices falling to test key support levels. Some delegates also suggested that the cartel is leaning towards approving the same production levels agreed in October, when a 2mb/d cut in output was announced. Fed Chair Powell to speak today – will he lean hawkish? Fed Chair Powell is scheduled to speak on the economy and labor market at a Brookings Institution event today at 13:30 U.S. eastern time. Market participants are expecting hawkish comments from Powell about higher terminal rates for 2023.  Given the huge shift in market pricing of the Fed policy rate in 2024 (cuts of over 150 basis points from the 2023 rate peak are currently priced by end 2024) the more interesting angle on Powell’s comments are whether he pushes back against the recent strong easing of financial conditions and this anticipation that the Fed will be in full retreat in 2024. The September FOMC “dot plot” projections show a wide dispersion of forecasts, but the median projection is that the policy rate will drop about 100 basis points by end 2024 from end 2023. Earnings to watch Today’s earnings focus is US technology sector earnings from Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to slow down to 14% y/y down from 27% y/y a year ago supporting the growth slowdown in the technology sector. To avoid the negative impact from the earnings release Salesforce must deliver meaningful improvement in profitability or face downward pressure on its share price. Snowflake is expected to see FY23 Q3 (ending 31 October) revenue growth to slow down to 61% y/y down from 110% y/y a year ago. As with Salesforce, Snowflake must deliver significant improvements in profitability to avoid a negative impact from falling revenue growth which current trajectory is worse than estimated just one year a ago. Today:  Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0745 – France Nov. Flash CPI 0830 – UK Bank of England Chief Economist Huw Pill to speak 0855 – Germany Nov. Unemployment Rate / Change 0900 – Poland Nov. Flash CPI 1000 – Eurozone Nov. Flash CPI 1315 – US Nov. ADP Employment Change 1330 – US Fed’s Bowman (Voter) to speak 1445 – US Nov. Chicago PMI 1500 – US Oct. JOLTS Job Openings 1530 – US Weekly DoE Crude Oil and Product Inventories 1735 – US Fed’s Cook (Voter) to speak 1830 – US Fed Chair Powell to discuss Economic and Policy Outlook 1900 – US Fed’s Beige Book 0145 – China Nov. Caixin Manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – November 30, 2022 | Saxo Group (home.saxo)

Summary:  Jerome Powell signals downshift likely next month; stocks surge. Dow Jones enters bull market. ASX200 is a sneeze off its record all time high. Focus is on commodity companies with China easing some restrictions and retailers ahead of potential festive season rally. We cover the three key areas of equities to be across and the stocks you might like to watch, with some already up 80% from their fresh lows What’s happening in markets? The US; Fed Chair Jerome Powell signaled the Fed will likely not be as aggressive next month, and only hike by 50 bps (0.5%), however he suggested the hiking cycle is far from over to slow inflation. He said the Fed will need "substantially more evidence" to ensure prices are moderating, with the path ahead for inflation remaining highly uncertain. However, amid the somewhat dovish pivot, Bond traders coiled back their peak rate expectations to below 5%, and that resulted in treasury yields falling; the 10-year yield fell 11 bps to 3.63%, pushing the dollar down against the entire G-10 basket. As a result, the S&P 500 rose 3.1% to a two-month high, while it notched its longest monthly winning streak since August 2021. The Dow Jones 30, rose 2.2% and entered a bull market, after collectively rising 20% from its September low. Gold spiked more than 1%, with most commodities rallying up supported by the US dollar falling. Crude oil rose 2.9% to $80.44 - getting an extra boost on forward looking optimism that China is encouraging vaccinations, while at the same time the International Energy Agency (IEA) said it expects Russian crude production to fall by some 2 million barrels of oil per day by the end of the first quarter next year. However gains were capped in oil as OPEC+ is due to hold its December 4 meeting and reports swirled that OPEC is not really likely to shift its policy. In Australia, the ASX200 (ASXSP200.1) is 3% away from its record high The Aussie market is up 12% from its October low, with commodities back in focus and rallying after the Fed signals a possibly smaller pace of rate hikes ahead while one key province in China has eased restrictions. The Fed’s somewhat pivot has pressured the US dollar (with the US dollar index down 5.4% from its peak). This is also supporting commodity prices higher, as well as the forward looking optimism on China. Locally, equites also appear supported as monthly inflation data came out weaker than expected yesterday - which supports the RBA remaining dovish and likely only hiking by 25bps (0.25%) next week. However, the important inflation read (quarterly CPI) is due early next year, which will be a more accurate reflection of price rises, and will likely show inflation in Australia is more sticky than monthly inflation read alluded to.(remember the RBA previously mentioned food and energy prices would rise – we didn’t see that reflected in yesterday’s data, but it will likely be reflected in the quarterly CPI read due out next year).   Three considerations and investment areas to watch  Firstly, consider if the best performers of late (who are all commodity companies) can continue to build momentum if stimulus continues in China’s property sector In November, copper-gold company Sandfire (SFR) rose 45%, energy business Origin Energy gained 41% while Australia’s fourth biggest iron ore company, Champion Iron (CIA) rose 35%, with Nickel company Nickel Industries (NIC) following up 33%. So, it’s clear to say we are watching commodity companies closely as we believe the world will still struggle with the lack of tangible supply. Secondly, watch those companies that could benefit from rate hikes not being as aggressive, and from the festive season spending It’s the world’s first festive season not in lockdown (excluding China), so we are watching retailer shares given they will likely benefit from retail shopping. As we’ve also been reporting, it’s worth watching retailers like perhaps JBH, HVN, Premier Investments (PMV), given they will likely benefit from Xmas shopping revenue rising. Also, travel and tourism companies will be on watch with travel-services spending likely to continue to gain momentum. Carnival shares are up 44% from October with the company seeing some of its strongest sales since pre-covid, Royal Caribbean shares are up 83% from July. We are also watching other travel affiliated companies do well, like Boeing, which is up 48% from September, as well as airlines, such as Singapore Airlines, Qantas, Air New Zealand. However we think although the travel and tourism sector, especially airlines, will likely see a pick up in sales amid the seasonality, we wonder if airlines will be able to extend their share price rally into 2023 as fuel costs are not expected offer respite into 2023. This means, those larger companies or those with a wide moat, might be more in focus, as they will be more likely able to sustain the costs pressures. And thirdly, as well, keep an eye on companies making the news Australia’s biggest oil companies will be a focus with the oil price likely to pick up next year. Woodside (WDS) today announced it sees operating cashflow at around $7-9 billion in the next five years. BHP (BHP) is also in a focus with its CEO saying steel demand from China will grow next year. Mike Henry sees China’s economy only experience a short-term slowdown before returning to a long-term growth. Lastly, other companies to watch include those lockdown stalwarts that aren’t doing so well, like Domino’s Pizza (DMP) with the company planning to raise $165 million in capital. Domino’s operates in Australia, NZ, France, Belgium and Asia. Domino’s Pizza shares are down 56% from their covid high. But the market thinks the business could see a turn around in revenue growth next year and the year after. So if you are a long-term investor, that’s food for thought.   For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast.     Source: Daily Dose of financial insights for investors and traders; Fed signals likely downshift, China eases some restrictions. Santa rally? | Saxo Group (home.saxo)

AUD/USD continues to power upwards and hit 10-week highs earlier today. The Australian dollar climbed 1.5% on Wednesday and has edged higher today. In the European session, AUD/USD is trading at 0.6796, up 0.14%. US dollar slides after Powell speech Fed Chair Jerome Powell spoke on Wednesday and gave the markets what they wanted to hear with regard to the December rate hike. Powell strongly hinted that the Fed would slow the pace of rate increases at the December 14th meeting, after four successive 75-bp hikes. Powell said that slowing down at this point “is a good way to balance the risks”, as the Fed Chair is trying to slow the economy while avoiding a recession. The markets duly responded by pricing in a 50-bp rate hike at 80%, up sharply from 65% prior to Powell’s remarks. This sent financial markets higher, while the US dollar was broadly lower. Investors focussed on Powell’s hint that rate hikes will slow at the next meeting, choosing to ignore his comments that rates could rise higher than previously expected and for a prolonged period in order to curb stubborn inflation. The likely easing to 50 bp was a green light for the markets, and what is down the road can be worried about another time. In Australia, Private Capital Expenditure disappointed in Q3 with a reading of -0.6%. This was below the Q2 reading of 0.0% and way off the consensus of 1.5%. The RBA meets on December 6th after having eased on rate hikes, with two straight increases of 25-bp. The cash rate is currently at 2.85%, and there is a good chance that the RBA will again raise rates by 25 bp next week, as it looks to fight inflation while guiding the economy to a soft landing.   AUD/USD Technical AUD/USD is testing resistance at 0.6829. Above, there is resistance at 0.6903 There is support at 0.6707 and 0.6633 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Daily Dose of financial insights for investors and traders for the week ending, December 2. Why gold stocks hit their highest level since July, with the gold price jumping 2%. Why the energy crisis continues; Santos lost an appeal to start a gas project, and a coal company in Australia slashed its output target amid La Nina rains impacting production. What the next catalysts are for markets. WATCH this five minute video.       Markets rally, on inflation easing. ASX200 at a seven month high Aussie share market had it worst day in about four weeks, falling 0.7%on Friday. But despite that, as they say the long term trend is your friend; the ASX200 closed off the week at its highest level in 7 months. The market has gained about 13% from October. Over the week; the market held onto a gain of 0.6%; and the ASX200 is just 4% away from its record all time high. What’s supported markets you might ask? Well economic data this week showed inflation pressures are easing for now. Both in the US and Australia. This offers hope to mortgage holders, corporates and equity markets. Hope that the US central bank, the Fed, won’t need to be so aggressive with rate hikes in two weeks. And in Australia; there’s hope the RBA can potentially stop hiking rates later next year. So markets are forwarding looking, and this is what has been supporting equity markets for now. Big market moves; gold equites shine    Today was all about all that glittered. Gold. Gold stock ripped higher hitting their highest level since July; St Barbara rose 10% after an investment firm bought a major stake in the gold miner. Silver Lake rose 6%. with other gold miners following. It’s all because the gold price made its best weekly gain in four weeks, up 2% today and this week. Remember, gold, the safe haven metal, traditionally does well when times are tough. And overnight the US economic slowdown gained pace with constructions and manufacturing data slowing. The US manufacturing sector fell into a contraction for the first time in two years. So this supports the Fed not being so aggressive with rate hikes. That supports the US dollar potentially continuing to fall. And this supports gold moving up. Economic news in Australia gives the RBA more room to stay dovish  On the economic news front in Australia, Home loan data showed lending is continuing to fall and much more than expected. Home loans fell 2.7% in the month, following the 8.2% drop last month. We think home loan demand will continue to fall and that this will continue to pressure property prices into 2023. Company news Santos lost a court appeal to restart a $3.6 billion gas project, as Indigenous groups were not properly consulted on the plan. Also in energy news, coal producer Coronado cut its production target for the year, as rain from La Nina has prevented it from getting as much coal of the ground that it wanted to. The takeaway here, is that Australia will continue to grapple with a lack of physical energy supply. Which is why we think energy prices will continue to rise next year. The RBA is also of the same view.  What to look for in coming days In the US; the final monthly employment report will be released before the Fed’s next interest rates decision. So tonight what’s released is non-farm payrolls. The market is expecting 200,000 jobs were added to the US in November, which is 60,000 less than October. On December 4; The Organization of the Petroleum Exporting Countries (OPEC) and their allies meet. Although a policy change is seen as unlikely. In Australia next week; the RBA meets on Tuesday. A 0.25% hike is expected.  The Australia Dollar continues to rally  The AUDUSD trades up about 10% from its October low, supported by the fact that China's 3rd biggest city is easing restrictions.    For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast. Source: Daily Dose of financial insights for investors and traders December 2; Gold glitters on recession concerns, Energy crisis back on the agenda | Saxo Group (home.saxo)

The Australian dollar’s has posted small gains today and is trading at 0.6816. After starting the week with sharp losses, AUD/USD has rebounded and hit a 13-week high on Thursday, at 0.6845. All eyes on US nonfarm payrolls Today’s highlight is the US nonfarm employment report, with a consensus of 200,000 for November. This follows a 261,000 gain in October. The US employment market has been surprisingly resilient, considering the sharp rise in interest rates. The employment market has recently started to cool off, but unless today’s NFP release significantly underperforms, it won’t change the Fed’s view that it is still too early to tell if inflation is on its way down. Jerome Powell’s speech on Wednesday sent the US dollar sharply lower, as Powell’s comments were not as hawkish as feared. Powell said that more evidence was needed to show that inflation was falling, and reiterated that rates would likely rise higher than the Fed has projected in September. Still, investors chose to focus on Powell’s broad hint that the Fed would ease the pace of rates next week with a 50-bp move, after four straight hikes of 75 bp. Reserve Bank of Australia Governor Lowe issued a shocking apology about rate policy earlier in the week. Lowe said that it was regrettable that people listened to the RBA saying it wouldn’t raise rates before 2024. but then delivered seven oversized rate hikes in 2022. Many Australians took out mortgages based on the RBA assurance but are now getting squeezed by huge mortgage payments. The RBA meets next Tuesday and is widely expected to raise rates by 25-bp, which would bring the cash rate to 3.10%. Read next: If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya| FXMAG.COM AUD/USD Technical AUD/USD testing resistance at 0.6829 earlier today. Above, there is resistance at 0.6903 There is support at 0.6707 and 0.6633 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

In the first half of December we will have a litany of central bank meetings. The ball will start rolling with Reserve Bank of Australia and Bank of Canada next week, both of which are set to raise interest rates, albeit at a slower pace. The Outlook Economic development since the last RBA meeting has been favorable. The labor market remains extremely tight and the unemployment rate has fallen to its lowest level in half a century. Meanwhile, wage growth accelerated in the last quarter, which is usually a sign of strengthening inflationary forces. The problems with the COVID-19 in China and the closure of this economy because of COVID situation, hits Australia. There is no doubt that Australia, the world's most dependent economy on China, is shaken by the shock wave of the virus. Accounting for one-third of Australia's total exports, it has caused significant economic problems across huge swaths of the Australian economy in recent times. Inflation Against expectations for an increase, both headline and core inflation rates for Australia's monthly inflation series fell in October. The headline inflation rate fell from 7.3% year-on-year in September to only 6.9% YoY in October. How the RBA fight against inflation? The RBA is working very hard to cool economic growth. It raised interest rates extremely quickly, from 0.1% to 2.85% in six months. They are expected to raise them more. Interest rate hikes slow down the economy and fight inflation in a number of ways: households pay more for a mortgage, leaving less for discretionary spending; the australian dolar (AUD) appreciates, driving down imports and discouraging people from buying local produce; The return on savings is higher, which encourages people to save rather than spend, the cost of borrowing is high, which makes businesses less likely to borrow and spend. Interest rate hikes are designed to divert money from spending to local businesses, making those businesses feel like they can't raise prices and wages. The RBA's job is to keep inflation an average of 2 to 3% a year and currently inflation is well above that target. Expectations The latest inflation figures might provide a reprieve for mortgage holders from ongoing escalating interest rate rises when the Reserve Bank meets on December 6 to decide on the official cash rate. The Australian economy continues to run at full capacity, setting the stage for another interest rate hike. Investors say that the cycle of monetary policy tightening may be stopped as soon as this month. This is mainly because inflation fell unexpectedly in October, fueling hopes that the worst was over. With house prices also falling and external threats intensifying as the Chinese economy loses momentum, there are solid arguments for a slowdown in the RBA. Markets currently rate a 75% probability of a quarter point rate hike and a 25% chance of no change at all. Westpac chief economist Bill Evans still believes the RBA needs to raise interest rates by 0.25 percentage points both in December and at its next meeting in February to quell continued inflationary pressures. The RBA said it would watch the data to see how many more rate hikes are needed to cool inflation without crushing the economy. The problem is that most of the data is from a few months ago, before rate hikes became popular. It takes some time for interest rates to take effect.

Summary:  Last week, bonds, commodities, and equities markets got a lift from a Powell speech that seems to have passed the peak hawkishness for now and a new round of encouraging signs of easing pandemic control restrictions in China and braved the hotter-than-expected wage inflation data on Friday. A light economic and earnings calendar plus the Fed entering into a blackout period before the December FOMC, this week will provide investors time to reassess and rebalance their portfolios in the final month of the year. In China, the politburo meeting will be a key event to monitor. US data watch continues as Fed goes into a quiet period Last week was quite a whipsaw for the markets after a dovish reaction to Fed Chair Powell’s speech which failed to add any new information for the markets that have been trained for a hawkish surprise from him over the last few months, to an expectedly higher US NFP print and a jump in the average hourly earnings data for November as well as October revision on Friday which showed sustained tightness in the labor markets. The Fed now goes into a quiet period ahead of the December 14-15 meeting so the focus turns to incoming data (or WSJ’s Nick Timiraos articles/tweets) for further direction in the yields and the dollar. US 10-year yields traded below the support at 3.50% at Friday’s close despite turning higher after the NFP, and the reaction of the dollar was also short-lived. Key data to watch this week will be the ISM services today, to see if the market is gaining sensitivity to recession concerns or still trying to celebrate the slower pace of rate hikes, and PPI on Friday which will likely continue to show a modest deceleration. China’s Politburo meeting is a key event to watch Before the Central Economic Work Conference convenes in mid/late December, the Chinese Communist Party’s Politburo will meet in early December to discuss economic policies and establish the direction and policy framework for the work conference. Investors will pay close attention to the readout from the Politburo meeting for hints about the macroeconomic policy priorities and how they are balanced with the pandemic control strategy. China’s inflation is expected to have moderated in November The Bloomberg consensus is expecting China’s PPI to shrink further by -1.5% Y/Y in November (vs Oct: -1.3% Y/Y) and CPI to slow to +1.6% in November from +2.1% in October. Weak industrial demand in the midst of countrywide pandemic control-related restrictions during the month and weakness in energy prices would likely have contributed to the decline in the PPI. November CPI would have been dragged by base effects and weakness in food prices. China’s new aggregate financing and RMB loans are expected to have bounced in November Market economists, as surveyed by Bloomberg, are expecting China’s new aggregate financing to bounce to RMB 2,100 billion in November from RMB 907.9 billion in October and new RMB loans to rise to RMB 1,350 billion in November from RMB 615.2 billion as People’s Bank of China urged banks to extend credits to support private enterprises including property developers. Less bond issuance by local governments and corporate and weak loan demand however might have weighed on the pace of credit expansion in November. Australia’s central bank to hike rates by 0.25% for the third straight month. What else to watch down under? On Tuesday the Australian dollar will be a focus with the RBA expected to make its 3rd consecutive quarter-point hike, taking the cash rate from 2.85% to 3.1%. Australian monthly inflation data out two weeks ago showed AU inflation is slowing, while weaker than expected jobs data also supports the RBA remaining dovish. However, the closely watched inflation quarterly print is due out early next year, and will be a more accurate reflection of price rises. It will likely show inflation is more sticky with food and energy prices rising, which is contrary to what the monthly CPI alluded to. The bottom line is, the monthly CPI was a little delusionary. At Saxo, we see energy prices continuing to rise into 2023, which is also line with the RBA’s view. Especially as coal prices are back at record high territory ahead of peak demand season. Meanwhile consider the AUDUSD is up ~10% from its October low on hopes of commodity demand picking up from China, with major cities increasingly start to ease restrictions. As for what else to watch in Australia; third-quarter GDP growth data is released on Wednesday; expected to show GDP grew at 6.2% YoY. Then on, Thursday Australia’s trade data and balance is released for October; expected to show a softening, with the trade surplus expected to fall from $12.4 billion to $11.8 billion. Still the AUDUSD is up ~10% from its October low on forwarding thinking that commodity demand from China will increase as some major cities have started to ease restrictions. G7 sets in a price cap for Russian oil, to kick in from Monday The G7 nations have agreed to cap the price of Russian seaborne oil at $60/barrel, with a motive to diminish Russia’s revenues. This price cap is to go in effect on December 5, and represents a discount of ~$27 to the current price for Brent crude, but Urals has been trading at a discount of about $23 in recent days. However the risk of setting a price cap too low is that Russia could slash its output, which would roil markets. It will be important to watch for Russia’s reaction this week, after Putin has repeatedly said that they will not supply oil to countries that implement the price cap. Key earnings Earnings next week are a mish-mash of companies, and include high-end homebuilder Toll Brothers on Tuesday, as it will be interesting to hear their outlook on the new home market after the enormous surge in US mortgage rates and collapse in home sales activity. Broadcom (AVGO: xnas) is the market cap giant of the week to report, with the CEO of the company having said that the semiconductor market will not be affected by the US’ new export restrictions on technology to China.   Key economic releases & central bank meetings this week Monday, Dec 5 U.S. ISM Services (Nov)Eurozone Sentix (Dec)Eurozone Retail Sales (Oct)China Caixin PMI Services (Nov)Singapore Retail Sales (Oct) Tuesday, Dec 6 Germany Factory Orders (Oct)U.K. PMI Construction (Nov)Japan Consumer Spending (Oct)Japan Total Cash Earnings (Oct)Australia Reserve Bank of Australia Policy Meeting (Dec) Wednesday, Dec 7 Germany Industrial Production (Oct)Eurozone GDP (Q3, final)Japan Reuters Tankan (Manufacturing) (Dec)Japan Economic Coincident Index (Oct)China Exports (Nov)Australia Real GDP (Q3) Thursday, Dec 8 U.S. Initial Jobless Claims (Dec 3)Japan GDP (Q3, sec)Japan Current Account (Oct) Friday, Dec 9 U.S. PPIU.S. University of Michigan Consumer Sentiment (Dec)Japan M2 (Nov)China PPI (Nov)China CPI (Nov) From Dec 9 to 15 (not fixed) China New RMB Loans, Aggregate Financing, and Money Supply (Nov) Key earnings releases this week Tuesday: MongoDB, AutoZone, Toll Brothers, FergusonWednesday: Brown Forman, Campbell Soup, GameStopThursday: Broadcom, Costco, Lululemon, ChewyFriday: Oracle Corp, Li Auto Source: Saxo Spotlight: What’s on the radar for investors & traders for the week of 5-9 Dec? US PPI, China’s Politburo meeting, RBA policy meeting | Saxo Group (home.saxo)      

Summary:  Today's financial insights for investors & traders:- Economic reopening plays, iron ore, copper and oil rally on China easing restrictions. Coal trades back at record highs and stocks exposed to China rip higher. Fortescue Metals shares are back in record high territory. Here are the Saxo equity baskets and stocks to watch, plus what's ahead this week, in this six minute video. Economic reopening plays and commodities will be in focus this week with China easing some COVID restrictions On Monday, Shanghai and Hangzhou scrapped PCR testing to enter public venues including on public transport and to enter parks. Shanghai and Hangzhou joined other top-tier cities, Beijing, Shenzhen and Guangzhou in relaxing curbs after mass protests took place against China’s stringent policies last week.In equites, which are forward looking – focus will be on stocks exposed to a potential turnaround in consumption, especially in cities with easing restrictions. Reflecting on Saxo's equity baskets, the best returns in markets on Friday, over the week, and month, have been in in Saxo’s China Consumer and Technology basket.  In Saxo basket you see stocks like Nio, Alibaba are up 40% on the month, Tencent is up 24%, while consumer spending giant JD.com is up 50%. Recall that Hangzhou is home of Alibaba so its rally continue with restrictions easing there from today.Meanwhile Commodities will also be a focus will be on oil with its trading back above US$81, and posting its biggest weekly gain on hopes that demand will increase from China. OPEC+ met at the weekend they committed to their targets for the rest of 2032. We think oil volatility will likely pick up this week with Venezuela’s top refinery halting gas output after a malfunction while further cities in China may also ease some restrictions. Australia’s share market, home of some of the commodity kings, hit a new high on China easing restrictions The benchmark index, the ASX200 (ASXSP200.1) hit a new seven month high on Monday and momentum could continue with China’s easing some restrictions today. The iron ore (SCOA) price rose 2.3% move the steel ingredients’ price back over back above $100 for the first time since August, on hope China could increase demand. The iron ore price is up 38% from its October low. This is benefiting benefit forward earnings of BHP, Rio, Fortescue and Champion Iron with all their shares trading higher today, with those most exposed to China seeing the biggest rallies. Fortescue shares are up 8% taking the miner back to record highs. To get more inspiration on stocks exposed to China in commodities, use Saxo’s Australian Resources basket Foreign Exchange traders will be busy this week; RBA meets, before the Fed next week The US dollar is higher against most G-10 pairs, with the New Zealand dollar leading risk currencies lower. Why? The market is focused on the Fed’s meeting next week after hotter than expected US jobs report. Still, the US dollar, against most currencies (as measured by the (DXY) is near a five-month low after losing 8.4% from its high; with US inflation cooling and investors betting the Fed will only hike rates by 50 basis points (0.5%) at their December meeting next. Currencies to watch include the AUDUSD, as the RBA meets on Tuesday December 6. The RBA is expected to make its 3rd consecutive quarter-point (0.25%) hike in the cash rate, which will take the cash rate from 2.85% to 3.1%. AUDUSD is up ~10% from its October low on forwarding thinking that commodity demand from China will increase as some major cities have started to ease restrictions.   For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast. Source: Financial insights for investors & traders: Economic reopening plays, iron ore, oil rally on China easing restrictions. What's ahead | Saxo Group (home.saxo)    

Summary:  Strong US November payrolls and especially strong earnings growth data failed to engineer a recovery in US treasury yields or the US dollar, taking both to new cycle lows, which kept global risk sentiment on an even keel for now after the recent rally. Focus tonight swings to Australia’s Reserve Bank which has lagged its global peers in this policy tightening cycle and kept a lid on the Aussie in the crosses, even as hopes for China’s “opening up” have found further encouragement.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continued in Friday’s session to fade the big rally back from Wednesday last week but did however recover from a big dip during the session with S&P 500 futures finishing above the 200-day moving average. This morning S&P 500 futures are trading lower with the 200-day moving average again being key to watch on the downside and then of course the big 4,000 level. There are no major earnings today and the VIX Index remains relatively calm sitting just above the 19 level. The US 10-year yield also remains in a downward trend adding little headwinds to US equities at this point. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and China equity markets surged on yet more signs of easing of Covid-related restriction measures in mainland China. Hang Seng Index soared 3.5% and CSI 300 gained 1.6%. Hang Seng TECH Index rallied 7.4%. Technology stocks, online healthcare platforms, EV makers, and consumer stocks led the charge higher. Bilibili (09626:xhkg) jumped 24% and Alibaba (09988:xhkg) surged 7%. EV maker XPeng (09868:xhkg) soared more than 22%. Leading Chinese catering stocks gained over 10%. USD lower even as earnings data well above expectations The US November payrolls and earnings data (more below) was stronger than expected Friday, which briefly jolted US yields and the US dollar stronger, only to see both rolling back over ahead of the close on Friday and then the US dollar following through lower still to new cycle lows in many places in Asia overnight. USDCNH plunged through 7.00 and EURUSD set a new multi-month high above 1.0550, for example. US data this week is sparse after today’s November ISM Services (that survey’s relative strength compared to the S&P Global measure, which has suggested contraction in the US Services sector for the last five months) as we await next Tuesday’s November CPI data and the FOMC meeting the following day. Without a revival in US treasury yields, the US dollar’s only source of support might be a fresh weakening of risk sentiment. Gold (XAUUSD) and Silver (XAGUSD) poised for further upside The supportive factors for precious metals continue to line up – China’s reopening, lower US yields and a weaker dollar. This helped gold run higher to test a break above the key $1800 level for the first time since August. Meanwhile, silver’s impressive November rally has extended into December with the price breaking above $22.25 – a 50% retracement of the March to September selloff – and on route to the next level of resistance at $23.35. Other metals such as copper and iron ore also charged with China now reopening Shanghai, while the risk of a policy error by the Fed continues to run high. Crude oil (CLF3 & LCOF3) lower on unchanged OPEC+ output After strong gains in crude oil last week, some softness was seen at the end of the week after speculation of no production cut from OPEC mounted. WTI traded back to $80/barrel from $83 levels mid-week on China’s reopening optimism, while Brent retreated from $90 levels to sub-86. The Sunday OPEC meeting did come out with an unchanged output decision, as expected, while the EU’s price cap on Russian oil was also fixed at $60. This week will be key to watch further China reopening and any signs of a retaliation from Russia on the price cap. European gas prices also continue to pick up as falling weather boosts heating demand, and expectations are for a colder-than-expected winter. US treasuries unmoved by strong US payrolls/earnings data (TLT:xnas, IEF:xnas, SHY:xnas) The stronger than expected US payrolls and earnings data failed to inspire a sustained recovery in US yields on Friday, as the US 10-year yield continues to hover near the 3.50% level, having dipped slightly below at times. This was a major high in that important benchmark yield back in June. The strong data pushed the 2-10 yield spread inversion back toward the cycle low of –80 basis points. What is going on? Hot US jobs report takes Fed terminal rate back toward 5.0% The nonfarm payroll change (NFP) data came out stronger-than-expected on Friday, with US employers added 263,000 jobs in November, less than October's upwardly revised 284,000 but well short of the turning point Fed officials seek in their battle against inflation. The unemployment rate was maintained at 3.7% (but with a 0.2% drop in the participation rate, showing once again a discrepancy in the household survey vs. the establishment survey used for the nonfarm payrolls calculation) while the wages were very hot: M/M rose 0.6% (exp. 0.3%) and Y/Y rose 5.1% (exp. 4.6%). After a few weeks where markets have been taking the slowdown in the pace of rate hikes by the Fed positively, this report was a reminder that rate hikes will continue well into 2023. WSJ's Fed Whisperer Timiraos said the report keeps the Fed on track to raise interest rates by 50bps at its meeting in two weeks and underscores the risk that officials will raise rates above 5% in the first half of next year. Another BOJ official fuels policy review speculation New BOJ board member Naoki Tamura urged a policy review, in his conversation with Bloomberg, saying that it would be appropriate for the central bank to conduct a review at the right time – soon or a little later depending on what happens to prices. USDJPY was quiet overnight after the exchange rate touched the 200-day moving average on Friday and near where it trades this morning in early European hours at 134.60. OPEC+ held production unchanged The OPEC+ group decided to keep the current production levels unchanged, as the crude oil prices started to show some tentative signs of a recovery after China’s continued commitment to ease its Zero covid policies. Still, a 2mb/d cut was announced in October, and the full effect of that is yet to be seen. Furthermore, there is volatility expected due to the EU sanctions and a G7 price cap on Russian crude which will go into effect this week, and further changes in China’s zero covid policy are also set to continue. The group’s next meeting is in February. Beijing, Shanghai and other large cities in China eased Covid policies Cities in China, one after one, announced to ease pandemic control restrictions including removing the requirement to show negative PCR test results when taking public transportation. Shanghai and Hangzhou joined the others on Sunday and announced that the cities no longer require negative PCR test results to enter public venues or take public transportation. EU sets in a price cap for Russian oil, to kick in from today The EU nations have agreed to cap the price of Russian seaborne oil at $60/barrel, with a motive to diminish Russia’s revenues, paving the way for a wider deal with the G7 countries. This price cap is to go in effect on December 5 and represents a discount of ~$27 to the current price for Brent crude, but Urals has been trading at a discount of about $23 in recent days. However, the risk of setting a price cap too low is that Russia could slash its output, which would roil markets. It will be important to watch for Russia’s reaction this week, after Putin has repeatedly said that they will not supply oil to countries that implement the price cap. Commodities pegged to China jolt higher Australia’s commodity heavy benchmark index, the ASX200 (ASXSP200.1) hit a new seven month high on Monday as China further eased restrictions in two major provinces. The iron ore (SCOA, SCOF3) price rose 2.2% in APAC trade, taking the steel ingredients’ price over $100 for the first time since August (to $108.30) on hopes China could increase demand. The iron ore price is up 38% from its October low. This is benefiting benefit forward earnings of BHP, Rio, Fortescue and Champion Iron with their shares trading higher today in Australia. Fortescue shares rose 7% taking the iron ore major’s shares to record highs. For inspiration on other commodity stocks exposed to China refer to Saxo’s Australian Resources basket. What are we watching next? Australia RBA’s Cash Target announcement tonight after hot November inflation data The Australia Melbourne Institute Inflation reading for November came out at +1.0% MoM and +5.9% YoY, both new highs for the cycle (the official inflation for October was out last week and was considerably softer than expected) ahead of tonight’s RBA meeting. The RBA has hiked rates at a more cautious pace than many of its peers and consensus is only slightly more than 50/50 that the central bank will hike another 25 basis points at its monthly meeting tonight, which would take the rate to 3.10%. The RBA has maintained a cautious stance on further policy tightening, quite concerned about the impact on households as rises in the adjustable mortgage rates impact disposable income. China’s Politburo meeting is a key event to watch Before the Central Economic Work Conference convenes in mid/late December, the Chinese Communist Party’s Politburo will meet in early December to discuss economic policies and establish the direction and policy framework for the work conference. Investors will pay close attention to the readout from the Politburo meeting for hints about the macroeconomic policy priorities and how they are balanced with the pandemic control strategy. Earnings to watch Earnings this week are a mish-mash of companies, and include high-end homebuilder Toll Brothers on Tuesday, as it will be interesting to hear their outlook on the new home market after the enormous surge in US mortgage rates and collapse in home sales activity. Broadcom (AVGO:xnas) is the market cap giant of the week to report, with the CEO of the company having said that the semiconductor market will not be affected by the US’ new export restrictions on technology to China. Tuesday:  MongoDB, AutoZone, Toll Brothers, Ferguson Wednesday: Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Nov. Final Services PMI 0830 – Sweden Riksbank Meeting Minutes 0930 – UK Nov. Final Services PMI 1000 – Eurozone Oct. Retail Sales 1330 – Canada Oct. Building Permits 1445 – US S&P Global Nov. Final Services PMI 1500 – US Oct. Factory Orders 1500 – US Nov. ISM Services 1600 – ECB's Wunsch to speak 2330 – Japan Oct. Labor Cash Earnings 0330 – Australia RBA Cash Target Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:   Source: Financial Markets Today: Quick Take – December 5, 2022 | Saxo Group (home.saxo)

The Reserve Bank of Australia will hold its last meeting of the year on Tuesday, December 6. It is by no means a passing meeting, so the AUD/USD pair may experience increased volatility. The previous signals are contradictory, so a certain intrigue regarding the results of the December meeting remains. However, in anticipation of this event the market has already formed its position with regard to the base case scenario. Thus, according to the opinion of the majority of experts polled by Reuters, the RBA this month will increase the rate by 25 points—the same as at the previous two meetings. There is a consensus on this issue, while further prospects for tightening monetary policy already look vague. At the very least, analysts' opinions regarding the pace of the rate hike after the December meeting differ. For example, 12 of 30 economists surveyed said that in the first quarter of next year, the RBA will increase the rate by a total of 50 points, 11 predicted a 25-point hike, while six analysts do not expect any steps in this direction from the RBA. In general, at the end of the first half of 2023, many of the experts surveyed (15 of 29) see an interest rate level of 3.60% "or higher," while 14 analysts said the rate would be below 3.6%. At the same time, some of them admit the option of the RBA taking a wait-and-see approach after the December meeting, which means that the rate will peak at 3.10%. Note that the Reserve Bank of Australia is gently and gradually leading traders to the fact that the regulator may indeed take a pause in rate hikes for the foreseeable future. In particular, the minutes of the latest RBA meeting indicate that members of the regulator simultaneously do not rule out two scenarios: they can either return to a 50-point rate hike, or suspend the process of tightening monetary policy. Judging by the opinion of the absolute majority of experts, the market is highly skeptical that the RBA can return to the aggressive pace of rate hikes. Market participants are more likely to be ready for an alternative option, according to which the RBA will take a break after the December or February meeting (when the Central Bank would have Q4 2022 data on inflation growth in Australia). RBA Governor Philip Lowe and his subordinates are also gradually preparing the markets for the implementation of a conditionally "dovish" scenario. In particular, Deputy Governor Michelle Bullock said back in November in the Senate of the Australian parliament that the regulator is approaching the moment when it will be possible to pause and look around. In turn, the head of the central bank, speaking last Friday at the Bank of Thailand's economic conference in Bangkok, said that inflation expectations in Australia remain under control, and the RBA's decision to slow the rate increase reflects the lagging effects of monetary policy. At the same time, he added that the Australian regulator seeks to slow down inflation "without having too much negative impact on the economy." The latter thesis, in one form or another, was repeatedly voiced by Lowe and his colleagues. And recently, this message is sounding more and more often, and so to speak, "louder" (accents are set accordingly). At the same time, each Australian macroeconomic release is considered by the market through the prism of these signals. For instance, last week, AUD/USD traders reacted rather strongly (more aggressively than usual) to a disappointing retail sales report which otherwise would have been ignored by the market. Consumer Spending in Australia was unexpectedly in the red, showing a contraction of 0.2% (instead of the forecasted 0.5% growth). Of course, the release itself reflects negative trends, but in this case, the published report was taken by the market as another argument in favor of a possible pause in the process of tightening monetary policy. Thus, the outcome of the December meeting of the RBA may turn out soft. The 25-point interest rate hike is already fully factored into current prices—this decision is likely to be ignored by the market. The market's attention will be focused on the rhetoric of the accompanying statement and on Philip Lowe's statements. If the RBA leadership "outright" allows a pause for a rate hike in early 2023, the Aussie will be under pressure, despite all prior hints about it. Judging by the results of the above-mentioned Reuters poll, most experts are still confident that the RBA will raise rates in the first half of 2023, even at a slow pace. Given such uncertainty, it is most reasonable to take a wait-and-see attitude for the AUD/USD pair until the RBA's verdict is pronounced. Relevance up to 07:00 2022-12-06 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328938

Summary:  U.S. stocks and bonds sold off on Monday. On the back of the wage inflation in the job report released last Friday, the ISM Services Index and its employment and price-paid sub-indices on Monday increased the uncertainty of the Fed’s interest path in 2023 as officials would now need to think twice before slowing the pace of rate hikes. China and Hong Kong stocks surged on more signs of China loosening Covid restrictions. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) sold off on a solid ISM Services report After an unexpectedly strong ISM Services, U.S. equities sold off. S&P 500 dropped by 1.8% and Nasdaq 100 lost 1.7%. The selloff was broad-based as all 11 sectors within the S&P 500 pulled back, with consumer discretionary, energy, and financials being the top losers. Within the financial sector, regional banks were the worst performers. Telsa (TSLA:xnas) plunged 6.4% on reports that the EV maker plans to cut production in its Shanghai factory. VF Corp (VFC:xnys) dropped by 11.1% after the maker of the North Face and Vans brands, cut revenue and earnings outlooks and announced the retirement of its Chairman and CEO. United Airlines shares gained 2.6% after a leading U.S. investment bank upgraded the airliner on expecting 2023 travel to be a ’goldilocks’ year with earnings to pick up.  US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) sold off with yields higher on a hot ISM Service Index U.S. treasuries sold off and yields surged after a strong ISM Service Index that came in with a rise in the headline to 56.5 and the employment sub-index back to expansion while price-paid moderating only slightly and remaining in strong expansion territory. Wall Street Journal’s Nick Timiraos, who is considered by market participants of the Fed’ media mouthpiece, said in his latest article that “ elevated wage pressures could lead [the Fed officials] to continue lifting [the Fed fund target] to higher levels than investors currently expect”. The 2-year yield surged 12bps to 4.39% and the 10-year yield climbed 9bps to 3.57%. The 2-10 year curve further inverted to minus 81bps. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied strongly on the loosening of Covid-restrictions Hong Kong and China equity markets surged on yet more signs of the easing of Covid-related restriction measures in mainland China. Hang Seng Index gained 4.5% and CSI 300 climbed 2%. Hang Seng TECH Index soared 9.3%. Technology names, online healthcare platforms, EV makers, and Chinese developers led the charge higher.  Bilibili (09626:xhkg) jumped nearly 29%. Alibaba (09988:xhkg) surged 9.3% and Tencent (00700:xhkg) climbed 7.1%. Tech hardware names performed strongly, with Sunny Optical (02382:xhkg) up 10.1% and Xiaomi (01810:xhkg) rising 13.6%. EV maker XPeng (09868:xhkg) soared more than 26%, followed by Nio (09866:xhkg) up 14.9% and Li Auto (02015:xhkg) up 12.2%. Online healthcare platforms were among the top gainers, with Alibaba Health (00241:xhkg) surging nearly 20% and JD Health (06618:xhkg) advancing 15%. Shares of leading Chinese developers gained. Longfor (00960:xhkg) rose 17.1% and CIFI (00884:xhkg) jumped nearly 24%. Macau casino shares soared by 15%-20%. In A shares, infrastructures and financials were among the top performers. Australia’s share market rally halts, metal prices head lower, coal stocks surge. RBA decision ahead  The Australian benchmark index, the ASX200 (ASXSP200.1) today is lower on Tuesday, following global markets; with selling in oil, gas, and gold stocks dragging down the market. As a result, the ASX200 stumbled from its seven-month high on expectations the Fed might keep rates higher for longer, which is also why interest rate sensitive stocks such as Block (SQ2) are in the loser board, down 5.3%, taking its year to date loss to 51%. While on the upside, coal stocks such as New Hope Corp (NHC) are up 2% with Whitehaven (WHC) up 1.2% supported higher by the coal Newcastle futures price heading back toward its record all-time high, on expectations coal demand will peak up.  FX and Commodities Oil pulled back 3.8% and gold plunged 1.6% as the US dollar rallied and bond yield rose. Iron ore (SCOA) fell 1.7% but held onto near its fresh highs of $106.50. USDJPY bounced 1.6% to 136.43. The Chinese renminbi strengthened versus the dollar to 6.9560 on more signs of China reopening from Covid restrictions.   What to consider? U.S. ISM Services Index unexpectedly rose by 2.1pp to 56.5 The U.S.’ November ISM Services Index came in at 56.5, which is 2.1 percentage points higher than October’s 54.4 and is way above the consensus estimate of 53.5. The business activity sub-index jumped 9pp to 64.7, the higher level since last December. The employment sub-index bounced to 51.5, back to the expansion territory, from 49.1 in October. The price paid sub-index remained at an elevated level of 70, down only modestly from 70.7 in October. China may roll out 10 additional measures to loosen Covid restrictions Reuters, citing “sources with knowledge of the matter”, reports that China “may announce 10 new COVID-19 easing measures as early as Wednesday” and downgrade the containment of COVID-19 to Category B management or even Category C, which are less stringent. Category A covers highly transmissible and deadly diseases such as bubonic plague and cholera. Category B includes SARS, anthrax, and AIDS while Category C has diseases such as influenza, leprosy, and mumps. The major focus in Australia is on the outcome of the RBA meeting today   At 2.30 pm Sydney time, Australia’s central bank is expected to hike rates by a quarter-point (0.25%) for the third straight month, which will take the cash rate from 2.85% to 3.1%. The focus will be on RBA commentary potentially ending its rate hike cycle, given that Australian households have the highest debt-to-income ratios in the world; with indebted households highly vulnerable to tightening, with loan arrears and insolvencies increasing. Look for color in the RBA statement that may allude to the RBA pausing rate hikes in early 2023. Lenders in Australia, Commonwealth Bank (CBA), ANZ (ANZ), Westpac (WBC), and National Australia Bank (NAB), as well as Suncorp (SUN) and Bank of Queensland (BOQ) will be on watch as they have been experiencing smaller profits as the property market is at breaking point with mortgage holders under stress. However, insurance companies are continuing to benefit from higher rates and are worth watching. Insurance company QBE Insurance (QBE) is trading up 9.2% this year and is a buy side analyst favorite. For more Australian buy-side analyst favouities, click here. If the RBA mentions a potential rate hike pause, you could expect banks to rally as well as REITs. For a list of Australian REITs, refer to Saxo’s Australian REIT stock basket. Caixin Services PMI slid further into contraction China’s services sector shrank deeper into contraction in November according to the Caixin Services PMI, which came in at 46.7 below both the consensus estimate (48.0) and the prior month (48.4). Covid containment measures weighed on business operations and consumer demand. China’s Xi is attending a China-Arab summit this week in Saudi Arabia China President Xi Jinping is expected to fly to Saudi Arabia on Dec 9 to attend a China-Arab summit. Saudi Arabia is the largest supplier of crude oil to China. China has been pursuing a grand strategy to move westward to secure ties with countries in Central Asia and the Middle East.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Market Insights Today: U.S. Stocks and bonds sold off on a solid ISM Services print – 6 December 2022 | Saxo Group (home.saxo)

Summary:  Equities falter with Fed gaining power to keep hiking vs RBA nearing the end of its path, coal stock surge. Here is what you need to watch in markets in this six minute video         US equites fell on the back foot on Monday, falling for the third day The pull back in US stocks was largely fuelled by the US economy’s service gauge unexpectedly rising, fuelling speculations that the Fed can keep hiking interest rates and keep policy tight. As such, in a typical risk off fashion, the 10-year bond yield jumped almost 11 bps to 3.59%, which helped push up the US dollar up against board, with the yen sliding 1.8%. Money is essential being taken off the table ahead of Friday’s US producer prices report, which will be one of the final pieces of data  Fed officials see before their December 13 meeting. 95% of the S&P500 stocks closed underwater, with all major sectors all in the red. The S&P500 fell 1.8%, moving further away from its 200-day average; with the technical indicators flagging another potential pull back could occur.  While the tech heavy Nasdaq Composite fell 1.9%, almost wiping out last week’s rally as tech stocks are the most sensitive to rate hikes as they are deemed expensive, with a PE ratio of over 40 times earnings. As for big sock moves in the US; Tesla tumbled and airlines rallied Tesla shares fell 6.4% on reports its plans to lower production at its Shanghai factory, as China’s demand isn’t meeting expectations. Tesla shares are now down 53% from their high and what’s keeping their shares at this level is that the raw material costs are still high, for example the price of lithium is back at record highs, and the market consensus suggests earnings growth will remain at near the 20% mark. As always, there were pockets of green, United Airlines shares gained 2.6% after Morgan Stanley upgraded the airliner on expecting 2023 travel to be a ’goldilocks’ year with earnings to pick up. In commodities moves Oil pulled back 3.8% as the US dollar rallied, gold plunged 1.6% as the USD and bond yield rose, and iron ore (SCOA) fell 1.7% but held onto its fresh highs of $106.50. Australia’s share market rally halts, metal prices head lower, coal stocks surge RBA decision ahead The Australian benchmark index, the ASX200 (ASXSP200.1) today is lower on Tuesday, following global markets; with selling in oil, gas, and gold stocks dragging down the market. As a result the ASX200 stumbled from its seven month high on expectations the Fed might keep rates higher for longer, which is also why interest rate sensitive stocks such as Block (SQ2) are in the loser board, down 5.3%, taking its year to date loss to 51%. While on the upside, coal stocks such as New Hope Corp (NHC) are up 2% with Whitehaven (WHC) up 1.2% supported higher by the coal Newcastle futures price head back toward its record all time high, on expectations coal demand will pick up. The major focus in Australia is on the outcome of the RBA meeting today At 2.30pm Sydney time, Australia’s central bank is expected to hike rates by 0.25% for the third straight month, which will take the cash rate from 2.85% to 3.1%. Focus will be on RBA commentary potentially ending its rate hike cycle, given Australian households have the highest debt to income ratios in the world; with indebted households highly vulnerable of tightening, with loan arrears and insolvencies increasing. Look for colour in the RBA statement that may allude to the RBA pausing rate hikes in early 2023. Lenders in Australia, Commonwealth Bank (CBA), ANZ (ANZ), Westpac (WBC) and National Australia Bank (NAB), as well as Suncorp (SUN) and Bank of Queensland (BOQ) will be on watch as they have been experiencing smaller profits as the property market is at breaking point with mortgage holders under stress. However, note,  insurance companies are continuing to benefit from higher rates. Insurance company QBE Insurance (QBE) is trading up 9.2% this year and is a buy side analyst favorite. For more Australian buy side analyst favouities, click here. If the RBA mentions a potential rate hike pause, you could expect banks to rally as well as REITs. For a list of Australian REITs, refer to Saxo’s Australian REIT stock basket.   For a weekly look at what to watch in markets - tune into our Spotlight.For a global look at markets – tune into our Podcast. Source: Video: Equities falter with Fed gaining power to keep hiking vs RBA nearing the end of its path, coal stock surge | Saxo Group (home.saxo)

Summary:  Markets were surprised yesterday by the strength of the November US ISM Services survey, which suggests a fresh increase in services activity from the October level as opposed to the deceleration expected. In response, US yields rebounded all along the curve, the US dollar rose sharply, and risk sentiment rolled over again, suddenly threatening key areas in the main US index that were taken out on the way up recently.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures gave up most of their gains from Wednesday last week closing just above the 4,000 key level. The rejection of the move above the 200-day moving average suggests to us that the conviction is low at this stage of the rally and if we see a breakdown below the 4,000 level then the 100-day moving average down at the 3,936 level is the next pivot point to watch. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong stocks pulled back following overnight weakness in the U.S. market and the uncertainty in the Fed’s ability to slow down in its pace of hiking interest rates after recent data indicating strength in wage inflation and business activities in the U.S. services sector. Hang Seng Index lost 1.3% while the CSI 300 was 0.3% higher. The rapid surge in the Hong Kong dollar money market interest rates recently also weighed on Hong Kong stocks. USD rebounds on hot ISM Services report, wilting risk sentiment The US November ISM Services survey cam in far stronger than expected, inspiring a fresh surge in US treasury yields, if a relatively modest one, and a significant rebound in the US dollar as risk appetite rolled over. The USD reversal is particularly interesting from a technical perspective as it came after support had broken in a few important USD pairs. EURUSD, for example, has been pushed back below 1.0500 this morning after an attempt on 1.0600 yesterday and after clearing the prior cycle high. USDJPY has surged above 137.00 after touching below 134.00. A more comprehensive reversal of the recent USD sell-off, however, would require EURUSD back below 1.0400 and USDJPY back above perhaps 139.00, with the key oncoming event risk next Tuesday’s November US CPI print and the FOMC meeting the following day. Gold (XAUUSD) took a tumble on Monday ...and following the failure to break above $1808, the August high, it reverted lower to a challenge recently established lows in the $1765 area. The turnaround was triggered by unexpectedly strong US services data adding renewed pressure on the Fed to keep interest rates higher for longer. Total holdings in bullion backed ETF’s suffered a large 13.7 tons reduction on Monday, and it highlights golds continued dependence on the dollar and yields to provide support, and once they fail to do so, selling emerges. Focus on Friday’s PPI report and liquidity which is likely to start drying up, thereby raising the risk of volatile price action ahead of year-end. Silver meanwhile tumbled 5.6% on Monday and has now returned to challenge support at $22.25 Crude oil (CLF3 & LCOG3) traded sharply lower on Monday ...after supportive micro developments such as restrictions on Russian sale of oil and China easing Covid restrictions were offset by a broad shift lower in risk sentiment after stronger than expected US data lifted the dollar and bond yields while sending stocks lower. For now, the price action remains stuck in a ten-dollar range with no clear short-term direction emerging. The market is undoubtedly going through a soft patch regarding demand with Saudi Arabia lowering its official January selling prices to Asia while time spreads continues to soften as the spot price falls faster than prices further out the curve. US treasuries rebound on strong US services survey (TLT:xnas, IEF:xnas, SHY:xnas) The stronger than expected US November ISM Services survey saw a rebound in US treasury yields all along the curve as the market priced the Fed to edge its policy rate a bit higher next year (peak yield seen hitting 5.00% again) as the 2-year Treasury yield surged over 10 basis points higher and the US 10-year benchmark pulled away from the important 3.50% level, although to suggest a reversal of the recent downtrend in yields, the benchmark yield would need to recover above 3.70-75%. What is going on? US November ISM Services surprises on the upside with 56.7 reading This is an important data point as the services sector dominates US economic activity. The market was looking for another deceleration of activity in November (consensus expectations for a 53.5 reading) after 54.4 in October. Among the sub-indices, the Prices Paid index was sticky at the high level of 70.0 vs. 70.7 in October, New Orders were 56.0 vs. 56.5 in October and Employment was 51.5 after 49.1 in October. Australia’s RBA hikes 25 basis points as most anticipated The hike took the cash rate from 2.85% to 3.1%. The AUD was mixed, rebounding sharply from session lows against NZD but that only came after a further slide late yesterday. The RBA maintained cautious guidance, saying the full effects of rates hikes since May have not been felt yet by the economy, while also declaring employment growth had slowed. As such the RBA said its path to achieving a soft landing is narrow, meaning it might be hard to avoid a recession. This also follows news out of Australia today that its current account fell into a deficit for the first time since 2019. The RBA warned it sees inflation increasing over the months ahead, particularly in wages. It conceded inflation is damaging the economy and is making life more difficult for people. The market only anticipates another 50 basis points of tightening in the coming 12 months from the RBA, as it’s rate peak lags the US Fed’s by nearly 150 basis points. Tesla shares fell 6.4% on reports its plans to lower production at its Shanghai factory ...as China’s demand isn’t meeting expectations. Tesla shares are now down 53% from their high and what’s keeping their shares at this level is that the raw material costs are still high, for example the price of lithium is back at record highs, and the market consensus suggests earnings growth will remain at near the 20% mark. US and Europe considering new tariffs on metal imports from China ...arguing that global overcapacity and carbon-intensive production in China could see the duties assessed on imports of key metals. The story is from Bloomberg, which cited “people familiar” with the situation. What are we watching next? China’s Politburo meeting is a key event to watch Before the Central Economic Work Conference convenes in mid/late December, the Chinese Communist Party’s Politburo will meet in early December to discuss economic policies and establish the direction and policy framework for the work conference. Investors will pay close attention to the readout from the Politburo meeting for hints about the macroeconomic policy priorities and how they are balanced with the pandemic control strategy. Expect a modest Q4 contraction for the eurozone Yesterday’s final PMI indicators for November point to a very mild GDP contraction in Q4 in the eurozone (minus 0.1 % or minus 0.2 % in our view). The manufacturing PMI surged marginally to 47.1 from 46.4 in October. The report was rather mixed. The softening of inflationary pressures continues but additional orders are falling once again due to lower client demand at the global level. This was expected. The services PMI was also out in contractionary territory at 48.5 against prior 48.6 in October. This is the exact same number as the flash estimate. This is the lowest level since early 2021. Overall, the services and the manufacturing sectors are more resilient than most expected a few months ago when fears of the energy crisis started to cause panic. Earnings to watch Today’s US earnings focus is the homebuilder Toll Brothers which is expected to see revenue growth slow down to 6% y/y in the quarter that in October as the US housing market is drastically slowing down from the interest rate shock in mortgages. While growth is slowing down for Toll Brothers investors will be looking for evidence that margins might even begin expanding as building materials are coming down in price. Today:  MongoDB, AutoZone, Toll Brothers, Ferguson Wednesday: Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 0900 – Norway Nov. Region Survey 1330 – US Oct. Trade Balance 1330 – Canada Oct. International Merchandise Trade 1500 – Canada Nov. Ivey PMI 1700 – EIA's Short-Term Energy Outlook 2130 – API's Weekly Report on US Oil and Fuel Inventories 0030 – Australia Q3 GDP Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-dec-6-2022-06122022

The Bank of Australia seems to be a fairly conservative central bank, which does not surprise with big interest rate hikes, but raises them systematically. This time was no different at the last meeting of the year. The Reserve Bank of Australia raised the interest rate by 25 basis points to 3.1% at its last meeting in 2022, matching market forecasts. The move marked the eighth consecutive rate hike, raising borrowing costs to levels not seen since November 2012, with the central bank announcing further increases as inflation in Australia is too high, tradingeconomics reports. The widely expected decision means the central bank has raised interest rates since May to 3 percentage points, the sharpest annual tightening of monetary policy since 1989. The committee reiterated that the interest rate is not a predetermined rate, as the size and timing of future increases will continue to be determined by incoming data. The council added that inflation in Australia will peak at around 8% this year, before weakening in 2023 and reaching just above 3% in 2024. Policymakers have reaffirmed their commitment to bringing inflation to target and will do whatever is necessary to achieve this. Source: Conotoxia MT5, AUDUSD, Daily Australian dollar exchange rate after the decision From mid-October to today, the AUD has strengthened against the USD by almost 9%. Today, after the decision, the AUDUSD exchange rate rose to 0.6723, which may represent an increase of 0.4% since the beginning of the day. Thus, higher and higher peaks and higher and higher lows could be observed on the chart of the described currency pair, which may be characteristic of a potential uptrend. From the point of view of technical analysis, only overcoming the vicinity of 0.6640 could lead to the formation of a new low within the recent upward structure. Interest rate hikes the cause of recession? Fitch thinks so As reported by BBN, Fitch Ratings once again lowered its global economic growth forecast for next year, citing the intensification of interest rate hikes by central banks, as well as the worsening trend in China's real estate market. Fitch lowered its growth forecast by 0.3 percentage points to 1.4% for 2023, while seeing the U.S. economy with slight GDP growth. Chinese growth, on the other hand, is expected to rise 2.8% this year and 4.1% in 2023. The eurozone economy is also expected to grow slightly, thanks to the easing of the energy crisis. The rating agency also said that central banks in the US and Europe will continue to raise interest rates above initial estimates. At the same time, a recession could be expected in the Eurozone and the UK this year, and in the US in the second half of 2023, the agency added. Source: Conotoxia MT5, US500, Weekly Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The Australian dollar is in positive territory on Tuesday, after sustaining losses of 1.4% a day earlier. In European trade, AUD/USD is trading at 0.6721, up 0.35%. RBA raises cash rate by 25 bp The Reserve Bank of Australia lifted interest rates by 25 basis points, bringing the cash rate to 3.1%. This is the highest the cash rate has been since 2012, and there was some speculation that the RBA might take a pause from raising rates. One can also make the argument that with the next rate meeting not until February 7th, there will anyway be a “default pause” in January. As the move was widely expected, the Australian dollar has had a muted reaction to the move. There wasn’t much for investors to glean from Philip Lowe’s rate statement, which was almost identical to the November statement. Lowe noted that the RBA expects to increase rates, but “is not on a pre-set course” and rate decisions would be data-dependent. This last point may seem obvious, but events such as consumer spending, employment and inflation will be key drivers which determine rate policy in the early part of 2023. There is a great deal of uncertainty as to the terminal rate, which forecasts ranging from 3.3% all the way to 3.8%. What is clear is that the RBA is likely to resume its rate hikes in February, barring a remarkable decline in inflation. The markets will have to quickly shift attention from the RBA to GDP, which will be released on Wednesday. GDP for Q3 is expected to slow to 0.7%, down from 0.9%. A reading that is wide of the mark could result in some volatility from AUD/USD.   AUD/USD Technical AUD/USD faces resistance at 0.6760 and 0.6878 There is support at 0.6676 and 0.6558 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The financial markets are already starting to slow down, and currently I have no major events on my calendar that could affect the movement of currency pairs. For now, the currency pairs are waiting for next week, where, among others, the Fed and the ECB will decide on interest rates. The EUR/USD, recorded a correction this morning. The British pound had exactly the same background as the euro. The RBA raised the spot rate by 25 basis points to a 10-year high. The yen did not get support from the Governor of the Bank of Japan Kuroda   EUR/USD - The overall picture of pray remains positive The EUR/USD exchange rate strengthened yesterday, recorded a correction this morning. Currently, the pair is trading around 1.0500. The overall picture of pray remains positive. Now the question for EUR/USD as the correction started yesterday is whether this is just a respite or is there a broader correction to be feared. Retail sales in Europe continue to fall. It came down to -2.7% in October, which is far worse than the expected. US Services PMI, Industry Orders and ISM Services PMI exceeded expectations. These reports added support to the US Dollar but contributed to the decline of the Euro/Dollar pair. The macroeconomic calendar is completely empty today, so market players have nothing to watch.     GBP/USD started a correction The GBP/USD pair also fell. It is currently trading around 1.2200. On Monday, the GBP/USD currency pair also started a correction. The British pound had exactly the same background as the euro, except for the retail sales report, which was only for the European Union. In addition, the neutral index of business activity was also published in the UK. There won't be many significant events in either the UK or the US this week. Yesterday, the US ISM services sector published a quite important business activity index, which led to the strengthening of the dollar. Therefore, the correction is justified.   AUD/USD Pair gets a lot of support Currently, the appreciation of AUD/USD is slightly decreasing. The US dollar continued its rebound on Tuesday morning against its main competitors in the foreign exchange market, but not against the Australian Dollar, which was supported by the RBA decision. The Reserve Bank of Australia raised rates for the eighth time as part of the current monetary policy tightening cycle, with an accompanying statement that was slightly less dovish than market participants expected. The Reserve Bank of Australia matched market forecasts by announcing a 25 basis point rate hike to 3.10%. The currency pair is not only supported by events in its economy but also by events in China. Australia and China cooperate economically, therefore its influence is visible and justified. So reports China will soon reduce its strict Zero-COVID policy seemed to support market optimism as well as AUD/USD bulls.   USD/JPY USD/JPY continued its gains in the Asian session, followed by a slight correction. Yesterday, the dollar posted its biggest daily gain against the yen since June. Bank of Japan Governor Kuroda didn't help the yen overnight with dovish comments about aiming for a sustained and stable 2% inflation target. Sources: dailyfx.com, investing.com

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

Summary:  The US equity market rolled over further, with the S&P 500 index crossing back below the pivotal 4,000 level, completing the rejection of last week’s rally attempt. In Asia overnight, further signs that China will continue to lift Covid restrictions failed to buoy sentiment further, with weak November export data spooking sentiment at the margin. In commodities, the major crude oil grades dropped to new lows for the cycle on demand concerns.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures declined another 1.5% yesterday pushing briefly below the 100-day moving average before bouncing back above that average. In today’s session the 100-day moving average which sits around the 3,937 level is the important level to watch on the downside and if it breaks then the 3,900 is the next major area of gravitation. The US 10-year yield remains close to 3.5% adding no further pressure from the cost of capital side and in general the equity market is slowly transitioning into hibernation. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) After a lackluster morning session, Hong Kong and mainland China stocks rallied in the afternoon after investors took note of the no mention of dynamic zero-Covid and a more balanced tone towards economic growth in the readout of the politburo meeting. However, stocks pared their gains and more, with the Hang Seng Index and CSI300 Index reversing and losing 1% and 0.4% respectively as of writing. The Chinese health authorities announced 10 additional measures to further fine-tune its pandemic control strategy ... and are holding a press conference later in the afternoon. Separately, China’s exports in November declined 8.7% (in USD terms) in November from a year ago, weaker than expectations. Geely (00175:xhkg) rose more than 2% as the Chinese automaker is reportedly talking to investment banks for a Hong Kong IPO of its Cao Cao Mobility ride-hailing arm. USD stays bid on weak risk sentiment, BoJ comments overnight A weak session for risk sentiment yesterday helped support the greenback, with treasury yields trading sideways and therefore marginalized as a factor. One of the bigger movers overnight was USDJPY, which is challenging above the important 137.50 area (prior range low) this morning after BoJ board member Toyoaki Nakamura supported the BoJ’s current easy policy, noting that the elevated inflation in Japan in the recent cycle is not wage-driven. Nakamura expressed concern that policy tightening might prompt the return of deflation. Elsewhere, USDCAD is making a bid at establishing a new up-trend, AUDUSD has posted a bearish reversal, and EURUSD & GBPUSD still need more downside to suggest a similar reversal, while all USD traders are holding their collective breath for next Tuesday’s US November CPI print and the FOMC meeting the following day. Gold (XAUUSD) holds above support at $1765 despite dollar strength and weak risk sentiment Stronger than expected US services data on Monday has renewed pressure on the Fed ahead of next week’s FOMC meeting, and with ETF investors still side-lined, gold remains very dependent on movements in the dollar and yields, both of which have been providing some headwind this week. While lower energy prices may ease inflationary concerns, Friday’s US producer price report may provide the next round of price volatility. Key resistance at $1808 with support below $1765 at $1735. Crude oil (CLF3 & LCOG3) suffering a three-day decline of close to 9% Brent closed below $80 on Tuesday for the first time since early January with WTI trading near $74on fading risk appetite as the attention turns to 2023 and increased worries about an economic slowdown hurting demand. The slump comes against a backdrop of low liquidity with Brent open interest falling to a seven-year low, thereby stoking volatility. After five months of cuts the EIA upgraded its 2023 production saying it could average a record 12.34m barrels per day. The API reported another big draw in crude oil stocks while China imported 11.42 million barrels per day last month, up 12% from October and highest since January. Overall, however, the market is undoubtedly going through a soft patch with time spreads softening as the spot price falls faster than prices further out the curve. US treasuries drop again, as safe-haven appeal comes and goes. (TLT:xnas, IEF:xnas, SHY:xnas) US treasury yields at the long end of the curve erased much of the previous day’s rise as risk sentiment was broadly weak yesterday, suggesting a safe-haven appeal. The 3.50% area remains the pivotal one for the 10-year benchmark yield. The 2-year US treasury yield was sideways, meaning that the 2-10 yield curve hit new cycle lows around –84 basis points. What is going on? EU to move forward with cases against China on trade policy at the WTO The first case is related to China restricting Lithuanian exports, a move that came after Lithuania allowed Taiwan to open what is arguably an embassy in the country. The other case revolves around Chinese treatment of patent holders. Apple set to postpone the roll-out of its first EV The company will postpone the launch of its first EV to 2026 (thought to be about a year later than originally intended), according to “people familiar” with the situation cited by Bloomberg. The original intention was for the EV to be fully autonomous, but the realization that this is an insurmountable engineering challenge for now has resulted in the redesign, which is now set to include human controls. TSMC plans to more than triple its investment to $40 billion in building plants in Arizona In an equipment installation ceremony at Taiwan Semiconductor Manufacturing Co’s (TSMC) first microchip production plant in the US, which President Biden attended, TSMC Chairman Mark Liu announced that the Taiwan chip foundry is building a second production plant that will make 3-nanometer chips in Arizona. The additional plant will bring TSMC’s previously announced investment of USD12 billion to USD40 billion. TSMC expects the second facility will begin operation by 2026. Also attending the ceremony were CEOs from Apple, Nvidia, AMD, Applied Materials, and Lam Research. The additional investment is a boost to President Biden’s plan to bring the semiconductor supply chain, in particular the capability to fabricate high-end chips, back to the U.S. CBOT Wheat (ZWH3) trades near a 14-month low Despite floods Australia is expected to produce a bumper year of crops including record wheat production in the current financial year, the government said on Tuesday, despite the impact of widespread flooding in the country's eastern region. An announcement that will pose even tougher conditions for US exporters already dealing with reduced competitiveness from the strong dollar and robust supplies from the Black Sea region. On Tuesday, the CBOT bellwether wheat contract dropped as low at $7.23 to the lowest level since October 2021. Focus on Friday’s WASDE report which will publish the US governments latest projections for production and stocks. Sugar prices likely to remain supported as India sees output drop 7% India, the world’s biggest producer and second largest exporter has said its output is likely to fall 7% this year as erratic weather conditions have cut cane fields. A reduction may, despite global economic growth concerns, lift prices and allow rivals Brazil and Thailand to increase their shipments. Sugar (SBH3) traded in New York recently surged higher by 17% before spending the past couple of weeks pairing back some of those strong gains. The biggest short-term risk remains the potential for speculators reducing exposure ahead of yearend. This following a three-week buying spree to November 22 during which time the net long increased four-fold to 202k lots, the strongest three-week period of buying in more than four years. Toll Brothers beat on margin and home sales The high-end US homebuilder delivered strong earnings yesterday with revenue at $3.7bn vs est. $3.2bn and EPS of $5.63 vs est. $3.96. The gross margin outlook for the current quarter came out at 27% vs 27% expected as pressures in building materials are easing. One negative trend for the homebuilder was the backlog which shrunk to 8,098 vs est. 8,814. Australia: Q3 GDP softer than expected, mining majors rally, then retreat Australian economic improved in the third quarter of 2022, but was weaker than expected at +0.6% QoQ and 5.9% YoY (vs. +0.7%/6.3% expected). The Australian market fell on the day, with mining companies Fortescue Metals, Champion Iron, BHP and RIO testing six-month highs before selling off later in the session. In other parts of the market, insurance companies continued to shine, as they traditionally do when interest rates are rising. QBE and IAG rose almost 2% today taking their YTD gains to over 14% each. China’s exports shrank 8.7% Y/Y in November In USD terms, China’s exports declined 8.7% Y/Y in November, much weaker than the -3.9% consensus estimate and -0.3% in October. The fall in exports was broad-based across destinations, U.S.  down 3.8% Y/Y, European Union down 9.3% Y/Y, and Japan down 4.6%. Exports to ASEAN slowed to a 7.7% growth in November from 19.7% in October. Imports, falling by 10.6% Y/Y, also below expectations. What are we watching next? Bank of Canada meeting today – market divided on anticipated hike size The Bank of Canada has shown considerable flexibility in its tightening path, having hiked 100 basis points in one go back in July, followed by a 75-basis point hike in September and 50-basis points hike in October. With that pattern in mind, the market is divided on whether the BoC will hike 50- or 25 basis points today, with market-pricing leaning for the smaller hike, while the majority of surveyed analysts are looking for another 50 basis points, which would take the policy rate to 4.25%. Regardless, the market is pricing that the Bank of Canada is nearing the end of its hiking cycle, projecting a peak rate next year of sub-4.50%. China opening up trade – has it run out of steam? The latest news in China of a further easing of curbs on activity relative to Covid saw equities in Hong Kong and mainland China posting marginal new highs before rolling over badly and then closing near the lows of the session, suggesting that after a torrid 35% rally off the lows, in the case of the Hang Seng Index, the further potential for this story to continue to support a positive outlook may have run out of steam. The highs overnight in the Hang Seng were within a few points of the 200-day moving average. Earnings to watch Today’s US earnings focus is Campbell Soup which is an US processed food manufacturer of meals and snacks. The company is expected to deliver 9.5% revenue growth for the quarter that ended in October suggesting substitution effects as middle income families are shifting into lower priced options. Today:  Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 1500 – Canada Bank of Canada meeting 1530 – EIA's Weekly Crude oil and Fuel Stock Report 2000 – US Oct. Consumer Credit 2130 – Brazil Selic Rate Announcement 0001 – UK Nov. RICS House Price Balance 0030 – Australia Oct. Trade Balance Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 7, 2022 | Saxo Group (home.saxo)

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

The global economy at a glance In this article US: Markets doubt the Fed’s intent Eurozone: Lower energy prices have temporarily stopped the downturn UK: Calmer markets and delayed fiscal pain not enough to stop recession China: Still dire from rising number of Covid cases Rest of Asia: No recession, but certainly slowdown CEE: Geopolitical misfortune  Rates: To reverse higher first, and then collapse lower as a theme for 2023 FX: Everyone is asking whether the dollar has topped   Shutterstock The World Reimagined globes in London, UK - 20 Nov 2022   1US: Markets doubt the Fed’s intent The economy is experiencing a strong second half of 2022. Jobs are being created in significant number, wages continue to rise and household keep spending as the Fed signals a step down to 50bp incremental rate hikes, but with a higher ultimate rate than they indicated was likely back in September. Officials suggest they may not cut rates until 2024 given their concern about stickiness in key service sector components of inflation, but their forward guidance needs to be taken with huge handfuls of salt given their recent track record. The “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. Nonetheless, the softer core inflation prints seen in October, combined with bad housing market data and weaker business confidence has led the market to anticipate rate cuts from second half of 2023 – in line with our long-held view. 2Eurozone: Lower energy prices have temporarily stopped the downturn With lower natural gas prices on the back of the unusual warm autumn weather the downturn in sentiment has been temporarily halted, though most indicators are still weak. With retail sales falling sharply in October a recession over the winter quarters still looks very likely, albeit perhaps not as deep as we previously pencilled in. Thereafter, growth will be subdued at best, as higher interest rates will start to bite, energy prices are likely to remain at elevated levels, while budgetary stimulus is bound to peter out in the course of 2023. Headline inflation fell back in November to a still high 10%, while underlying inflation remains stuck at 5%. The ECB is therefore likely to lift the deposit rate to 2% in December, considered by some members of the Governing Council as the neutral rate. The first quarter might see another 50 bp further tightening, as well as the start of gradual reduction of the balance sheet, though at a very slow pace in the beginning. 3UK: Calmer markets and delayed fiscal pain not enough to stop recession Calmer financial markets and some fresh tax rises allowed the Chancellor to put off some of the painful spending cuts until after the next election in 2024/25 in his Autumn Statement. Nevertheless, energy support will become considerably less generous for most households from April, and the housing market is showing very early signs of faltering. Despite the sharp fall in swap rates since September’s mini-budget crisis, mortgage rates have fallen much more gradually. A recession now looks virtually inevitable, though it might not be until the first quarter until we see more material signs of slowing. The Bank of England has begun to talk down market rate hike pricing, and investors have taken the hint, but are still probably overestimating what is to come. We expect the BoE to pivot back to a 50bp hike in December, and expect one further 50bp move in February, which is likely to mark the top of this tightening cycle. 4China: Still dire from rising number of Covid cases Even the government offers property developers to increase funding channels, uncompleted home projects are yet to be finished. Most of those projects are left in the hands of local governments to find a private company to finish the construction work. This takes time to finish. The housing market is therefore quiet as home price continues to fall. On Covid, more local governments have subtly changed to slightly softer practices to implement Covid measures. But the higher number of Covid cases means that there is limitation on how fine-tuning can benefit the economy. Sporadic lockdowns would continue and still affect retail sales and production adversely. We have already seen retail sales fell into yearly contraction in October, and PMIs showed that could easily repeat for the rest of 4Q22. More, exports should continue to show weaknesses due to high inflation in US and Europe. The only support to the economy is now fiscal spending, which has been in the area of advanced technology and new energy. 5Rest of Asia: No recession, but certainly slowdown On the positive side, inflation rates in Asia look to be peaking out, and at levels well below comparable rates in Europe and the US. And this has also meant that although central banks across the region have been raising policy rates, they have not gone up alarmingly, and it feels as if in many cases, we are nearing a peak after the next one or two hikes. On the negative side, Asia is highly geared to global growth through global trade, and so with Europe contracting, China in as weak a state as we have seen it, and the US slowing, it is not surprising to see Asia export figures swinging sharply negative, with Korea and Taiwan the bellwethers for the North Asia, and Singapore’s Non-oil domestic export declines performing the same barometer role for SE Asia. Not entirely independently, the global semiconductor downturn is heaping further downward pressure on the region, which is the key production centre for most global technology hardware, weighing on industrial production and exacerbating the export downturn. 6CEE: Geopolitical misfortune  In addition to the global story of high energy prices and headline inflation, the CEE region is suffering from its own problems. The common denominator is the region's unfortunate geographic location in the current geopolitical landscape and historically strong labour market. The result is significantly higher inflation than in Western Europe, but also high and persistent core inflation, underpinned by a still massively tight labour market that shows no signs of easing despite the coming recession. Moreover, in response to the energy and migration crises at the same time, governments across the region have come up with another wave of household support spending, resulting in massive twin deficits. However, this has been countered by central banks tightening monetary conditions through interest rate hikes, well above global peers, but also often through the FX channel. The resulting picture of this wild mix for next year is thus a shallow recession driven mainly by a fall in household consumption, only gradually slowing inflation with a possible upside surprise, and cautious central bank foot-dragging around the timing of the start of monetary policy normalisation.  7Rates: To reverse higher first, and then collapse lower as a theme for 2023 2022 is shaping up to be the biggest bear market for bonds in modern times. This might help explain why market rates have reversed lower in recent weeks. But it’s also to do with position squaring, as a decent rump of investors square up on bear market positions taken in 2022. That requires the buying of both duration and risk. However, this stores up problems for the turn of the year. Arguably, financial conditions (especially in the US) are prone to loosening too much, driven there by falls in market rates. But the Fed is still hiking and needs tighter financial conditions. That should force market rates back up first. But the biggest narrative for 2023 will be one of big falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. 8FX: Everyone is asking whether the dollar has topped At top of everyone’s minds in the FX market is the question as to whether the dollar has topped. Softer US inflation data and some hints of softer Covid policy in China have combined to knock the dollar some 8% off its late September highs. Those arguing for a continued dollar decline are wholly focused on the Fed story and the extension of a Fed pivot into a full-blown easing cycle. We certainly agree that a dovish turn at the Fed – a turn that finally sees short-dated US yields start to fall – is a necessary condition for a drop in the dollar. But a sufficient condition requires investment destinations in Europe and Asia being attractive enough to pull funds out of dollar deposits yielding 4%+. It remains questionable whether either of these necessary or sufficient conditions are met in 2023 and we remain sceptical that EUR/USD will be able to sustain gains above the 1.05 level. Elsewhere, sterling has recovered after November’s fiscal U-turn – a sign that policy credibility has a big role to play in FX markets. And finally, Japanese policy makers will be looking at back at some incredibly effective FX intervention to sell USD/JPY in September and October. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Australia's economy is showing clear signs of slowing and will drop further in 2023. House price growth appears to be on the cusp of turning negative and provides a rationale for a peak cash rate at the relatively low level of 3.6%. We believe the economic slowdown will be accompanied by a similarly rapid decline in inflation Macroeconomy: inflation outlook turning down A lot has changed in the last year. In October 2021, the Reserve Bank of Australia (RBA) was still maintaining that the inflation target would not be sustainably met until 2024. A month later, it was abandoning its yield curve control in the face of market pressures. By May of this year, the RBA was hiking rates, throwing in the towel on its previous stance that concluded inflation would not sustainably be up to the RBA’s target until wage growth exceeded 3.5% (it still isn’t based on the 3Q22 wage price index). Inflation hit 7.3% year-on-year in the third quarter of this year, with rises also in core measures, although the October monthly series has raised hopes that inflation may already have peaked, dropping to 6.9%YoY. We think it will now slow quite rapidly. Policy rates nearing a peak Source: CEIC, ING Inflation is mainly due to goods, not services Most of Australia's inflation comes from goods rather than the service sector. But this is not simply an imported phenomenon. Inflation in the tradeable sector is no higher than in the non-traded sector. However, what this does mean is that this is less likely a labour-cost-driven event than a discrete price-level shock (or series of shocks), and as such, is probably easier to squeeze out of the economy. Inflation by source (goods vs services and tradeable vs non-tradeable) Source: CEIC, ING Don't blame inflation on wages growth, which remains negative in real terms By sub-component, there are few inflation standouts. Certainly, the transport sub-component was swollen earlier in the year by high oil prices, although with Brent crude now back below $90/bbl, oil is no longer contributing to higher inflation, and may even be a slight drag in the near future. Widespread flooding this year across many parts of the country has also pushed up food prices at times. Everything from cereals to dairy was looking more expensive. Though even this looks to be normalising.  In the near-term, inflation is likely to remain the focus for policy-setters and the investment community. But on the assumption that energy prices remain roughly where they are now and do not re-accelerate upwards from here, we look for inflation to rapidly subside over 2023 and could be as low as about 3.0%YoY by the end of 2023.  One thing that policymakers obsess over is second-round price effects – wage-price spirals for example. RBA anecdotes point to a pick-up in wages, which fills in the gaps left by the wage-price index, which is only released quarterly and with long lags. That is only showing a growth rate of 3.1%YoY (3Q22). The wage price index inflation rate will surely rise further, but the large current gap between wages and prices shows that wages are being dragged higher, rather than driving prices higher. In the end, the wage component of the economy is becoming less of a cost issue than other components. We do not need to worry unduly about the cost implications of this. The labour market as a whole is not squeezing margins, though admittedly there will be pockets of the service sector where it is. Employment growth by sector Source: CEIC, ING Household spending is running out of sources of growth So far this year, consumer spending has by far contributed to the bulk of GDP growth. And that is not just because consumer spending accounts for the bulk of GDP. It has also been growing unlike most other parts of GDP.  Underpinning that real spending growth – which as we have determined is not a function of wages (which are falling in real terms) – is employment growth. The last 12 months have seen Australia adding around 400,000 jobs to a labour force of just over 14 million. More than half of these jobs were full-time (generally better-paying) jobs. Comparing employment against its values four quarters ago, we see that the gains are not in manufacturing or agriculture. Lately, jobs in the hospitality industry have been on the rise (some of which may be part-time), as well as in the wholesale and retail sectors. Construction jobs have also gained ground recently. Within the other service sector jobs, not surprisingly in the wake of the Covid-19 pandemic, healthcare-related jobs, as well as professional and scientific jobs, rose consistently, although growth in these areas is now beginning to slow. Jobs growth in public administration is also slowing down now after rising in the previous three quarters, and so too are jobs in finance. In the three months since July, the number of employed has stagnated at just over 13.6 million. It looks like the boost to spending likely to come from employment growth is slowing. And with wages negative in real terms, the only way household spending is going to continue to boost economic growth in the quarters ahead is if households draw down savings (e.g. borrow more). That doesn’t look as if it is going to happen to any large extent. Household balance sheets received a big boost during the pandemic, mainly from markets juiced up by easing monetary policy pushing up equity prices and reserves held in superannuation accounts. Liquid savings in the form of currency and deposits also picked up. But household balance sheets peaked at the turn of the year and have since begun to decline. And while liquid assets will provide a solid buffer, the household savings ratio has now fallen to 6.9%, well below the post-war historical average of 9.5%, so further declines are probably going to be limited unless they are a response to crisis conditions. And if that is the cause, then it probably won’t matter all that much. Rising interest rates will also deter discretionary dis-saving. Savings ratio and personal income growth (YoY%) Source: CEIC, ING Rent-reset shocks should be modest in 2023 Another factor that could weigh on household spending is that a sizeable number of Australian households will be facing much higher mortgage payments shortly after the New Year. The latest Financial Stability Review by the Reserve Bank has a detailed chapter on the impact of rising interest rates and inflation on indebted households’ cash flows. Households that are owner-occupiers with variable-rate mortgages account for about two-fifths of outstanding housing credit. Many of these are making sizeable prepayments on their mortgages, which they could trim back as rates rise. Some (about 15% according to the RBA) might see their spare cash flow turn negative, requiring a drawdown of savings buffers, with the possibility that some owners might even fall into arrears. Using scenario analysis based on market expectations for the likely further increase in the cash rate, the RBA analysis noted that: “Just over half of variable-rate owner-occupier borrowers would see their spare cash flows decline by more than 20% over the next couple of years, including around 15% of households whose spare cash flows would become negative as the combined burden of higher interest payments and the higher cost of essential goods and services exceed their initial spare cash flows.” Mortgage rates to reset Source: Reserve Bank of Australia House price inflation likely to turn even more negative in 2023 Around 35% of outstanding household credit is for fixed-rate mortgages (including split-rate loans). And around two-thirds of these are due to expire by the end of 2023. The RBA estimates that most fixed-rate borrowers will face a discrete rise of 3-4 percentage points in their mortgage rates when they re-set. Some will face this re-set as early as January 2023. That being said, the current household finance ratio is still close to all-time lows at around 5-6% of disposable household income, so this would only take it back to historical norms.   The rate of quarterly increase in mean house prices peaked in the third quarter of 2021 at 6.7% quarter-on-quarter, but it has been slowing ever since. In the second quarter of this year, house prices registered a small (-1.8%QoQ) decline, which was followed by a larger decline in the third quarter (-4.0%QoQ). Annual house price growth has now dropped to only 1.1 %YoY.  We anticipate this price decline continuing through at least the first half of 2023 before prices begin to stabilise and then slowly turn around again. Year-on-year house price growth will turn negative in the first quarter of 2023 and could show something close to a 10%YoY decline at its worst in the second quarter before starting to stabilise. Year-on-year house price declines will likely persist until early 2024, and while they do, they should put a further dampener on household spending. House price inflation already dropping sharply Source: CEIC, ING Business investment: not coming to the rescue Business investment is a much smaller proportion of Australian GDP than consumer spending, but its importance for the business cycle is not to be underestimated, since it is the variance of GDP components, as well as their absolute size that provides the impetus to cyclical swings. Business investment Source: CEIC, ING   Gross fixed capital formation is the official GDP term for such business investment, and this grew by 0.7%QoQ in the third quarter of this year, however this wasn't enough to prop up the year-on-year growth rate, which showed a contraction of 0.3%YoY. As rates continue to rise, the domestic economy slows, and Australia's main trading partners skirt recession, it is hard to believe that there won't be a further slowdown in the pace of business investment. Construction by type (contribution to GDP YoY%) Source: CEIC, ING Construction going nowhere For the subset of business investment that falls under the generic term “construction”, there has not been any contribution to GDP from this sector for several quarters. Residential construction (on dwellings) has been a recent underperformer, dragging on year-on-year GDP growth by more than 0.2pp in the last two quarters. This could well deteriorate further given what is happening to the housing market. There is a marginally less dour story emerging on engineering construction. This comes mainly from electricity generating expenditure and roadbuilding, and less from the extraction industries, where spending is softening. Extraction exploration: no longer following the money Normally, we would expect exploration expenditure in the extraction industries to follow the price of the underlying commodity. That would support spending on coal extraction, and maybe natural gas. Instead, what we see is that the liveliest investment part of this industry in recent years relates to gold, though this too is beginning to peak out. It is possible that this mix of exploration spending reflects new attitudes to fossil fuels and the financing of their extraction. Indeed, we also see relatively muted exploration expenditures in onshore and offshore petroleum (including natural gas) which would tie in with that hypothesis. In short, while there remain some pockets of resilience, business investment overall is flat to slightly down, and we anticipate the going getting even tougher during 2023 before recovering in a more supportive lower rates environment in 2024. Extraction exploration (AUDm four quarter moving average) Source: CEIC, ING Trade is already dragging on growth, but this should slow One bright spot in the economy has been international trade. Thanks in part to some extremely helpful swings in Australia’s terms of trade (the ratio of export prices to import prices), what was once a long-standing deficit and leakage from the economy has provided a consistent surplus since late 2016. The 12-month average trade surplus is now more than AUD10bn and is still trending higher, though more slowly than it was. That slowdown in trade surplus expansion means that the contribution to year-on-year GDP growth from net exports actually turned to a small drag at the end of 2021, and has subtracted from year-on-year growth in three out of the last four quarters. That contribution could change as the domestic economy, in particular household consumption, slows further, causing import growth to decelerate. Though it may have to slow quite a lot if it is to outweigh the slowdown in external demand likely to stem from the US, Europe and China all effectively going into recession in 2023 and weighing on exports. The external environment could begin to turn around in the second half of 2023. But that's not a foregone conclusion.   Contributions to Australian GDP (QoQ%) Source: CEIC, ING Terms of trade have helped create Australia's external surplus The upswing in Australia's terms of trade implies a much stronger AUD/USD exchange rate than has actually been the case, and this will also have helped to keep Australia’s exports very competitive. The fact that the currency has not absorbed more of the terms of trade shift owes a lot to the RBA’s seemingly conscious decision to always pitch monetary policy on the dovish side of the US Federal Reserve and will have helped keep the AUD weaker and more competitive than it would otherwise have been.  Considering how important China has been to Australia’s export success, it is perhaps even more surprising that Australia’s trade surplus has held up so well. Digging into the data, after China closed some export avenues with Australia following political disagreements, export flows into China seem to have been steadily improving again. It may be that given China’s domestic economic weakness and the stresses following the Russia-Ukraine war, the authorities have decided to take a more pragmatic approach to trade with Australia. We think this will continue, however China's domestic weakness remains a concern, and it is not clear that recent efforts at re-opening will bear fruit quickly – though in time this approach is probably the right way forward  Terms of trade and trade surplus Source: CEIC, ING Financial markets: a more positive outlook despite the economic slowdown The Reserve Bank of Australia successfully adopted what might be described as a "dovish pivot" at its October meeting, slowing the pace of tightening from 50bp to only 25bp, and taking greater account of the current level of rates and the absolute change in the policy rate from its pandemic low. Following the latest 25bp rate hike at the December meeting, the current cash-rate target is 3.10%, up 300bp from its pandemic low of 0.1%.  This finessing of the tightening that the RBA is implementing has been vindicated by subsequent inflation data and also the slowdown becoming more apparent in GDP growth and the housing market.  Recent RBA statements still claim that policy will respond to the flow of data. However, it looks more like policy is not particularly data-dependent, but is instead, “state-dependent”. And the current "state" is that policy may now be in mildly restrictive territory and has already tightened a lot. We don’t, therefore, expect policy tightening to deviate on the upside from the current 25bp per meeting approach over the next few months, whatever the data delivers, and look for rates to get up to no more than 3.6% in the first quarter of next year. At this point, with inflation clearly on its way down, we think the RBA will opt to keep rates on hold.  Australian bond yields Source: CEIC, ING   This approach to monetary policy is considerably less hawkish than that suggested by the Federal Reserve. And so while longer-dated Australian government bonds are very heavily influenced by US treasuries (correlation coefficient of 0.98 over the last two years) Australian 10Y yields have recently traded lower than their US counterparts, following a long period of trading above them. This looks set to continue and the negative spread could even widen further – though we have to add that the actual path of both US Treasuries and Australian government bonds is subject to considerable uncertainty.  That Fed/bond yield view is also likely to play a large role in the outlook for the AUD. You can do lots of fancy analysis about iron ore futures, terms of trade, trade surpluses and relative producer prices and rates of productivity. But in the end, like the importance of Treasury yields for AUD government bond yields, the direction of EUR/USD is likely to explain most of the variance of the AUD over the next 12 months. A sense of peak Fed funds and bond yields is likely to correlate with a shift out of the USD and into everything else. It is possible this has already started, though there is still a tail risk of a further down leg in sentiment as the global recession is priced into risk assets more fully than it currently is.   The year ahead for Australia is likely to exhibit considerably slower growth, but also a peak in inflation, which raises the prospects of a shift in domestic and foreign monetary policy. And it is this elimination of inflation and turning rate cycle that will usher in an eventual improvement in market sentiment and eventually the real economy. Even with growth slowing, we still look for growth to come close to (but below) 2% for the full-year 2023 (and not much more in 2024). On paper, that is still a fairly soft landing, though we concede that it could be harder, especially if we get a more violent correction in real estate prices than we are anticipating, or if financial markets fall more heavily. In this respect, the RBA's recent caution seems much better suited to the economic backdrop than a more hawkish "higher for longer" approach.  Summary forecast table Source: CEIC, ING Read this article on THINK TagsRBA rate policy Australian inflation Australian house prices Australia economy AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Quieter markets ahead as we head into the year-end, but focus will remain on US PCE data which is the Fed’s preferred inflation gauge. China’s reopening may continue to be the bigger focus as holiday season sets in with Chinese New Year in January, likely raising concerns of a wider Covid spread. China’s loan prime rate fixing on watch this week and RBA minutes will likely confirm the bank’s dovish bent, but bigger focus will be on Bank of Japan’s possible hints of a policy review in 2023. On the earnings front, Nike (NKE:xnys), FedEx (FDX:xnys), and Carnival (CCL:xnys) will be the key ones to watch. This is the last Saxo Spotlight for 2022. Our first edition for 2023 will be on 9 January. We would like to wish all our readers a safe and enjoyable festive season.   US November PCE may be on course for further easing for now US inflation is cooling, but we argue that the debate at this point needs to move away from peak inflation to how low inflation can go and how fast it can reach there. Fed’s preferred inflation gauge, the Core PCE, will continue to remain in focus especially after Powell has highlighted it a key metric recently at both the Brookings Institute and the December FOMC press conference. However, PCE may now slow as rapidly as CPI with the two key restraining components – goods and energy – likely to play a smaller part in PCE. Expectations are for a November reading of 4.7% YoY reading vs a previous reading of 5.0% YoY while core is expected to come in at 5.5% YoY from 6% YoY in October. Still, risks to inflation remain tilted to the upside going into 2023 as financial conditions have been easing and China reopening brings a fresh wave of inflation risks. Therefore, despite a soft PCE, it will remain hard for the Fed to part with its hawkish stance. The first of 2023 will bring December ISM prints, which will be key to watch after the flash S&P PMIs indicated quickening economic concerns. The FOMC minutes from the December 14 meeting will also be due on January 5. The focus of China’s economic data during the three festive weeks will be on PMIs The economic calendar is light in the three festive weeks ahead in China and the primary focus will be on the official NBS Manufacturing PMI and Non-manufacturing PMI scheduled to release on Dec 31, 2022, Caixin China PMI Manufacturing on January 2, 2023, and Caixin China PMI Services on January 4, 2023. These reports cover the month of December 2022 when China across the country has substantially exited from stringent Covid containment restrictions. As high-frequency data are yet to show meaningful pick-ups in economic activities, these December PMI readings are expected to stay in the contractionary territory.  Watch for Bank of Japan’s policy review hints, Japan CPI also due later in the week The Bank of Japan is set to meet on Tuesday this week, and no change is expected in its monetary policy stance. The BOJ is expected to keep rates unchanged at -0.1% while maintaining its cap on the 10-Year JGB at 0.25%. Even as inflation increased to 3.6% YoY in October, the BOJ remains focused on achieving wage inflation before it considers a shift in policy stance. However, keep an eye out for any comments about a monetary policy review, which can trigger a strong JPY correction. There have been some mentions by BOJ members regarding a review of how monetary policy is conducted, they have generally been dismissed. While the timeline is still expected to be closer or after Governor Kuroda’s retirement in spring, any notes on who will succeed him or what policy change can be expected would be critical. Japan will also release November’s CPI on Friday. Expectations are for an uptick in core to 3.7% YoY while the headline gets closer to 4% YoY. RBA minutes remain on watch to confirm a dovish bias Despite the major global central banks maintaining their hawkish stance last week, the minutes from the Reserve bank of Australia’s December meeting will likely confirm a dovish bent. This comes despite a strong labor market report last week, that showed strong hiring demand and record low unemployment rate may continue to fuel more inflationary pressures especially as China’s reopening and policy stimulus gathers further traction in 2023. This could mean an environment for underperformance for Aussie assets for now, after AUD was the weakest G10 currency against the USD last week. Key earnings this week Earnings to focus on this week are Nike (NKE:xnys), FedEx (FDX:xnys), and Carnival (CCL:xnys). As Peter Garnry highlighted in his note, with recent sell-side analyst upgrades, the pressure is on Nike to deliver on the outlook for 2023. For FedEx, the situation is completely opposite as revenue expectations have come down to zero growth over the two next quarters suggesting a hangover for the logistics company following the boom days of the pandemic. Monday: HEICO Tuesday: Nike, FedEx, General Mills, FactSet Research Systems Wednesday: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori   Key economic releases & central bank meetings this week Monday 19 December Malaysia Trade (Nov) Germany IFO surveys (Dec) US NAHB Housing Market Index (Dec) EU Energy Ministers Meeting Tuesday 20 December China Loan Prime rate 1Y/5Y Germany PPI (Nov) Japan BOJ Interest Rate Decision Taiwan Export orders (Nov) US Building Permits, Housing Starts (Nov) Wednesday 21 December South Korea 20 Days exports and imports (Dec) Canada CPI (Nov) US consumer confidence (Dec) Thursday 22 December Bank Indonesia meeting Taiwan Unemployment rate (22 December) UK GDP (Q3 F) US Initial jobless claims (Dec 17) and 3Q GDP Final Friday 23 December Japan CPI inflation (Nov) Taiwan Industrial output (Nov) Singapore CPI inflation (Nov) US Durable goods orders, personal Income, Core PCE price index, and new home sales (Nov) Source: Saxo Spotlight: What’s on the radar for investors & traders for the week of 19-23 Dec? US PCE, China LPRs, RBA minutes, possible hints of BOJ policy review and earnings focus on Nike and FedEx | Saxo Group (home.saxo)

AUD/USD struggles to defend bulls during the first positive day in three. Risk appetite remains mixed as hopes of more stimulus from China, Covid woes test sentient amid light calendar. Hopes of Australia-China diplomatic ties also underpin AUD/USD rebound. Reserve Bank of Australia Meeting Minutes, Federal Reserve’s preferred inflation data will be crucial for Australian Dollar traders. AUD/USD seesaws around the 0.6700 round figure as a short-term moving average defends the Australia Dollar buyers during early Monday morning in Europe. In doing so, the Aussie pair portrays the cautious optimism in the market amid sluggish moves and a light calendar. However, broad US Dollar weakness allows the pair buyers to cheer the first daily gains in three. China-linked news favor AUD/USD buyers. Be it a likely restoration of the Aussie-Sino ties or China’s readiness for more stimulus, AUD/USD has reasons to defend the latest recovery moves. In this regard Reuters said, “Australian Foreign Minister Penny Wong will visit China this week, Prime Minister Anthony Albanese said on Monday, signaling an improvement in diplomatic relations between Beijing and Canberra.” The news also stated that China President Xi Jinping and his senior officials on Friday pledged to shore up China's battered economy next year by stepping up policy adjustments to ensure key targets are hit. Alternatively, doubts over China’s economic growth and the reliability of the latest easing in Covid policy seem to challenge the AUD/USD pair buyers. It’s worth noting that the People’s Bank of China's (PBOC) defense of easy money policy also keeps the Australia Dollar firmer, due to the strong trade links between Australia and China. US Dollar fails to cheer hawkish Federal Reserve talks US Dollar Index (DXY) picks up bids from intraday low but prints 0.15% daily loss around 104.60 as traders struggle for clear directions. The reason could be linked to the hawkish comments from the US Federal Reserve (Fed) officials and softer US PMIs for December. Federal Reserve Bank of Cleveland President Loretta Mester and New York Federal Reserve President John Williams recently favored higher rates. On the other hand, the US S&P Global Manufacturing PMI dropped to 46.2 from 47.7 in November, as well as the market expectation of 47.7. Further, S&P Global Services PMI declined to 44.4 in December's flash estimate from 46.2 in November and market expectation of 46.8. AUD/USD traders await Reserve Bank of Australia Meeting Minutes, United States Inflation data In its latest monetary policy meeting, the Reserve Bank of Australia (RBA) announced 25 basis points (bps) rate hike and showed readiness for more. However, the RBA Governor Philip Lowe appeared less convinced of the hawkish move and hence the AUD/USD pair traders will pay more attention to confirm the dovish bias over the RBA, which in turn could weigh on the Australian Dollar. On the other hand, the Federal Reserve’s (Fed) preferred version of inflation, namely Friday’s US Core Personal Consumption Expenditures (PCE) - Price Index, expected 4.6% YoY and 5.0% prior, will be important for the AUD/USD pair traders. Should the inflation number appear softer, the US Dollar may have more downside to trace, which in turn could weigh on the Aussie pair. Additionally, Australia’s Mid-Year Economic and Fiscal Outlook will be important as economic fears gain momentum, which if confirmed could weigh on the AUD/USD prices. AUD/USD: Technical analysis AUD/USD bears mark another retreat from the 200-SMA, after an early November rebound from the stated key Simple Moving Average (SMA). Not only the U-turn from the 200-SMA, around 0.6680 by the press time, but an impending bull cross on the Moving Average Convergence and Divergence (MACD) indicator also keeps the AUD/USD pair buyers hopeful. However, a successful run-up beyond the previous weekly start of around 0.6730 appears necessary for the Australia Dollar buyers. Following that, a one-week-old horizontal hurdle surrounding 0.6815 appears as the last defense of the AUD/USD pair bears, a break of which could propel the quote towards a convergence of the five-week-old ascending trend line and the monthly top, close to the 0.6900 round figure. On the flip side, a break of the 200-SMA level surrounding 0.6680 could fetch the Australia Dollar towards the late November swing low near 0.6585. In a case where the AUD/USD bears break the 0.6585 support, the November 08 peak of 0.6551 appears the key challenge before activating a south run towards the previous monthly low near 0.6272. AUD/USD: Four-hour chart Trend: Recovery expected

The US Dollar is weaker today as markets appear to be restoring their signal ahead of next week's holiday. Chinese words about stimulating economic growth strengthened risk sentyment. The Australian Dollar is the biggest gainer today as the generally more optimistic sentiment towards risky assets helped to bolster it. Later in the day, the focus will be on US GDP, which is expected to improve for the third time in a row, revealing a downside risk for the EUR/USD pair. In addition, central banks must balance the need to fight inflation with the risk of further deepening of the economic slowdown. EUR/USD EUR/USD keeps trading above 1.06 for another day. For a significant part of the day, the pair traded in the range of 1.0630-1.0660. It is currently trading below 1.0630, 1.0622 to be precise The euro has a strong start to Thursday's European session with the dollar weakening. In addition, de Guindos of the European Central Bank (ECB) upheld the hawkish narrative, stating that "50 basis points may soon become the new standard" to quell rising inflationary pressures in the eurozone. GBP/USD The cable pair dropped to 1.2040. The British pound traded around $1.21, down slightly from its recent six-month high of $1.2446 as investors weighed less hawkish BoE and economic outlook. Analysts mainly see the risk of the pound falling between now and the end of the year as the UK economy is stuck in stagflation conditions. The outlook for the UK is still pretty bleak. The UK economy contracted slightly more than originally estimated in the third quarter and business investment performed poorly, the Office for National Statistics said on Thursday. Household spending and business investment fell significantly, boosting expectations that the British economy was heading into recession. Most services sub-sectors experienced a slowdown, however, services output increased by 0.1% in Q3 2022, revised upwards from the first estimate of solid output. Compared to pre-coronavirus (COVID-19) levels, service output is now 1.3% lower than in Q4 (October-December) 2019. Read next: Credit Suisse Sold Building In Geneva | Visa Is Building Success At The Expense Of Small Retailers| FXMAG.COM USD/JPY USD/JPY dropped from 137.50 to 130.50 in no time. It has since stabilized. USD/JPY in the Asian session fell to around 131.70, in the European session the pair rose above 132.10. The yen firmed on Thursday, returning towards a four-month peak against the dollar hit this week after an unexpected tweak to the Bank of Japan's bond yield controls spurred bullish yen bets. Japan is the largest holder of government bonds and once again, if domestic yields move north, the world's largest debt market could be affected. The bank's new CEO is due to be appointed in April 2023, and there is a perception that he could pave the way for the new leader to tighten policy in the face of accelerating inflation. The yen is used as a funding currency by some investors, and the rise in Japanese yields changes the price dynamics for these participants. AUD/USD Yesterday, at the end of the day, the exchange rate was below $0.67, but closer to midnight it started to increase. The new day will start with an increase in the Aussie pair. It peaked at 0.6769, then you start to fall. Trading is at 0.6726 The sentiment-linked Australian dollar outperformed its major counterparts on Wednesday, benefiting from a cautious improvement in risk appetite. The aussie also benefited from a general weakness in the US dollar, as well as hopes for more pro-growth policy measures in China. Earlier in December, the Reserve Bank of Australia raised its policy rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade. Source: dailyfx.com, investing.com, finance.yahoo.com

According to MNI, the Reserve Bank of Australia (RBA) believes that “accumulated savings, a tight jobs market and spending cuts will make higher interest rates manageable for most homeowners.” This comes as AUD400 billion of fixed-rate mortgages mature in 2023 and home prices are set to add to eight straight months of declines. Citing sources familiar with the RBA thinking, MNI noted: “The full impact of the cumulative 300bps of tightening since May will become evident over coming months as higher cash rates are passed through to variable-rate mortgages, but a particular focus is on borrowers who fixed rates at historic lows and will confront a significant increase in repayments as the bulk of pandemic-era fixed rate deals mature this year. Fixed-rate mortgages peaked at around 40% of all home loans in early 2022.” Related reads China considering a partial end to Australia coal ban AUD/USD firms up toward 0.6800 as risk flows return

The US dollar on Monday approached a seven-month low against other major currencies after data suggested the Federal Reserve could slow the pace of rate hikes. The dollar suffered its biggest quarterly loss in 12 years in the last three months of 2022, driven mainly by investor confidence that the Fed would not raise interest rates above 5%. The probability of a 25 basis point Fed rate hike in early February rose above 70% after the release of this data, reflecting the return of dovish Fed betting. The US economic report will not contain any important macro data on Monday. Later in the day, Atlanta Federal Reserve Bank Chairman Raphael Bostic will give a speech, and he said on Friday that he expects the Fed to keep interest rates at peak levels until 2024. Friday's monthly employment report showed an increase in non-farm payrolls and a slowdown in wage growth. The US employment data hit the US dollar hard. USD/JPY The Japanese yen strengthened above 132 to the dollar, returning to its highest level in seven months. The yen is building on December gains amid mounting speculation that the Bank of Japan may soon move away from ultra-easy policy after it unexpectedly raised the upper end of its 10-year government bond tolerance band to 0.5% from 0.25% last month . However, BJ Governor Haruhiko Kuroda clarified that the move was not a sign of starting a massive stimulus exit, but was intended to improve the functionality of the bond market. AUD/USD The AUD/USD pair builds on Friday's strong rally and gains strong traction on the first day of the new week. This marks the second day in a row of positive movement. The Aussie pair broke through the 0.69 level in the Zajati session. China's hopes of reopening may have contributed to the strengthening of the commodity currency. The world's second largest economy has lifted quarantine requirements for visitors, taking another step towards reconnecting to the world in the post-Covid era. Over the weekend, China finally reopened its sea and land border crossings with Hong Kong, the last pillar of its zero-covid policy, after three years. On the monetary policy front, the currency remains supported by expectations that the Reserve Bank of Australia will raise interest rates further this year in an ongoing effort to bring down inflation. Otherhand, markets are currently split on whether the RBA will deliver another rate increase at its Feb. GBP/USD The British pound hit a two-and-a-half-week high on Monday against a fundamentally weak dollar. GBP/USD entered a consolidation phase and pulled back towards 1.2100 after hitting a two-week high at 1.2175 earlier in the day. The US dollar came under strong selling pressure before the weekend. Traders are fully pricing in a 25bps rate hike at the February BoE meeting with around a 65% chance of a larger 50bps hike. The money markets predict that the bank rate will peak at around 4.5% in the middle of this year. EUR/USD EUR/USD is on a strong gain for the second day in a row. After Friday's rally before the weekly close, EUR/USD rose to 1.0699 on Monday. The euro benefited from better market sentiment. Today the EUR/USD pair climbed towards 1.0700. Unemployment in the EU shows a downward trend and November's print jobs reached 6.5% . Lower gas prices are also contributing to optimism in the eurozone and a better economic outlook for the eurozone, but the main driver of the euro appears to be a sell-off of the dollar along with flows into risky assets. Source: investing.com, finance.yahoo.com, dailyfx.com

The November monthly inflation series surprised markets with a stronger-than-expected rise. While this will be a disappointment for the Reserve Bank of Australia, many of these factors look likely to reverse in the months ahead Australian retail sales Source: Shutterstock 7.3% November inflation YoY% Higher than expected A bad number, but it should soon fade After falling to 6.9% in October, the return of inflation to 7.3% in November is quite disappointing and highlights the fact that inflation in Australia is not going to be a pushover for the Reserve Bank as it tries to squeeze it back to its 2-3% target. A relatively muted month-on-month gain in the price level in November last year meant that at best we were only likely to have seen a modest further reduction in inflation this month instead of the rise we actually saw. But some outsize rises in the price of a number of components mean that we may be waiting another month or two before we can confidently call "peak inflation" in Australia.   Rain stops play The monthly data tells the story quite well. Let's start with food. And after two consecutive months of large declines, food prices, especially fruit and vegetables, were pushed strongly higher. Poor weather and more flooding in New South Wales and Victoria are probably to blame for much of this. And December wasn't by any means a return to normality either, with the Bureau of Meteorology noting rainfall was 33% above average for the month as a whole with temperatures below or very much below normal (though New South Wales and Victoria were drier than normal after the previous month's rain).   Australian December rainfall - percentage of mean Source: Australian Bureau of Meteorology Oil isn't helping The second 2.2% month-on-month increase in a row for the transport component is largely a reflection of crude oil and retail gasoline prices, with the motor fuel component up 5.6% MoM after a 7% MoM increase in October. National pump prices in December more than reversed the November increase, though they are on the rise again in January, so any respite in December may be short-lived. Then there is the recreation component, which is being driven by holidays, the price of which rose 4.3% in November due to a choppy and hard-to-forecast combination of air fares (a derivative of oil prices) and pressure on holiday vacancies (a function of global reopening). Rising overseas visitors for Christmas mean that these November figures may only partially reverse in December after the latest spike.   Australian inflation by component MoM% Source: CEIC, ING Better news buried in the detail However, all of this could be regarded as the death throes for inflation in Australia, as there are some encouraging developments elsewhere that could signal lower inflation once this latest volatility is out of the way, and absent any renewed climate-related impacts (a very big "if" these days).  Firstly, clothing, which is a good reflection of discretionary spending strength, dropped 2.4% MoM, though it is also extremely volatile, so we aren't reading too much into just one month's reading. More importantly, housing registered only a 0.1% MoM increase in November, with house purchase costs also only up 0.1%, while rents rose only 0.2% MoM, down from 0.6% in October. These prices tend to be much less volatile, and having softened, we could anticipate even weaker figures in the months ahead, which may help to soften any residual volatility in the other components that we still need to work through.  What does this mean for markets? Interestingly, after a brief spike higher on the news, 10Y Australian bond yields have tended to drift lower today following the CPI numbers. This could indicate that markets also view this as a last hurrah for inflation rather than any meaningful setback for the Reserve Bank of Australia. The same seems true for RBA expectations, where December 2023 bank bill futures have risen, signalling an expectation for lower, not higher yields. The Australian dollar did push higher against the US dollar following the release, though drifted back before strengthening again later, though not clearly a direct result of today's data.  Certainly, today's data adds more risk to our view that the RBA will stop raising rates once it reaches 3.6% (another two 25bp rate hikes from here), and we may have to raise that to 3.85% if we don't see some more encouragement from other figures, for example, the labour data. But we are not throwing in the towel just yet. This latest inflation data offered just enough hope that this is a temporary setback to enable us to defer that decision for a little while longer.   Read this article on THINK TagsRBA rate policy Australian inflation Australian economy AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Risk sentiment found its feet yesterday after the prior day’s reversal ahead of the important December US CPI release tomorrow, though markets seem confident that the trajectory of inflation is not a threat in the near term. The US dollar hovers near multi-month lows in many USD pairs ahead of that data and gold has notched new eight-month highs overnight, while copper is cementing its move higher above four dollars per pound.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 0.7% after a weak Tuesday’s session in a strong signal that the market remains upbeat about growth prospects and inflation cooling. US equities are still stuck in an odd range with moving averages of different lengths pointing in all directions. The key trading focus is tomorrow’s CPI report and whether the market dares to extend momentum into the report. Tuesday’s intraday high in S&P 500 futures at 3,973 is naturally the hard resistance level on the upside. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) The Hang Seng Index resumed its uptrend to make a new recent high to trade above 21600, up more than 1% from yesterday and a level last seen in July last year. China’s Lunar New Year travel season started last Saturday 7 January with 9,454 flights or a 2.3% growth from the first day of the same travel season last year. The number of daily flights increased to 10,123 on 8 January, a 13.7% increase from the same period last year and above 10,000 for the first time since August 2022. Other high frequency data also showing increases in inter-city travelling. Chinese mega cap internet names led the charge higher, with Alibaba (09988:xhkg) and Tencent (00700:xhkg) gaining over 3%. Coal miner, China Shenhua Energy (01088:xhkg), rising by 5.6%, was the top winner within the Hang Seng Index. Mainland China’s CSI300 was flat. Coal mining, oil and gas exploration and development, and property management services stocks gained. FX: USD dips on rebounding risk sentiment ahead of December CPI data Thursday Lack of data and any relevant commentary in Fed Chair Powell’s short comments at a conference of central bankers yesterday saw the USD easing lower by this morning as risk sentiment rebounded. EURUSD was the outperformer, with better growth outlook underpinning, but it continued to find resistance at 1.0760. USDJPY is back above 132 amid higher yields, while AUDUSD rose back above 0.69 following the higher-than-expected Australian November CPI print released overnight. USDCNH also still below 6.7900. Tomorrow’s US December CPI release will prove important in confirming or rejecting the recent USD weakening move. Crude oil (CLG3 & LCOH3) choppy amid China optimism and inventory build Crude oil prices continue to pivot around $80 per barrel in Brent and $75 in WTI as the market remained buoyed by optimism of China demand recovery while yesterday’s European session was supported by upbeat Eurozone outlook. Meanwhile, EIA raised its forecast for demand growth in 2023 to 1.05mb/d. However, it also expects US output to rise to meet this demand, with US shale oil providing the bulk of the gains. The API report showed a strong inventory build of 14.9mn barrels in crude as against expectations of a 2.2mn draw and focus now turns to EIA figures today. Near-term futures spreads meanwhile are holding in a bearish contango structure, signalling ample supply. Resistance around the 21-day moving average in Brent at $81.50 and $76 in WTI Gold (XAUUSD) pushed higher overnight ... supported by general metal strength amid the current focus on the reopening of the Chinese economy and pent-up seasonal demand ahead of the Lunar New Year holiday. Developments that are being supported by a softer dollar and a drop in US bond yields ahead of tomorrow’s US CPI print, which is expected to show further softening, leading to speculation the FOMC may slow the pace of future rate hikes. While momentum supports technical and speculative buying, for now primarily through short covering, activity in ETF market from longer-term investors remain tepid, raising the short-term risk of a correction. The next major hurdle for gold being $1896, the 61.8% retracement of the 2022 correction, with support now at $1865 and $1830. Copper continues to march higher Copper continues to gain momentum as it remains buoyed by the reopening of Chinas economy and increased policy support to fuel an economic recovery to offset the economic fallout from President Xi’s failed and now abruptly abandoned covid-zero policies. Gains were further boosted by Chair Powell staying away from a pushback on easing financial conditions, and the weaker USD as a result. While the metal increasingly looks ripe for a correction, the sharply improved technical outlook and limited investor positioning may drive it higher in the short term. Overnight futures prices in London and New York managed to retrace 50% of the 2022 sell off, in HG copper at $4.0850 and LME at $8900. Support at $3.96 followed by the 200 DMA at $3.84 US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) edge higher, 10-year auction up today After nearly touching 3.50% at the start of the week, the US 10-year benchmark yield rebounded above 3.60% yesterday before settling slightly lower as risk sentiment improved. An auction of 3-year treasuries saw strong demand yesterday, with a 10-year auction up later today after a string of weak auctions for longer maturity US paper in late 2022. Read next:According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM What is going on? The Aussie dollar rallies after hotter than expected Australian CPI and retail data The Aussie dollar nudged up 0.3% to 0.6906 US, with local inflation and retail sales coming in hotter than expected, reflect that the RBA can continue to tighten, as inflation remains above the RBA target. Today's data also reflects stagflation could hit the nation in 2023; with unemployment likely to rise, and real GDP to fall to 2% (consensus). The biggest contributors to inflation (housing price rises, food and transport (petrol costs)) are also sticky and are not expected to subside in the near term. (Core CPI rose from 5.3% YoY to 5.6% YoY in Nov (beating 5.5% expected). Moving to retail sales in November, which jumped 1.4%, boosted by Black Friday, also reflect Australian's are not perturbed by rate hikes. Over the medium term, the Aussie could remain supported amid China’s reopening, with GDP to also benefit from China buying Australian coal for the first time in two years.    The story is shifting on Europe Softer energy prices, the lack of black-out and resilient hard data (notably in Germany) is pushing forecasters to review their 2023 recession calls. Goldman Sachs is the first international bank to drastically revise its growth forecasts upward, from minus 0.1 % in 2023 to 0.6 %. Said differently, the U.S. based bank does not expect a recession in the eurozone this year anymore. Early Q4 indications are out this Friday with the preliminary 2022 FY growth estimate. This should certainly confirm a milder-then-expected economic downturn. A mild recession (meaning drop in GDP of 0.1 or 0.2 %) is still our baseline this year. But we agree that the economy is surprisingly resilient. We also believe there will be no extreme macro and market events in 2023 – which could be positive from a growth perspective. If the economy performs much better, this will however give ECB policymakers more confidence in hiking rates as laid out in December by Christine Lagarde. China’s aggregate financing slowed to 9.6% y/y while loans to corporate picked up In December, the growth of outstanding aggregate financing, the broad measure of credit in China, decelerated to 9.6% y/y from 10.0% y/y in November. New aggregate financing declined to RMB1,310bn in December (below consensus RMB1,850bn) from RMB1,987bn in November, dragged by a decline in new bond issuance from local governments and a net bond redemption by corporate. New RMB loans rose to RMB1,400bn (above consensus RMB1,200 billion) from RMB 1,214bn in November and were also above RMB1,130bn in December 2021. The growth of RMB loans picked up to 11.1% y/y in December from 11.0% in November. The better-than-expected growth in RMB loans was driven by new loans to the corporate sector which rose to RMB1,264bn in December from RMB884bn in November and above RMB 662bn a year ago, as the Chinese authorities had asked banks to extend credits to support the housing market and other key industries. New loans to households came in weak, falling to RMB175bn in December from RMB263bn in November and RMB372bn in December a year ago. Apple aims to start using own screens by 2024 replacing Samsung Apple is accelerating its vertical integration with the news yesterday that it plans to replace Broadcom chips by 2025 and today it is aiming to replace screens from Samsung by 2024. It is a classic move for a big company increase profit margins by insourcing parts of the value chain, but the key risk long-term is the potential loss of innovation and lower prices. The alternative to integrating components is to let a competitive market supplying what you need as Samsung and LG do today in fierce competition. French labor unions call for strike to start Jan 19 on Macron pension plan French president Macron unveiled a plan to raise France’s minimum retirement age to 64 by 2030 from the current level of 62. France has one of the highest pension costs as a percentage of GDP in the EU (nearly 14%) and the ranks of the retired are set to grow for at least another 15 years if no changes are made. Iron ore price above $120 The iron ore futures traded in Singapore reached a 5-month high overnight, underpinned by China reopening and stimulus for the property sector. Look for a reversal as China had warned of tightening the supervision on iron ore pricing on Friday to crack down on speculators. Supply outlook is also relatively better, with an estimated 40 million tons of additional supply in 2023, while demand will likely be suppressed due to constraints on crude steel production in China. Wages set to rise in Japan? The fast-fashion Japanese retailer Uniqlo is set to hike pay for many full-time staff in Japan by as much as 40% and will raise the salary for newly hired graduates by over 17%. Bank of Japan Governor Kuroda has long stated that inflation is only rising sustainably if Japanese wages also begin to rise in line with commodity- and other input costs. What are we watching next? US December CPI up on Thursday The latest CPI data out of the US is the next important test for global markets, which seem confident that the Fed will not only halt its policy tightening soon after perhaps 50 basis points of further tightening but will even be signalling rate cuts by year-end. The US CPI releases have triggered considerable volatility in recent months, particularly in equity markets on aggressive trading in very short-dated options. The market expects that inflation will actually fall month on month by –0.1% and only rise 6.5% year-on-year versus +7.1% in November. The core, ex Food and Energy number is expected to rise +0.3% MoM and +5.7% YoY vs. +6.0% YoY in November and a peak rate of 6.6% in September. Earnings to watch The Q4 earnings season kicks off this Friday with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth this year. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Thursday: Fast Retailing, Seven & I Friday: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 0800 – Czech Dec. CPI 1530 – EIA’s Weekly Crude and Fuel Stock Report 2350 – Japan Nov. Current Account data 0030 – Australia Nov. Trade Balance 0130 – China Dec. PPI, CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 11, 2023 | Saxo Group (home.saxo)

US equities first struggled to find direction, as the Federal Reserve (Fed) Chair Jerome Powell kept mum on monetary policy in Stockholm yesterday, worried about the World Bank’s morose growth projections, but then turned north on hope that a softer US inflation print tomorrow could boost the Fed doves and enhance appetite in US equities. Gold Gold benefits from softer US yields, and softer dollar on expectation that a softer inflation could soften the Fed’s policy stance. World Bank The World Bank predicts a global growth of about 1.7% this year, about half the pace it predicted last summer. Although the slowing economic growth softens the rate expectations – and boost equities, a weaker global economy should weigh on corporate profits and should not let the rally run too far. Forex In the FX, European Central Bank (ECB) officials stand behind their hawkish view despite the latest softening in inflation. The EURUSD pushes higher as the positive pressure is the fruit of the divergence between softening Fed expectations and hawkish ECB bets. Australia In Australia, inflation advanced more than expected to 7.3% in Q4 fueling the expectation that the Reserve Bank of Australia (RBA) could opt for another 25bp hike in its February meeting. Energy Finally, in energy, crude oil is dragging its feet below the $75 this morning and will likely remain under pressure as yesterday’s API data showed that the US oil inventories rose by a little less than 15 mio barrels last week as the refining activity returned to normal following weather-related shutdowns. Watch the full episode to find out more! 0:00 Intro 0:23 Stocks rallied on softer US inflation bets 1:58 ‘Be careful what you wish for!’ 3:20 World Bank cuts growth forecasts… 3:53 … but Goldman calls off the Euro recession!? 5:48 Euro, Aussie gain on hawkish central bank expectations 6:55 Crude oil under pressure on 15-mio US stockpile build 7:34 Gold benefits from softer dollar, yields 7:56 Microsoft could be on a good path with ChatGPT! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #inflation #expectations #USD #EUR #GBP #XAU #earnings #season #Microsoft #ChatGPT #tech #stocks #World #Bank #Goldman #Sachs #growth #forecast #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH        

The Australian dollar is trading quietly on Wednesday. AUD/USD is at 0.6904, up 0.14%. Australian CPI climbs to 7.3% Australian inflation pushed higher in November, rising to 7.3% following a 6.9% gain in October. This matched the forecast. The trimmed mean rate, a key gauge of core inflation, rose to 5.6% in November, up from 5.4% a month earlier and its highest level since 2018. The drivers behind the increase were higher jet fuel prices as well as accommodation prices. The drop in inflation in October (6.9%, down from 7.3% prior) had raised hopes that inflation might have peaked, but the rise in the November release has dampened such hopes. Retail sales for November jumped 1.4%, buoyed by Black Friday sales. This was much higher than the forecast of 0.6% and the October read of 0.4%. Consumer spending remains strong despite the double-whammy of rising interest rates and high inflation. What will be the RBA’s take on this data? The trimmed mean rate indicates that the rise in inflation is broad-based, a reminder that the RBA has more work to do as it tackles high inflation. The strong retail sales data shows that the economy can still bear further hikes, and the markets have priced in a 25-basis point increase at the February 7th meeting. The RBA rate policy is data-dependent, which means that the quarterly CPI release on January 25th could determine what decision the central bank takes at the meeting. The minutes of the December meeting indicated that the RBA considered three options at that meeting – a 25 bp hike, a 50-bp hike and a pause. In the end, RBA members opted for the 25-bp increase. I would expect the RBA to show similar flexibility at the February meeting. Fed Chair Powell finds himself under constant scrutiny, not just for his comments but also for what he doesn’t say. Powell participated on a panel at a symposium of the Swedish central bank on Tuesday. The topic was central bank independence, and Powell did not touch upon the economy or monetary policy. The markets took this as a dovish sign and the US dollar pared gains as a result. Read next:Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM AUD/USD Technical 0.6931 remains a weak resistance line, followed by 0.7044 0.6817 and 0.6747 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Australia's inflation report was released on Wednesday, which exceeded expectations of most experts. The consumer price index rose 7.3% in Q4 2022, with a forecast of 6.8% growth. Notably, in the third quarter, inflation showed signs of slowing (when the growth forecast was 7.4%, the indicator turned out to be at 6.9%). And in the fourth quarter analysts expected further development of this trend - but in fact the CPI returned to the level of the second quarter, thereby puzzling market participants. In addition, on Wednesday another equally important report was published in Australia, which reflected a significant increase in consumer activity. We are talking about retail sales, which rose by 1.4% month-on-month in November (with a modest forecast of 0.6%). This is the strongest growth rate since last March. For comparison, in the previous month the figure increased by only 0.4%. The data added to the fundamental picture for the pair, which is shaping up quite positively. The relevant news flow is mainly related to China, which abandoned its "zero-Covid" policy and resumed imports of coal from Australia. The reset in relations between Beijing and Canberra was appreciated by AUD/USD traders: in the first week and a half of 2023, the pair rose more than 200 pips to settle at the 69th figure area. Interest rate  Wednesday's inflation report, which is important in and of itself, also suggests that the Reserve Bank of Australia will continue to "quietly" tighten monetary policy parameters. The RBA has cut the rate of interest rate hikes to 25 points since last October, but assures markets that it is not going to pause the tightening of monetary policy. The resumed growth of inflation in the fourth quarter suggests that the issue of a pause is now finally off the agenda (at least in the perspective of the next meetings). Following the December meeting, RBA head Philip Lowe said that the central bank does not pursue a pre-planned course: in his words, the size and timing of future rate hikes "will be determined by incoming data and the outlook for inflation and the labor market. Another noteworthy phrase from the head of the RBA is that the Board's priority remains restoring low inflation and getting inflation back into the 2-3% range over time. Inflation report is unlikely to prompt the RBA to be more aggressive As we can see, so far inflation in Australia is moving in the opposite direction. Therefore, the likelihood of any pause at this point is close to zero. On the other hand, the latest inflation report is unlikely to prompt the RBA to be more aggressive (in the context of a return to the 50-point rate). Most likely, the Australian central bank will continue to raise the rate in 25-point increments, without risking to increase the rate due to possible side effects (relevant concerns were repeatedly voiced by the RBA representatives). In other words, the aforementioned report will not lead to any "revolutionary" changes, despite its greenback color. At the same time, this release has reduced to zero the probability of a pause in the RBA rate hike. That's enough for the aussie to keep trying to climb back up to the 70s. But so far the bulls' attempts to get closer to the main price barrier at 0.7000 are failing. During the two days the pair's bulls were assaulting the intermediate resistance level at 0.6930 (the upper line of the Bollinger Bands indicator on the daily chart), but each time they were back to their previous positions, to the base of the 69th figure. The reason for such indecisiveness is also caused by the inflationary report, only now it is the American one. US data Let me remind you that the US Consumer Price Index will be released at the beginning of the US session. According to most experts, the release will reflect a further slowdown in US inflation, reinforcing the discussion that the Fed may move to a 25-point rate hike. The likelihood of such a scenario materializing (at least in the context of the February meeting) has risen to 76% after last Friday's Nonfarm data. If inflation also disappoints traders, the probability of a 25-point rate hike in February will probably rise to 85-90%. The greenback will again come under pressure and bulls will have an excuse to make a march to the 70s. The alternative scenario But the alternative scenario (though unlikely, of course) is that inflation in the US will show growth contrary to what most experts predicted. In that case, the dollar bulls will assert themselves all over the market, especially in the light of the latest statements of the Fed representatives. Mary Daly and Raphael Bostick made some very hawkish remarks this week. Specifically, Daly said that the rate could be raised "by either 25 or 50 points" at the next meeting. Also, in her opinion, the final point of the current cycle would be in the 5.1%-5.25% range (that is, she was against lowering the upper bound). Bostick took a similar stance. Fed All this suggests that it is too early to write off the hawkishness of the Fed: if the inflation report surprises market participants with its greenback, the US currency will strengthen its position considerably. Again, this option is unlikely, but judging by the dynamics of the dollar pairs, traders do not risk to play against the greenback on the threshold of this release. AUD/USD Thus, at the moment the best option for the pair is to take a wait-and-see stand, because the key macro report of Thursday is hypothetically able to "redraw" the fundamental picture for all the dollar pairs.   Relevance up to 23:00 2023-01-12 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332040

Next week’s data calendar features China’s GDP numbers, jobs data from Australia, and a rate hike by Bank Indonesia Source: Shutterstock RBA looking to jobs report next week for direction After the disappointingly high November inflation numbers, the Reserve Bank of Australia (RBA) will want to see some evidence of slowing in the labour market if it is not going to have to raise rates more than the additional 50bp we are currently forecasting. The consensus is for around 64,000 new jobs, which would indeed be a strong figure, and unless there was an offsetting rise in the unemployment rate, would probably prompt us to review our peak rates forecast in favour of an increase. We expect total employment of roughly 45,000 fresh jobs of which only 20,000 would be full-time jobs. Lending rate and activity data out from China The People's Bank of China (PBoC) will decide whether to cut the 1Y Medium Lending Facility rate (MLF) on 16 January. We expect the PBoC to pause at 2.75% as the economy is recovering. Furthermore, the government has emphasised that the central bank's actions should be more focused, and a general rate cut would not be considered a focused monetary policy move. After the PBoC’s announcement of 1Y MLF, Chinese banks will announce 1Y and 5Y Loan Prime Rates (LPR) on 20 January. We expect no change in these interest rates as banks usually follow the move of MLF and banks’ interest margins have been thinner. But the government has urged banks to lend out more loans, which may imply banks could be under pressure to cut. Meanwhile, China will announce activity data and GDP data between 10 and 27 January. We expect retail sales to contract deeper on a yearly basis while industrial production could turn from positive growth to mild contraction in December. This leaves the economy mainly supported by fixed-asset investments. As a result, GDP growth for the fourth quarter should be in slight year-on-year contraction. BoJ to reiterate dovish stance while BI set to hike The Bank of Japan (BoJ) is expected to stand pat after delivering its unexpected decision in December to expand the yield curve band. Governor Haruhiko Kuroda’s future guidance will remain dovish, but apart from that, the market appears to be pricing in additional normalisation steps from the next BoJ governor. Considering that Tokyo CPI inflation hit 4% year-on-year earlier this week, national CPI inflation for December is likely to climb up to 4%. But, pipeline prices, such as import price and producer price, are expected to be lower than in the past month.  Meanwhile, Bank Indonesia (BI) meets to discuss policy next week and we expect Governor Perry Warjiyo to start the year with a rate hike to support the Indonesian rupiah (IDR). Softer inflation reported in the past few months and fading growth momentum suggest that BI will likely opt for a 25bp rate increase which would widen interest rate differentials to support the currency. Indonesia's trade report to show slowing export growth Indonesia also reports trade numbers next week. With commodity prices moderating, exports will likely manage to grow a modest 6.2% while imports could contract for a second straight month. The trade balance will likely remain in surplus but could slide to $3bn, lower than the previous month and less than half of the record $7.6bn recorded in April last year. With the trade surplus fading, we could see the IDR missing a key support in 2023, which could suggest some depreciation pressure on the currency this year. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Latest thoughts on global central bank policy (continued) Persistent wage pressures make pivot unlikely in 2023 The RBA’s policy moves so far have been in line with our expectations, and we anticipate three more hikes in early 2023 to take the cash rate to 3.85% by the second quarter of 2023. The RBA’s challenge will present itself in the form of persistent inflation (October CPI was at 6.9%) amid a strong labor market and subsequent wage growth of 4%–5%. Growth has been resilient in the face of hikes and slowing property prices, but household consumption data are starting to feel the pinch. Yet, a recession is not our baseline scenario. Inflation will continue to be the prime focus for policymakers, even in 2023. While a slowdown  in price pressures will be evident in 2023 due to base effects and easing supply chains, the outlook  will hinge on wage growth and commodity prices. Elevated wage pressures could see the cash rate move beyond 4% as well, which will add to heightened growth risks. For now, we expect an extended pause from the RBA once the peak rate is reached. A shallow recession as more hikes to come Inflation has consistently exceeded expectations due to rapid wage growth throughout 2022. While goods inflation will likely moderate as supply chain pressures and commodity prices ease, services inflation due to wage growth is turning out to be a lot stickier. While the last available wage data were for the third quarter of 2022, higher frequency wage settlements show wages are still going at full strength. This makes the case for further rate hikes in the first half of 2023, likely taking the terminal rate to 5.50% from the current 4.25%. The magnitude of hikes has also jumped from 50 bps through much of the year to 75 bps at the November 2022 meeting. While the sharp hikes so far will dampen growth including construction activity, business sentiment and consumption patterns, a shallow recession is our base case for 2023. We believe the probability for a deeper slowdown will be dependent on how quickly unemployment rates worsen but given that labor demand remains strong especially in re-opening related sectors like tourism, we think a sharp rise in unemployment levels is unlikely in 2023. Early pivot in sight What started with the chip downturn cycle has turned into a more broad-based slowdown in South Korea. The manufacturing Purchasing Managers’ Index (PMI) has remained in contractionary territory since July 2022, the housing market has slumped, and financial conditions have deteriorated due to the rapid interest-rate hikes since late 2021. Default risks are looming for the country’s non-bank financial companies because they have a higher degree of exposure to the property market and rely on volatile short-term funds. The good news is that inflation is moderating gradually, although it remains at an elevated 5%. This prompts us to believe that the central bank will soon need to prioritize growth over inflation with one final rate hike in the first quarter of 2023 (to 3.50%). We expect inflation to sustainably cool throughout 2022, which will make a strong case for the BoK to pivot, especially as recessionary risks will gather steam. While we do not expect a recession just yet, monetary policy action will be key to determine the balance of this tradeoff. We, therefore, do not rule out an early pivot. Zero-Covid exit to eventually unclog monetary policy transmission channel The PBoC has kept monetary policy accommodative throughout 2022—with a combination of liquidity injections and rate cuts. However, monetary policy transmission channels have remained impaired as  tight COVID-19 control measures and the property sector have weighed on the economy. However, statements from the recently held Central Economic Work Conference (CEWC) show that zero-Covid will  play a substantially less important role in 2023’s economic agenda. Infections have already been on the rise as more than half of China’s zero-Covid measures have been eliminated over the past month. The  real litmus test will be the government’s tolerance for a possible surge around the Lunar New Year  holidays in late January. While we expect economic activity to worsen before it becomes better as China transitions to “living with COVID-19,” the PBoC’s accommodative stance should finally start to yield  more positive results as mobility and the labor market benefit from the economic reopening. As for rates, with major lenders cutting deposit rates across the board earlier in the year, we expect to see a further reduction in Loan Prime Rates (LPR), especially the five-year LPR, to boost demand for mortgage loans. Source: cbw-0123-u.pdf (widen.net)

While parts of the Australian economy, in particular the labour market, remain robust, there are already clear signs that the economy is slowing, and it should slow further in 2023. That at least will provide some scope for a relaxation of monetary policy as inflation is also showing signs of peaking out In this article Australia: At a glance 3 calls for 2023 GDP growth to be less than 2% in 2023 House prices will fall from their 2022 peaks Cash rates close to peak and could fall   istock Australia: At a glance The Australian economy is slowing down. In the third quarter of 2022, the GDP growth rate dropped to 0.6% quarter-on-quarter. And even though that still leaves the year-on-year growth rate looking very robust at 5.9%, most of that is due to base effects, and that growth rate will drop sharply in the fourth quarter of 2022. Inflation also appears to have peaked, with the new monthly CPI series showing inflation dropping below 7%. House prices too have been falling rapidly in the last quarter as the Reserve Bank of Australia has increased the cash rate to squeeze out inflation. Business investment remains depressed thanks to the higher rate environment and weak external backdrop, and while the trade surplus remains impressive, it is no longer adding to growth. The Australian dollar (AUD) has been moving in line with broader US dollar (USD) trends and is showing signs of strengthening again.   GDP and inflation outlooks CEIC, ING estimates 3 calls for 2023 1 GDP growth to be less than 2% in 2023 GDP growth should fall below 2% for the full year. After projected growth of around 3.6% for 2022, GDP growth is expected to slow to a sub-2% pace in 2023. The household sector is running out of room to keep spending growing in the face of higher inflation and much more subdued nominal wage growth. Households are also running out of room to smooth spending by reducing savings, as savings rates have already fallen sharply from their pandemic peaks and the falling values of real assets (property) will also weigh on their balance sheets. Large discrete mortgage re-sets will probably not do too much damage, as many households are already making overpayments, but this will cause problems for some. 2 House prices will fall from their 2022 peaks House price growth should drop to nearly -10% YoY. In year-on-year terms, median Australian house price growth has already fallen from its pandemic stimulus-induced peak rate of 25.0% YoY, to just 1.1% YoY in 3Q22. Further small quarterly declines in the first and second quarters of 2023 will all but ensure that the annual rate of house price growth falls to close to -10% YoY at its most negative, delivering a full-year decline of just over 7%. Prices should stabilise by the end of 2023, but it may be closer to the end of 2024 before house prices are recording positive year-over-year growth rates again. 3 Cash rates close to peak and could fall Cash rates will peak at only 3.6% and will start to be reduced before the end of the year, in our view. The cash rate target was raised a further 25bp in December and now stands at 3.1%. We are calling for a peak rate of only 3.6%, in other words, after only another two rate hikes of 25bp each. This forecast derives from our assumptions of more slowdowns in GDP growth, further declines in consumer price inflation, worsening negative house price growth, and the discrete impacts of rate hikes on mortgage payments. Rates ending the year lower than their forecast peak will lessen the subsequent re-set impact in early 2024 and sow the seeds for a broader recovery.  Australia forecast summary table CEIC, ING estimates TagsRBA rate policy Australian inflation Australia economy AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

AUD/USD gains some follow-through traction on Monday and climbs to a fresh five-month high. Bets for smaller Fed rate hikes, a positive risk tone undermines the USD and offers some support. Looming recession fears cap the optimism and act as a headwind for the risk-sensitive Aussie. The AUD/USD pair kicks off the new week on a positive note and climbs to its highest level since mid-August during the Asian session. The pair, however, trim a part of its intraday gains and retreat below the 0.7000 psychological mark in the last hour. A combination of factors drags the US Dollar to a fresh seven-month low on Monday, which, in turn, acts as a tailwind for the AUD/USD pair. The US consumer inflation figures released last week showed that the headline CPI fell for the first time in more than 2-1/2 years in December. The data fueled speculations that the Fed may be nearing the end of its rate-hiking cycle and lifted bets for smaller rate hikes in February. This, along with a generally positive tone around the equity markets, continues to weigh on the safe-haven buck and benefits the risk-sensitive Aussie. The Australian Dollar draws additional support from rising odds for a further interest rate hike by the Reserve Bank of Australia (RBA) in February, bolstered by the upbeat domestic data released last week. In fact, the Australian Bureau of Statistics reported that the headline Consumer Price Index (CPI) re-accelerated to the 7.3% YoY rate - a 32-year-high - in November from the 6.9% in the previous month. Furthermore, Australian Retail Sales surpassed the most optimistic estimates and jumped 1.4% in November, while October's reading was also revised up to show a 0.4% growth. Read next: The Swedish Real Estate Market Will See Significant Price Drops| FXMAG.COM Market participants, however, remain worried about the economic headwinds stemming from the COVID-19 outbreak in China. Apart from this, the protracted Russia-Ukraine war has been fueling concerns about a deeper global economic downturn, which keeps a lid on the optimism in the markets. Traders also seem reluctant to place aggressive bullish bets around the AUD/USD pair amid a holiday in the US and ahead of the Chinese economic release, including the Q3 GDP print, on Tuesday.  

The Bank of Japan defied hawkish speculation and held policy steady this morning, sending the yen lower. Some market confusion was also generated by a headline suggesting the European Central Bank is mulling slower rate hikes: clarifications may come from Davos by the end of the week, and the euro may recover. In the US, the data calendar picks up again The Bank of Japan in Tokyo USD: US data back in focus An exceptionally grim Empire Manufacturing reading for January has been the only noteworthy data release out of the US so far this week, and the dollar has continued to be a bystander as developments in Japan, Europe and China drive most market moves. Today, retail sales, PPI, industrial production and TIC flows data will be in focus. The market's scrutiny over the US economic outlook has grown exponentially since the ISM service report pointed to an imminent recession: expect more pain for the dollar should fresh signs of a slowdown emerge now that the US data calendar is picking up again. The Fed’s Raphael Bostic, Patrick Harker and Lorie Logan are set to speak today. The fall in the yen after the BoJ announcement (more details in the JPY section below) is offering some relief to the dollar this morning. However, we suspect this may only prove temporary and downside risks into the 101-102 area still prevail in the very near term. After all, the global environment continues to be rather benign for the ongoing rerouting of flows into emerging markets and high-beta currencies. The growing feeling that China may face a reality check on the sustainability of looser Covid rules may be contributing to halting CNY gains, but recent data gave reasons for optimism on Chinese growth, as noted by our colleague Iris Pang here. We are also approaching the lengthy Chinese New Year holiday season, which may be keeping some investors on hold before moving significantly into Chinese assets. Our commodities strategists have revised their forecasts for iron ore and copper prices higher on the back of China’s reopening. A demand-driven improvement in the metal price outlook is an ideal scenario for commodity currencies: the Australian dollar is a good example here, also considering the tentative conciliatory steps in Sino-Australian diplomatic relations. Indeed, the Reserve Bank of Australia's policy remains an open question: the resilience of inflation poses risks to our conservative call for only two more 25bp hikes before the end of the hiking cycle, and could add some more steam to the AUD rally. A 0.70-0.72 range could easily become the norm for AUD/USD in the next few weeks. Francesco Pesole EUR: Conflicting news Yesterday was a day of conflicting headlines for the euro. In a long interview to the Financial Times, Chief Economist Philip Lane offered elaborate reasoning to support the ECB’s recent hawkish rhetoric. However, later in the day, a Bloomberg report cited some ECB officials saying that Governing Council members are actually considering a slower pace (25bp) of tightening. EUR/USD dropped below 1.08 on the news. It does seem premature for the ECB to unwind its hawkish narrative just yet, and we would not be surprised to see some remarks aimed at “mitigating” yesterday’s dovish headline. Francois Villeroy (today) and President Christine Lagarde (tomorrow) have a chance to do so in Davos. Either way, the overall environment looks likely to stay largely supportive for EUR/USD and a return to 1.0850-1.0900 seems possible by the end of this week. Other conflicting headlines came from Germany. Chancellor Olaf Scholz said he’s sure that Germany will avoid a recession, while his finance minister suggested in a previous interview that there will indeed be a recession, but it should be very mild. The ZEW expectation survey (which spiked into positive territory yesterday) surely seemed to favour more optimism on the German outlook, and undoubtedly fed into the divergence in growth narratives between the eurozone (increasingly upbeat) and the US (increasingly downbeat). This ultimately makes us believe EUR/USD can stay mostly supported for now. Francesco Pesole GBP: Inflation matches expectations December CPI numbers were released in the UK this morning and largely matched consensus expectations. Headline inflation decelerated from 10.7% to 10.5%, while the core rate held at 6.3%. With the peak apparently past us, we could see headline inflation return to 6% in the summer and 3.5-4% by year-end, according to our economists. It’s important to note that core services jumped from 6.4% to 6.8%, a development that the BoE should particularly take into consideration, and when added to yesterday’s wage data should tilt the balance towards a 50bp hike in February. EUR/GBP is back to pre-Christmas – sub-0.8800 levels – thanks to some idiosyncratic EUR underperformance and a supported pound. As discussed in the euro section above, ECB-related weakness in the euro may not last long, and EUR/GBP may struggle to trade sustainably below 0.8800 for now – also given the lack of strong bullish forces in the pound. Francesco Pesole JPY: No hawkish surprise by the BoJ The Bank of Japan’s decision to leave its policy tools unchanged has seen USD/JPY live up to its pricing as one of the most volatile pairs in the G10 space. We expect that to continue. The big correction higher in USD/JPY may endure for a little while. This is because the BoJ’s forecasts for CPI ex-food remain below 2% for FY23 and FY24 and could make the case for the new BoJ governor in April to continue with the current ultra-loose policy. Yet USD/JPY is down at 130 on both the BoJ and the dollar story. We look for a broadly weaker dollar – especially in the second quarter when US core inflation should fall more quickly. This means USD/JPY should again come under pressure from the dollar side. And plenty of speculation over a BoJ policy shift in April should limit USD/JPY upside too. We see this correction stalling in the 132.50/133.00 area (outside risk to 135), with a bias to 126/128 for the end of the first quarter. Later in the year USD/JPY will probably be trading under 125. Chris Turner Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

AUD/USD bears poke previous monthly top during a two-day downtrend from five-month high. Australia jobs report bolstered case for slower rate hike from the RBA. US Treasury bond yields renew multi-day low even as downbeat data, hawkish Fedspeak renew recession fears. AUD/USD holds lower ground near the intraday low near 0.6890 as the previous monthly top probes the bears during the second loss-making day amid early Thursday in Europe. In doing so, the Aussie pair extends the previous day’s pullback from the highest levels since August 2022 amid a downbeat Australian employment report for August, as well as growing fears of recession. Australia’s headline Employment Change turned negative on a seasonally adjusted basis, printing -14.6K figure versus 22.5K expected and 64K prior. Further, the Unemployment Rate also rose to 3.5% compared to the market consensus of witnessing no change in the 3.4% previous readings. Elsewhere, softer prints of the US data and hawkish Fed talks renew economic slowdown fears and weigh on the sentiment, which in turn exert downside pressure on the risk-barometer AUD/USD pair. That said, US Retail Sales marked the biggest slump in a year while the Producer Price Index also dropped to the lowest level in six months during December. Further, St. Louis Federal Reserve's President James Bullard said US interest rates have to rise further to ensure that inflationary pressures recede. On the same line, President of the Federal Reserve Bank of Cleveland Loretta Mester praised the Fed’s actions to tame inflation. Further, Kansas City Fed President Esther George mentioned that the central bank must restore price stability, "that means returning to 2% inflation." Recently, Dallas Federal Reserve President Lorie Logan supported a slower rate hike pace but also mentioned possibly a higher stopping point. As the AUD/USD bears cheer the recession woes in the US, as well as fears of a less hawkish Reserve Bank of Australia (RBA) due to the downbeat Aussie jobs report, the pair traders ignore upbeat concerns surrounding China. Recently, Gita Gopinath, the first Deputy Managing Director of the International Monetary Fund (IMF) said, “China could see a sharp recovery in economic growth from the second quarter onwards based on current infection trends after the dismantling of most COVID-19 restrictions.” Amid these plays, the S&P 500 Futures and Australia’s ASX 200 print mild losses while the US 10-year Treasury yields refresh a four-month low and the two-year counterpart drops to the lowest levels since early October at the latest. Looking forward, AUD/USD traders should pay attention to the risk catalysts, mainly the central bank speakers amid a light calendar, for clear directions as bears struggle to retake control.

The Australian dollar has extended its slide on Thursday. AUD/USD is trading at 0.6884 in Europe, down 0.82%. Australian employment data disappoints Australia’s December employment report was weaker than expected, sending the Australian dollar sharply lower. The headline reading showed a loss of 14,600 in total employment, which may have soured investors. The release wasn’t all that bad, as full-time jobs showed gains of 17,600, with part-time positions falling by 32,200. The unemployment rate remained at 3.5%, but this was a notch higher than the forecast of 3.4%. On the inflation front, recent releases point to inflation moving higher. November CPI rose to 7.3%, up from 6.9%, and the Melbourne Institute Inflation Expectations climbed to 5.6%, up from 5.2%. We’ll get a look at the all-important quarterly inflation reading next week. Inflation came in at 1.8% q/q in Q3, and an acceleration in Q4 would force the Reserve Bank of Australia to consider raising rates higher and for longer than it had anticipated. The cash rate is currently at 3.10%, and I expect the RBA will raise it to 3.50% or a bit higher, which means we are looking at further rate hikes early in the year. The US dollar seems to take a hit every time there is a soft US release, and this week has had its share of weak data. The Empire State Manufacturing Index sank to -32.9, while headline and core retail sales both fell by -1.1%. PPI came in at -0.5%. All three releases were weaker than the November readings and missed the forecasts, indicating that cracks are appearing across the US economy, as the bite of higher rates is being felt. The markets are clinging to the belief that softer numbers will force the Fed to ease up on its pace of rate hikes and possibly end the current rate-cycle after a 25-bp increase in February. The Fed has done its best to dispel speculation that it will pivot, but I expect the US dollar to lose ground if key releases are weaker than expected.   AUD/USD Technical AUD/USD is testing support at 0.6893. Below, there is support at 0.6810 0.6944 and 0.7027 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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

The AUD/USD pair has come under heavy pressure this week, following the release of the Australian labor market report. The release unexpectedly came out in the red zone, and the aussie made a new weekly low, sliding to 0.6876. However, we can say by the end of the week the bears couldn't take their successes, on Friday, the aussie regained some of the lost ground and got back to the 69th figure area. I note that the main "test" for the Aussie is yet to come – key data on inflation growth in Australia in the 4th quarter of 2022 will be published next week. If this report disappoints the AUD/USD bulls, then the implementation of bullish ambitions will have to wait: further growth of the pair will be possible only due to the weakening of the greenback. But today, all is not lost for bulls, although the "Australian Nonfarm" has significantly spoiled the fundamental background for aud/usd. Aussie lost an rally It should be noted that the Australian labor market has been a staunch ally of the aussie over the past few months. The unemployment rate gradually decreased during the first half of last year, and since June it has fluctuated in the range of 3.4% -3.5% (for comparison, we can say that the peak was recorded in October 2021 at around 5.2%). The growth rate of the number of employed has recently shown a positive trend (October and November should be especially noted in this context). Given the trends of recent months, no "trick" was expected from the December report: experts predicted a decrease in unemployment and an increase in the number of employed. However, the published release was, to put it mildly, controversial, and it is not at all surprising that the market interpreted it against the aussie. Traders focused their attention on the fact that unemployment remained at 3.5%, while according to forecasts, it should have fallen to 3.4%. The proportion of the economically active population unexpectedly dropped to 66.6% (although an upward trend was observed over the past three months). But most of all, the indicator of the increase in the number of employees was disappointing: the indicator came out at -14,600, despite the fact that experts expected to see a 27,000 increase. However, one point needs to be clarified here. The structure of this component indicates that in December the level of part-time employment significantly decreased (-32.200). While the number of full-time employees increased by 17,600, it is known that full-time positions offer a higher level of wages and a higher level of social security, compared to temporary part-time jobs. And yet, the "overall result" was against the aussie (especially since the 17,000th increase in full employment did not impress investors). Australian Nonfarm put a lot of pressure on AUD/USD. Bulls were forced to retreat from the key resistance level of 0.7000. All is not lost yet As a result of the trading week, bulls still managed to return to the area of the 69th figure. Therefore, the 0.7000 price barrier is still on the horizon. The inflation report, which will be published in Australia next week, can play a decisive role here. According to preliminary forecasts, the consumer price index in the 4th quarter will come out at around 1.8% in quarterly terms (in the 3rd and 2nd quarters, an increase of 1.8% was recorded). While in annual terms, an increasing trend can be recorded - experts predict growth to a record 7.5%. If both components of the release come out in the green zone, the Australian dollar paired with the US currency will again try to gain a foothold in the area of the 70th figure. Let me remind you that the Reserve Bank of Australia slowed down the pace of rate hikes to 25 points last fall - earlier than many central banks of the world's leading countries. Therefore, this issue was removed from the agenda a few months ago. However, in December, there were rumors on the market that the RBA might even pause in tightening monetary policy. And although representatives of the Australian central bank have repeatedly denied such intentions, the relevant rumors do not subside. And if inflation indicators in Australia show a downward trend next week, talk of a "dovish character" will again be on the agenda, especially against the backdrop of weak "Australian Nonfarm". Findings Despite the disappointing data in the labor market, it is still too early to write off the Australian dollar. A strong inflation report may well bring the aussie back to life, especially against the backdrop of a weakening greenback. If Australian inflation disappoints, then the bullish outlook for AUD/USD will depend solely on the US dollar. Given the high degree of uncertainty, before the release of the above-mentioned inflation report (Wednesday, January 25) for the pair, it is advisable to take a wait-and-see attitude.   Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332913

Much of the recent inflation disappointment can be put down to one-offs, weather-related and other seasonal effects. But that still leaves inflation higher, and likely to come down slower than otherwise, suggesting that the Reserve Bank of Australia's (RBA) policy of a 25bp increase in the cash rate each meeting has longer to run before its peak Reserve Bank of Australia Governor Philip Lowe Source: Shutterstock 8.4% December inflation YoY% Higher than expected Holiday in the sun The chart below shows that most of the damage to inflation this month was done from one source, holidays (a subcomponent of the recreation series), and with December being peak holiday time in Australia and overseas visitors making the journey to see family and friends after, in many cases, long waits, it is perhaps not completely surprising to see some price pressure here. In December 2021, holiday prices rose 10.8% from the previous month. In December 2022, they rose a staggering 27% MoM, which is almost double the highest monthly increase in recent history.  Last month, food prices were the big shock to the data, driven higher by poor weather and flooding. The December weather wasn't particularly good either, and food prices, especially fresh fruit and vegetables, were up another 3% from the previous month, though the impact of the food and beverage component was offset this month by some declines in alcohol and tobacco prices.  Clothing bounced back after a big drop in November, and confusingly, housing also delivered a strong lift to the overall index with house-purchase, rents and furnishings all delivering sizeable increases from the previous month. The quarterly index with which most people are more familiar, showed inflation rising from 7.3%YoY in 3Q22 to 7.8% in 4Q22. Trimmed mean inflation rose from 6.1%YoY to 6.9% over the same period, while the median weighted index inflation measure rose to 5.8% from 5.0%.  Australian inflation month-on-month % by component Source: CEIC, ING More work for the RBA to do We had already been looking at our cash rate forecast with a view to revising it higher, and this latest data leaves us no option but to increase it. The RBA is hiking the cash rate by 25bp a meeting, and we do not believe this will change. But while we had harboured hopes that base effects would start to quickly bring down inflation, enabling the RBA to stop hiking once rates reached 3.6%, which they would have done by the March meeting, we now believe they will have to keep hiking for at least another 2 meetings, taking the peak cash rate up another 50bp to 4.1%.  The increase in inflation and its implications for policy rates has taken 10Y Australian government bond yields sharply higher. The 10Y yield is up about 13bp from its intra-day lows, and may not have stopped rising yet.  As we note in our introduction, a lot of what we are seeing is still one-offs and seasonal shocks, and we do think that in a few months, those shocks could quickly start to drop out of inflation again. As a result, we still eye lower bond yields as the easier direction of travel now that they have risen on this inflation news. The main risk to this view is that we may not yet have seen an end to the one-offs and seasonal shocks.  Read this article on THINK TagsRBA rate policy Cash rate target Australia inflation Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Equity markets lose steam and trade cautiously ahead of the Fed’s preferred inflation gauge. The S&P500 closes above it 200-day average for the second day - a sign there are more bulls in the market than bears, but Tesla's results could rock the boat. Australian and NZ CPI blow hotter than expected. Gold is on the cusp of a bull market. Oil slides, investors buy the dip ahead of the EU ban on Russian oil. Oil prices make their biggest drop in 3 weeks; some investors see this as opportunity Equity markets lose steam and trade cautiously ahead of the Fed’s preferred inflation gauge   US equity markets were a bit dull on Tuesday with investors weighing up mostly stronger than expected Microsoft earnings results, vs a weaker than expected earnings from chipmaker giant, Texas Instruments. The S&P500(US500.I) fell 0.1% but closed above it 200-day average for the second day (a sign there are more bulls in the market than bears), while the Nasdaq 100 (NAS100.I) lost 0.2%. Still markets are waiting for the next major catalysts; Tesla’s results on Wednesday, then later in the week the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) price index for December to gauge if the Nasdaq’s rally of 11% from its low can be sustained, especially as the PE for the Nasdaq is about 54.6 times earnings; meaning tech stocks are still quite expensive compared to their averages. The risk is if Core PCE doesn’t fall as expected from 4.7% QoQ to 3.9%, then we could see a selloff in equity markets, while the US dollar would be bought as hotter inflation supports the Fed keeping rates higher for longer. However, the S&P500 is seemingly bullish for now, until the next tests (some of which we mentioned), click for an in depth Technical Analysis on what the next levels could be for the S&P500. Mixed Microsoft (MSFT) result has shareholders relived as cloud sales rise more than forecast; a sign the business could stand tall amid the murky year ahead After hours Microsoft (MSFT) shares gained 4.3% with investors relieved its revenue in constant currency rose 7% in the quarter, versus the 6.59% estimate. Microsoft’s closely watched Azure cloud-computing business, sales gained 38%, compared with predictions for a 37% increase, excluding the impact of currency fluctuations. This underscores Azure’s ability to help drive the company forth, even as sales of Windows software to PC makers plummeted amid a slumping market. Adjusted earnings per share came in at $2.32, slightly better than the $2.30 estimate, thanks to the cost cutting. Capital expenditure was $6.27 billion, less than Bloomberg estimated ($6.63 billion), while revenue slightly missed expectations hitting $52.75 billion vs the $52.93 billion estimate. Commodities see red on profit taking, while gold nudges up on the cusp of a bull market   Oil dropped, with WTI falling $1.8% below $81 after as OPEC+ are expected to keeping oil production unchanged when they meet next week as they await clarity on Chinese demand and the impact of EU’s ban on Russian supply (from Feb 5). Copper declined 0.2% with investors booking profits after the copper prices gained 32% from their low. Traders bought into Wheat, lifting the Wheat price up 2% as its trades at year lows. While Gold nudged up 0.4%, taking its total rally off its low to 19.5%, meaning gold is on the cusp of a bull market. Be mindful that we also think gold could also face profit taking, or a consolidation. Ole Hansen, head of commodity strategy discusses that here.  Australia CPI came out hotter than expected. Focus is on oil’s biggest drop in 3 weeks with some investors buying the dip  After Australia’s ASX200(ASXSP200.I) rallied for five straight days, the market fell like a knife on Wednesday after CPI came out hotter than expected supporting the notion that the RBA can keep rates higher for longer, despite the services sector remaining in contractionary phase. You have to remember Australian CPI has now on numerous occasions been hotter than expected. So given the market is up 16% from its low, we are seeing traders and investors book in profits ahead of the public holiday tomorrow and ahead of next week's RBA decision. Oil stocks such as Santos, Woodside, WorleyParsons, Ampol trade lower but some longer term investors would be seeing this pull back as an opportunity to buy the dip. Why? Oil prices remain supported ahead of EU’s ban on Russian oil coming up (Feb 5), which will restrict oil supply, plus we’re seeing APAC air travel rev up and this is expected to continue over the medium term; which is also driving demand for diesel and underpinning oil demand. In FX the Aussie dollar is on the cusp of a key event   The Aussie dollar vs the US (AUDUSD) trades at its highest levels since August, 70.64 US, after AU CPI came out showing prices are up 7.8% YoY, vs 7.6% expected. Core mean CPI rose 6.9% YoY, also hotter than the 6.5% expected. This means the RBA has more fire power to keep rising rates, despite the services sector remaining in a contraction (with a reading of under 50). If the AUDUSD's 50 day simple moving average crosses above the 200 day, marking a ‘golden cross’, we could see a quick run up to 0.7137, the August peak. It’s also worth watching the AUDEUR as bullish momentum could see the pair on the weekly chart cross over its 100-day moving average. - Stay tuned to Saxo's inspiration page for trading and investing ideas, as news breaks.  For a global look at markets – tune into our Podcast. Source: Video: Oil prices drop, some investors buy the oil dip. AU & NZ CPI hotter than expected | Saxo Group (home.saxo)  

Summary:  A double dose of upside surprise in inflation was reported this morning. Australia’s 4Q CPI rose to fresh 33-year highs and New Zealand’s remained firm near its recent three-decade highs as well. This brings potential for some upward re-pricing in RBA’s rate hike path, and also raises concerns on whether China’s reopening and the surge in commodity prices, along with a boost to travel demand, could bring another leg up in price pressures later in 2023. Hot Australia CPI cements RBA’s February rate hike Inflation reports in Australia and New Zealand were released this morning, and both came in higher-than-expected. The bigger upside surprise was in Australia’s CPI report which showed inflation rising to a fresh 33-year high in the fourth quarter. 4Q CPI was up 7.8% YoY from 7.3% YoY in 3Q, coming in above the 7.6% YoY expected. December inflation was an even bigger shock, rising by 8.4% YoY from 7.3% YoY in November. Both weighted median and trimmed mean measures of inflation also rose. Price pressures were mostly underpinned by a rise in electricity prices as well as a pickup in holiday travel during the Christmas period. While some may argue that Australia’s inflation is peaking, given that the headline CPI gain of 7.8% YoY was less than the RBA’s expectation of 8% YoY, it is imperative to look at how close the trimmed mean is getting to the headline CPI. With trimmed mean CPI at 6.9% YoY, less than 100bps below headline, shows that the price pressures are rather broad-based. Today’s inflation print cements another 25bps rate hike by the RBA at the February meeting, while also raising the risk of further tightening if inflation data continues to surprise on the upside. Source: Bloomberg, Saxo Markets Steady NZ CPI suggests RBNZ could surprise Earlier in the day New Zealand CPI came in steady at 7.2% YoY for Q4, the same as previously, but above the 7.1% consensus estimate. The quarter-on-quarter read was 1.4% rather than the 1.3% forecast but a deceleration from the prior print of 2.2%. The YoY read was still below the central bank’s forecast of 7.5%, but still remaining close to the 30-year peak of 7.3% YoY printed in June 2022 This suggests that inflation isn’t cooling yet despite rapid rate increases. Price pressures were underpinned by higher house-building costs and higher wages, along with higher demand for holiday travel just like for Australia. Non-tradable inflation, or domestic price rise rises, were up 6.6% YoY, same as last quarter. Meanwhile, tradable inflation was 8.2% YoY, higher than 8.1% YoY on Q3. While the downside surprise in non-tradable inflation may prompt some calls for the RBNZ to slow down its rapid rate increases, there is also reason to believe that the central bank could continue to deliver hawkish as inflation remains hot. This brings the February RBNZ meeting (decision due 22 Feb) in focus, with market pricing also split between a 50 or a 75bps rate hike. Also worth noting that the new NZ Prime Minister Chris Hipkins is bringing the focus back on economic growth amid forecasts of a recession in 2023, and the administration is highlighting the fall in quarterly CPI from 2.2% in Q3 to 1.4% this quarter as a peak in inflation. Source: Bloomberg, Saxo Markets AUDNZD poised for more gains AUDUSD has been bumped higher recently due to a host of factors, including the faster-than-expected China reopening and the resulting gains in commodities such as iron ore. Meanwhile, reports that China will relax its soft ban on some Australian commodities, including coal, has also underpinned. Today’s CPI data should provide further support for AUD, with AUDUSD making fresh highs above 0.7100. The pair may however remain volatile however with US PCE data on the horizon this week ahead of the FOMC meeting next week. If the USD emerges stronger, resistance at 0.7125 may stick. NZDUSD was a notch weaker, staying below 0.6500 with key hurdle at 0.6535. AUDNZD was up over 1%, jumping past the key 1.0900 to test the cycle highs at 1.0955 and the 0.618 retracement around 1.11. The cross likely has more room on the upside due to the relative scope for upward re-pricing of the RBA path compared to RBNZ. Source: Bloomberg, Saxo Markets Here is the latest technical analysis on AUDUSD and other AUD crosses from our Technical Analyst, Kim Cramer, highlighting the key levels to watch next. Peak inflation narrative getting a reality check A double dose of upside inflation surprises will spark concerns on whether the global inflation has really peaked. We have continued to see tight labor markets for now, which should continue to fuel wage pressures globally. China’s reopening is also further raising prices of commodities, especially crude oil and industrial metals. Meanwhile, a big part of Australia and NZ’s CPI gains in Q4 came from a rebound in travel, which is likely to get a further bump higher with China’s reopening and pent-up demand. In summary, today’s data was a reminder that it is still early to take comfort on inflation, and start thinking about peak rates even as a pause from several central banks looks imminent in Q1. Inflation could come back to haunt global markets in H2, and this would force most central banks, especially the Fed to stay cautious of premature easing.   Source: Macro Insights: Hot Australia and New Zealand CPI to challenge the peak inflation narrative | Saxo Group (home.saxo)

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

The Australian dollar is almost unchanged on Friday, trading at 0.7112. Australia’s PPI slips Just a day after Australian CPI unexpectedly rose, the Producer Price Index went in the opposite direction. PPI in the fourth quarter slowed to 5.8% y/y, down from 6.4% in Q3 and below the consensus of 6.3%. On a monthly basis, PPI fell to 0.7%, much weaker than the gain of 1.9% in Q3 and the forecast of 1.9%. The RBA has raised rates sharply but inflation is yet to peak. The CPI release for Q4 was a shocker, rising to 8.4% after a 7.3% gain in Q3. The markets had priced in a peak rate of 3.6%, but with the cash rate currently at 3.1% and more rate hikes on the way, it appears that the market is underestimating the terminal rate. The Australian dollar has been on a tear, rising around 10% since Nov. 1. The outlook for the Aussie remains bright, both for domestic and global reasons. At home, the RBA will continue to raise rates in order to curb inflation. Abroad, China has reopened and that will increase demand for Australian exports. As well, commodity prices are high which is good news for the export sector and the Australian dollar. Will the US be able to avoid a recession? The answer isn’t clear, as the economic data shows a mixed picture. The employment market remains robust and overall growth has been positive, with GDP for Q4 coming in at 2.9%. Manufacturing and Services PMIs continue to show that these sectors are contracting and housing has been especially weak, as it lowered Q4 GDP by about 1.3%. Consumer spending, which accounts for some 68% of GDP, could determine whether the US economy tips into a recession or not. Consumer spending rose 2.1% in Q4, down slightly from 2.3% in the third quarter. However, the December release is worrying, as consumer spending declined by 1.1%. If the Fed is to guide the economy to a soft landing, retail sales will have to rebound strongly. Read next: The Aussie Pair Is Holding Above 0.7100, The Major Currency Pairs Are Waiting For US PCE Report| FXMAG.COM AUD/USD Technical There is resistance at 0.7160 and 0.7256 0.7064 and 0.6968 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

It has been a rough start to the week for the Australian dollar. AUD/USD has dropped 0.68% on Tuesday and is down 1.36% on the week. In the European session, the Australian dollar is trading just above the 0.70 line. Australia’s retail sales sink Retail sales for December were dismal, with a reading of -3.9% m/m, compared to the consensus of -0.3%. This was down from the 1.7% gain in November and marks the third decline in four months. It was the first decline in 2022 and the Australian dollar has responded with sharp losses. The silver lining is that retail sales are traditionally weak in December and the strong November read was a sign that consumers did their Christmas shopping early in order to take advantage of Black Friday discounts. The sharp drop in consumer spending is another sign that cost of living pressures are taking a toll on consumers. Strong consumer spending has enabled the Reserve Bank of Australia to continue raising rates in order to tame inflation. The RBA will not be pleased with the latest retail sales data but it still expected to go ahead next week with a modest 25-basis point increase. The cash rate is currently at 3.10% and the markets are estimating that the peak rate will rise to somewhere between 3.6%-3.85%. This means that more hikes are on the way after February, but the pace of the rates will be data-dependent, especially on inflation reports. The Federal Reserve concludes its 2-day meeting on Wednesday, and a 25-bp increase is priced at close to 100%. This doesn’t preclude volatility in the currency markets, as a hawkish stance from the Fed, either in the rate statement or in comments from Jerome Powell, could provide a boost to the US dollar. The markets continue to talk about a rate cut late in the year due to the weakening US economy, but the markets could be in for a nasty surprise if the Fed reiterates that high rates are here to stay and there are no plans to cut rates. Read next: AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$| FXMAG.COM AUD/USD Technical AUD/USD is putting pressure on support at 0.7000. The next support line is 0.6890 0.7071 and 0.7181 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Next week’s calendar features inflation readings from Australia, India, the Philippines and China, plus Indonesia’s growth performance and trade data from Taiwan Source: Shutterstock Has inflation peaked in Australia? On 7 February, the Reserve Bank of Australia (RBA) is expected to hike rates by 25bp. Some months ago, when the RBA adopted the smaller 25bp hike approach, it became obvious that the central bank was not operating on a data-dependent policy. As it got closer to the peak in rates, it would simply proceed at a slower pace to avoid, or at least limit, the risk of overtightening. Considering the much higher-than-expected inflation readings over the past two months, we have increased our peak RBA cash rate forecast to 4.1% from 3.6%, assuming that there are two further months of 25bp hikes ahead. We see a slight softening of the labour and housing markets, but this is not likely to be decisive for future rate decisions There will be a subsequent statement on monetary policy on 10 February and this will likely provide more clarity on direction. India expected to pause hikes We can expect to see further central bank action from the Reserve Bank of India (RBI) on 8 February, and the outcome is much less certain than the RBA. The current repo rate is at 6.25%, which is 55bp higher than the prevailing rate of inflation, which has since fallen back into the top end of RBI’s 2-6% tolerance range. Our contention has been that the RBI is at or close to the peak, and we believe that the RBI will put a pause on the hikes to give growth a chance. Philippine inflation to stay elevated as supply shortages persist Philippine inflation is expected to dip to 7.8% year-on-year in January, down slightly from 8.1% in the previous month. However, we expect inflation to remain at elevated levels as supply shortages persist. Low domestic production resulted in surging prices for basic food commodities, Meanwhile, still-elevate global energy prices have resulted in high utility costs and rising gasoline prices. The Bangko Sentral ng Pilipinas (BSP) is expected to retain its hawkish stance for the time being although Governor Felipe Medalla has hinted at a possible reversal later in the year. Read next: Resumption Of Cooperation Between Airbus And Qatar Airways| FXMAG.COM Price pressures expected to slow in China China’s January CPI inflation should rise faster given the post-Covid lockdown reopening and extended holiday. Our estimate is 2.4%YoY.  Despite the acceleration, it’s too early to say whether this is a trend and is still below the warning level of 3%. Inflation should be slower in February after the holiday. PPI on the other hand should stay at a slight year-on-year contraction level due to the combination of lower commodity prices and a high base effect. Construction activities have yet to pick up, leading to lower metal prices. We expect construction activities to start to recover after winter which should give some support to PPI inflation. Headwinds in Taiwan's semiconductor industry Taiwan’s trade data should show a dire picture as the western market has placed fewer orders on semiconductor chips while the Mainland China market has yet to fully recover. We expect a contraction for both exports and imports of around 20%YoY.   This might lead to more uncertainty about the projected central bank’s hike in the first quarter of the year. Taiwan’s central bank should consider opting not to follow the Fed or hike at a slower pace due to the headwinds in the semiconductor industry. Other data reports: PBoC's decision on RRR, reserves and Indonesia's GDP report We do not expect the People's Bank of China (PBoC) to change the interest rate or RRR this year. The main monetary policy should be through a re-lending programme, which is more focused and helpful for economic recovery. Meanwhile, China is going to release credit data (from 9-15 February) and we expect a jump in January despite being the month of the Chinese New Year. New yuan loans will be the key engine of credit growth in the first month of the year. More credit growth from the debt market should follow during the first quarter. FX reserves should rise as indicated by the strengthening of the yuan which implies capital inflows into China. Further capital inflows are possible, especially portfolio inflows. But due to uncertain geographic tension, multinational companies might defer direct investments into China. Lastly, Indonesia reports fourth-quarter GDP and we expect growth to hit 4.9%YoY, taking 2022 full-year growth to 5.2%. Softer commodity prices weighed on both export performance and industrial output, however solid domestic demand was able to offset the downturn.     Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia week ahead Asia Pacific Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

After a sluggish start to the week, AUD/USD bounced back on Wednesday with gains of 1.18%. The pair has edged lower on Thursday and is trading at 0.7137 in the European session. Powell sends US dollar lower The Federal Reserve raised rates by 25 basis points at the Wednesday meeting, as expected. The Fed noted that inflation has eased but reminded listeners that it remained much higher than the 2% target. Jerome Powell signaled that more rate hikes are coming and said he did not expect to cut rates this year. Sounds hawkish, right? Well, the US dollar initially recorded gains but headed lower after Powell acknowledged that the disinflation process had begun, which was sweet music to the ears of the financial markets. The result was a dovish hike and the Australian dollar surged against its US counterpart. The US dollar index is in retreat and has fallen to 100.99. There are two more inflation reports ahead of the Mar. 22 meeting and if they show inflation continues to fall, the Fed could wrap up the current rate-tightening cycle at that meeting. Besides inflation, the Fed is focused on employment data, which will make Friday’s nonfarm employment report an important factor in the Fed’s rate plans. In December, nonfarm payrolls fell from 256,000 to 223,000 and the downturn is expected to continue, with an estimate of 190,000 for January. The Reserve Bank of Australia meets next week and is expected to deliver a modest 25-basis point hike. The cash rate is currently at 3.10% and the markets are estimating that the peak rate will rise to somewhere between 3.6%-3.85%. This means that more hikes are on the way after February, but the pace of the rates will be data-dependent, especially on inflation reports. Read next: Resumption Of Cooperation Between Airbus And Qatar Airways| FXMAG.COM AUD/USD Technical AUD/USD faces resistance at 0.7181 and 0.7282 0.7071 has switched to support, followed by 0.7000 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Reserve Bank of Australia (RBA) will be making its first monetary policy decision for the year next week. Expectations The Reserve Bank (RBA) Board meets next Tuesday and the most important item on the agenda will be the official interest rate decision. In the last eight games, he has risen every time, by a record 300 basis points in total. He did this in an effort to slow down the rate of economic growth, and thus bring inflation back to the target range of 2-3 percent as quickly and painlessly as possible. The Reserve Bank board is expected to raise interest rates by another 25 basis points on Tuesday, bringing the cash rate to 3.35%. The expected 25 bp hike next week would be the ninth in a row. One of the reasons for the expected increase is the latest inflation data, which in December 2022 reached 1.9% quarterly and 7.8% annually. The RBA will also release an updated economic outlook in its monetary policy statement due to be released on Friday. Two extreme views The February interest rate question is sure to spark heated debate. The RBA board will eventually discuss whether it needs to lay off tens of thousands more as it works to meet its inflation target. This is a serious decision. Two extreme views will be confronted at the February RBA meeting. First, it would be unwise to raise interest rates as growth is clearly slowing down, all future inflation rates are falling and global growth is headed for a hard landing. The second view from the RBA deliberations will scream “rate hike”. Inflation is at a 32-year high and well above target, the unemployment rate remains at a 48-year low - fueling wage growth - and there is a risk that inflation will not fall as expected unless the economy is further weakened by another interest rate hike. Expectations of economists from Australian banks Here's what big bank economists have to say about next week's RBA board meeting: ANZ said the strength of inflation cemented a 25 basis point RBA hike this month. NAB economist Taylor Nugent said the RBA is expected to deliver 25 basis points gains next week, thanks to a taming rate of inflation. Westpac expects the RBA to raise interest rates by 25 basis points in February and March, bringing the cash rate to 3.60%. Read next: Forex Weekly Summary: USD/JPY Ended At 129.80, AUD/USD Closed Above 0.71| FXMAG.COM Other data To start the week, the Melbourne Institute will release its monthly inflation index.The Australian Bureau of Statistics will release December's international trade data on Tuesday. The RBA will also release an updated economic outlook in its monetary policy statement due to be released on Friday. The unemployment rate is important Next Friday, following Tuesday's board meeting, the RBA will release its most important quarterly monetary policy statement. It will feature the RBA's updated economic outlook, with the focus - as always - on the RBA's calls on the unemployment rate and inflation. The pressure on the labor market in recent times is important. The unemployment rate is at a multi-decade low, employment fell in December, and various future job demand indicators in business surveys, job postings and job vacancies tilt downward. This means, quite plainly and simply, that the best of the good news about unemployment is behind us. The outlook for inflation will also be extremely important. The RBA had previously projected inflation to fall to 4.7 percent. at the end of 2023, and then to 3.2 percent. by the end of 2024, after reaching a peak of 8.0 percent. Source: investing.com, rba,gov.au

Next week’s calendar features inflation readings from Australia, India, the Philippines and China, plus Indonesia’s growth performance and trade data from Taiwan In this article Has inflation peaked in Australia? India expected to pause hikes Philippine inflation to stay elevated as supply shortages persist Price pressures expected to slow in China Headwinds in Taiwan’s semiconductor industry Other data reports: PBoC’s decision on RRR, reserves and Indonesia’s GDP report   Shutterstock   Has inflation peaked in Australia? On 7 February, the Reserve Bank of Australia (RBA) is expected to hike rates by 25bp. Some months ago, when the RBA adopted the smaller 25bp hike approach, it became obvious that the central bank was not operating on a data-dependent policy. As it got closer to the peak in rates, it would simply proceed at a slower pace to avoid, or at least limit, the risk of overtightening. Considering the much higher-than-expected inflation readings over the past two months, we have increased our peak RBA cash rate forecast to 4.1% from 3.6%, assuming that there are two further months of 25bp hikes ahead. We see a slight softening of the labour and housing markets, but this is not likely to be decisive for future rate decisions. There will be a subsequent statement on monetary policy on 10 February and this will likely provide more clarity on direction. India expected to pause hikes We can expect to see further central bank action from the Reserve Bank of India (RBI) on 8 February, and the outcome is much less certain than the RBA. The current repo rate is at 6.25%, which is 55bp higher than the prevailing rate of inflation, which has since fallen back into the top end of RBI’s 2-6% tolerance range. Our contention has been that the RBI is at or close to the peak, and we believe that the RBI will put a pause on the hikes to give growth a chance. Philippine inflation to stay elevated as supply shortages persist Philippine inflation is expected to dip to 7.8% year-on-year in January, down slightly from 8.1% in the previous month. However, we expect inflation to remain at elevated levels as supply shortages persist. Low domestic production resulted in surging prices for basic food commodities, Meanwhile, still-elevate global energy prices have resulted in high utility costs and rising gasoline prices. The Bangko Sentral ng Pilipinas (BSP) is expected to retain its hawkish stance for the time being although Governor Felipe Medalla has hinted at a possible reversal later in the year. Price pressures expected to slow in China China’s January CPI inflation should rise faster given the post-Covid lockdown reopening and extended holiday. Our estimate is 2.4%YoY.  Despite the acceleration, it’s too early to say whether this is a trend and is still below the warning level of 3%. Inflation should be slower in February after the holiday. PPI on the other hand should stay at a slight year-on-year contraction level due to the combination of lower commodity prices and a high base effect. Construction activities have yet to pick up, leading to lower metal prices. We expect construction activities to start to recover after winter which should give some support to PPI inflation. Headwinds in Taiwan’s semiconductor industry Taiwan’s trade data should show a dire picture as the western market has placed fewer orders on semiconductor chips while the Mainland China market has yet to fully recover. We expect a contraction for both exports and imports of around 20%YoY.   This might lead to more uncertainty about the projected central bank’s hike in the first quarter of the year. Taiwan’s central bank should consider opting not to follow the Fed or hike at a slower pace due to the headwinds in the semiconductor industry. Other data reports: PBoC’s decision on RRR, reserves and Indonesia’s GDP report We do not expect the People's Bank of China (PBoC) to change the interest rate or RRR this year. The main monetary policy should be through a re-lending programme, which is more focused and helpful for economic recovery. Meanwhile, China is going to release credit data (from 9-15 February) and we expect a jump in January despite being the month of the Chinese New Year. New yuan loans will be the key engine of credit growth in the first month of the year. More credit growth from the debt market should follow during the first quarter. FX reserves should rise as indicated by the strengthening of the yuan which implies capital inflows into China. Further capital inflows are possible, especially portfolio inflows. But due to uncertain geographic tension, multinational companies might defer direct investments into China. Lastly, Indonesia reports fourth-quarter GDP and we expect growth to hit 4.9%YoY, taking 2022 full-year growth to 5.2%. Softer commodity prices weighed on both export performance and industrial output, however solid domestic demand was able to offset the downturn.     Key events in Asia next week Refinitiv, ING TagsEmerging Markets Asia week ahead Asia Pacific   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  With several Fed speakers talking this week it puts broad equities on notice, as well as the Australian dollar. Ford flopped last week, why could Toyota, Honda and Volvo follow? Suncorp reports results this week, kicking off bank earnings in Australia. In commodities, Orange Juices up, metals face pressures as the US dollar gains strength What’s happening in markets and what to consider   The US dollar jumps, broad equities soften ahead of Fed speakers talking this week and more US earnings After a hotter than expected US jobs report on Friday, equities and the VIX index, and the US dollar are on watch. Several Fed speakers are due to speak and they could disagree with the Fed’s dovish tilt last week, which could spark of a risk-off rally, and a flight to safety which could take the US dollar higher, and shave down broad indices. A bevy of EV and motor companies report this week and if Ford was something to go by last week, reporting weaker than expected profits, which resulted in its shares sinking 8% on Friday; then you may consider watching this week’s motor companies who report; Toyota Motor, Honda Motor and Volvo Car. RBA meeting ahead, putting AUDUSD and EURAUD on watch for a potential whipsaw The Melbourne Institute Inflation gauge for Australia rose more than expected MoM & YoY, while Australian retail sales beat expectations. These indicators, coupled with building approvals seeing one of their biggest jumps in a decade, gives the RBA power to keep hiking rates. The RBA is expected to hike by 25bp on Tuesday, with the market pricing in another 25bp hike. But, there is a small chance the RBA could keep hiking before pausing in July. The jury is still out. We are watching the AUDUSD and the EURAUD with the AUD having nose-dived as commodity prices fell from their highs, while the USD gathers strength. While the ECB hiked by 50bps last week. There is a risk the RBA could be aggressive in its commentary (more than prior meetings), which may perhaps trigger an AUD knee-jerk rally up. For more on FX, click here. Australian reporting season ramps up; banks and property groups results are on watch Financial results kick off with Suncorp reporting on 8th Feb- this could be a good indication of what we can expect from big banks such as CBA who reports next week. Data last year showed loan growth in regional banks grew slightly more than the big four banks; so we could see earnings surprises in Suncorp and Bank of Queensland. The market expects 25% earnings growth from Suncorp, and flat growth from CBA next week. The Telco giant, Telstra reports on Tuesday, with a flood of property groups reporting such as Centuria on Tuesday, BWP Trust – the Bunnings landlord, as well as Dexus on Wednesday, followed by Mirvac and Charter Hall Long WALE REIT reporting Thursday. For defensive plays; the plastics giant Amcor reports Tuesday. While interest rate sensitive Australian Tech companies, which are not traded very much at Saxo- start to report this week with Megaport reporting Thursday, and real estate-tech business REA on Friday. Commodities; metals head south; breakfast commodities charge The most strength is coming in breakfast commodities; orange juice, coffee, sugar, and soybeans, with prices mostly being supported by limited supply following the hurricanes last year. While wheat and lean hogs are lower. In metals, we’re seeing price weakness in commodities that have been benefiting from Chinese demand picking up. Iron ore, copper, and aluminum appear to be facing selling pressure, with investors and traders taking profits, awaiting more evidence of a pickup in activity in China. While the higher US dollar is also acting as a catalyst to take profits too. That said, longer term fundamentals in metals support higher prices over the longer term. Gold is also seeing a sharp pullback from its fresh cycle highs after the US dollar strengthened (following that very strong US jobs report). That said, gold ETFs like GLD, have seen increased buying throughout the year. Click here for Ole Hansen’s commodity report.   Source: Financial Insights for second week of February | Saxo Group (home.saxo)

Summary:  This week, markets will be digesting the slew of central bank meetings from last week, along with the bumper jobs report, as more Fed speakers including Chair Powell take stage. The Reserve Bank of Australia may likely stay in the chorus and hike rates by 25bps as well, but focus will be on guidance. Bank of Japan’s nominees for the new chief will likely continue to send market jitters, while UK GDP is expected to dodge a recession. China’s inflation and credit data may throw further light on the economic momentum, but US-China tensions will also be on watch. Earnings calendar stays in full force with reports due from Disney, PepsiCo, Toyota as well as Adani Green. Powell’s speech, more Fed speakers on watch as the US dollar jumps After a hotter-than-expected US jobs report on Friday, equities and the VIX index, and the US dollar are on notice. Fed Chair Powell and several Fed speakers are due to speak this week and they could disagree with the Fed’s dovish tilt last week, which could spark a reversal of the risk-off rally we have seen since the start of the year. Powell will be speaking in Washington on Tuesday (1am SGT on Wednesday for Asia), followed by Barr, Williams, Cook, Kashkaru, Waller and Harker over the course of the week. Flight to safety could take the US dollar higher, and shave down broad indices. USD is also likely to find some support this week amid the rising US-China tensions after a suspected Chinese spy balloon was shot down over the weekend. RBA meeting ahead, putting AUDUSD and EURAUD on watch for a potential whipsaw The Melbourne Institute Inflation gauge for Australia rose more than expected MoM & YoY, while Australian retail sales beat expectations. These indicators, coupled with building approvals seeing one of their biggest jumps in a decade, gives the RBA power to keep hiking rates. The RBA is expected to hike by 25bp on Tuesday, with the market pricing in another 25bp hike. However there is a small chance the RBA could keep hiking before pausing in July. The jury is still out. We are watching the AUDUSD and the EURAUD with the AUD having nose-diving as commodity prices fell from their highs, while the USD gathers strength. While the ECB hiked by 50bps last week. However, there is a risk the RBA could be aggressive in its commentary (more than prior meetings), which may perhaps trigger an AUD knee-jerk rally up. For more on FX, click here. Bank of Japan’s nominee submissions and expectations for a policy pivot Monday morning reports from Nikkei that the government has approached Bank of Japan Deputy Governor Masayoshi Amamiya as a possible successor to central bank chief Haruhiko Kuroda sent jitters. The week was supposed to bring possible BOJ chief nominations, as the nominees list has to be presented to parliament on February 10. However, FM Suzuki refused to confirm Amamiya’s nomination. Amamiya has helped Kuroda since 2013 on monetary policies, and is considered the most dovish among the contenders, which is thrashing hopes that BOJ policy normalization could progress under the new chief. As more names are likely floated this week, there will potentially be some volatility in the Japanese yen and equities, with markets continuing to weigh up the possibility of a shift in Bank of Japan’s yield-curve control policy. German inflation on watch; Riksbank rate hike; UK GDP may confirm a delay in recession After a technical delay last week, Germany’s inflation prints for January will be due this week. Spain and France printed higher-than-expected CPI for the month, while the region-wide printed was softer last week. This suggests Germany’s inflation likely eased due to energy price increases being more subdued than previously expected. Meanwhile, adjustments in the CPI basket could also likely result in a softer print. Riksbank meeting next week is also likely to bring a 50bps rate hike, after a similar-sized hike by the Fed, ECB and Bank of England last week. While inflation still remains entrenched, the Governor has recently hinted at financial stability risks, limiting the scope of another 75bps rate increase this month. Lastly, the key in UK will be the preliminary GDP report for the fourth quarter which is likely to dodge a recession. Bloomberg consensus expect GDP growth to be flat QoQ in Q4 after a negative 0.3% QoQ print in the third quarter, underpinned by a strong labor market and fiscal easing. However, it is still hard to conclude that UK could avoid a recession, but only likely suggest a potential delay. If growth comes in weaker than expected, pressure on sterling could start to mount. China’s new loans expected to rise as banks frontloading lending Chinese banks typically deploy proportionally a larger part of their annual loan targets at the beginning of the year. According to Bloomberg’s survey, economists are forecasting new RMB loans jumped to RMB 4,200 billion in January from RMB 1,400 in December which represent around 11% Y/Y growth in outstanding RMB loans, marginally below the 11.1% in December. While mortgage lending likely remained slow, corporate and government bond issuance increased in January. As corporate lending and bond insurance picked up, new aggregate financing is expected to rise to RMB 5,400 billion in January from RMB 1,310 billion in December, but the implied 9.3% Y/Y growth in total outstanding aggregate financing was below the 9.6% in December. China inflation is expected to inch up China’s Inflation may have accelerated as the headline CPI is forecasted to bounce to 2.2% Y/Y in January from 1.8% in December. A surge in in-person service consumption after the reopening may have underpinned some price increases but the upward pressure on the general level of inflation has remained moderate. Rises in vegetable and fruit prices were likely damped by a decline in pork prices. The decline in producer prices is expected to narrow to -0.4% in January from -0.7% in December as industrial metal prices bounced offsetting a decline in coal prices. This week’s earnings focus: Walt Disney, Siemens, and Toyota The Q4 earnings season is not over yet with 243 companies in the S&P 500 Index having reported earnings. This week’s earnings calendar will provide plenty of information for investors to chew on. The list below highlights the absolute most important earnings to watch and out of those the three most key earnings are from Walt Disney, Siemens, and Toyota. The entertainment giant Disney is expected to report revenue growth of 7% y/y and EPS of $0.76 up 21% y/y and a lot of focus will be on Nelson Peltz, the activist investor that has gone into the company, and his quest for higher streaming profitability and potentially changing the asset portfolio of Disney. Siemens, one of Europe’s largest industrial companies, is expected to show revenue growth of 11% y/y and unchanged operating income compared to a year ago as cost pressures remain a key challenge for Siemens. Last quarter the order book and net new orders looked healthy, so the question is whether this will flow through into the outlook for 2023. Toyota is expected to report revenue growth of 19% y/y as demand for cars have come back, but the real interesting focus point on Toyota is further details on the new CEO’s aggressive move towards offering many more fully electric vehicles rather than hybrids. Toyota has recently indicated that they have made errors in their technology bet and looking to aggressively invest in battery EVs. Toyota, Honda and Volvo company earnings are on watch and could disappoint like Ford A bevy of EV and motor companies report this week including Toyota Motor, Honda Motor and Volvo Car. We think there could be a risk they report weaker than expected results, similar to Ford; which sent Ford shares 8% lower on Friday. Ford is struggling to make money on its EV business and blamed supply shortages. Metal commodities are a large contributor to car manufacturers costs. And we’ve seen components of EVs rise significantly in price, amid limited supply vs the expectation China will increase demand.  For example consider the average EV needs about 83 kilos of copper- and its price is up 26%, 250 kilos of aluminium are needed - and its price is up 20% from its low. These are some headwinds EV makers are facing, in a market where consumer demand is restricted amid rising interest rates. Australian reporting season ramps up; banks and property groups results are on watch Financial results kick off with Suncorp reporting 8th Feb- this could be a good indication of what we can expect from big banks such as CBA that reports next week. Data last year showed loan growth in regional banks grew slightly more than the big four banks, so we could see earnings surprises in Suncorp and Bank of Queensland. The market expects 25% earnings growth from Suncorp, and flat growth from CBA next week. The Telco giant, Telstra reports on Tuesday, with a flood of property groups reporting such as Centuria on Tuesday, BWP Trust – the Bunnings landlord, as well as Dexus on Wednesday, followed by Mirvac and Charter Hall Long WALE REIT reporting Thursday. For defensive plays; the plastics giant Amcor reports Tuesday. While interest rate sensitive Australian Tech companies, which are not traded very much at Saxo; start to report this week with Megaport reporting Thursday, and real estate-tech business REA on Friday. Adani Group companies start to report earnings this week After over $100 billion in losses over the last two weeks, focus will remain with the Adani Group stocks this week in India as some of the companies start to report earnings. Adani Green Energy reports earnings this week, and investors will be looking out for comments on corporate governance, response to Hindenburg’s fraud allegations as well as the company’s financial position and debt trajectory. Adani Green is one of the most highly indebted companies in the group, and a big player for India’s net zero ambitions. Macro data on watch this week: Monday 6 February New Zealand, Malaysia Market Holiday Australia Retail Trade (Q4) Germany Industrial Orders (Dec) Germany Consumer Goods (Dec) Eurozone S&P Global Construction PMI (Jan) Germany S&P Global Construction PMI (Jan) Eurozone Sentix Index (Feb) United Kingdom S&P Global/CIPS Construction PMI (Jan) Eurozone Retail Sales (Dec) Germany CPI (Jan, prelim) Indonesia GDP (Q4) Tuesday 7 February Japan All Household Spending (Dec) Australia Trade Balance (Dec) Australia RBA Cash Rate (Feb) Malaysia Industrial Output (Dec) Germany Industrial Output (Dec) United Kingdom Halifax House Prices (Jan) Taiwan Trade (Jan) United States International Trade (Dec) Canada Trade Balance (Dec) Wednesday 8 February Japan Current Account Balance (Dec) India Repo and Reverse Repo Rate United States Wholesale Inventories (Dec) Thursday 9 February Taiwan CPI (Jan) United States Initial Jobless Claims Friday 10 February Australia RBA Monetary Policy Statement (Feb) China (Mainland) CPI and PPI (Jan) United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Dec) United Kingdom GDP (Q4, prelim) United Kingdom Goods Trade Balance (Dec) Canada Unemployment Rate (Jan) United States UoM Sentiment (Feb, prelim) Taiwan GDP (Q4, revised) India CPI Inflation (Jan) China (Mainland) M2, New Yuan Loans, Loan Growth (Jan) Earnings on watch this week: Monday: Activision Blizzard, IDEXX Laboratories Tuesday: Carlsberg, BNP Paribas, Siemens Energy, SoftBank Group, Nintendo, BP, Linde, Vertex Pharmaceuticals, KKR & Co, Fortinet, DuPont, Illumina, Enphase Energy Wednesday: A.P. Moller – Maersk, Vestas Wind Systems, TotalEnergies, Societe Generale, Deutsche Boerse, Adyen, Equinor, Yara International, Walt Disney, CVS Health, Uber Technologies Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Source: Saxo Spotlight: What’s on the radar for investors & traders this week? Powell’s speech, RBA meeting; Bank of Japan’s nominee submissions; UK GDP; and more earnings from Disney, Toyota, PepsiCo, Adani Green | Saxo Group (home.saxo)

After a miserable end to the week, the Aussie is steady on Monday and is trading at 0.6912. The January US nonfarm payrolls was a blowout that shocked the markets. The economy created a stunning 517,000 new jobs, crushing the estimate of 185,000 and well above the previous read of 260,000. The unemployment rate fell from 3.5% to 3.4%, its lowest rate since 1969. There was more positive news as the ISM Services PMI climbed back into expansion territory with a reading of 55.2, up from 49.2 and above the forecast of 50.4 points. The US dollar surged against most of the major currencies after the employment report, while equity markets were down. The Australian dollar plunged by 2.2% on Friday. There had been speculation that the Fed might deliver a “one and done” rate hike in March which would end the current rate-hike cycle, but the job report has poured cold water on those hopes. The labour market is running much too hot for the Fed’s liking and wage growth remains an important driver of inflation. Fed member Mary Daly called the employment release a “wow number” and said that the Fed’s December forecast of a peak rate of 5.1% was a “good indicator” of Fed policy. RBA expected to raise rates The RBA will be in the spotlight on Tuesday with its monthly rate announcement. The central bank is expected to raise rates by 25 basis points, which would bring rates to 3.35%, a 10-year high. This would mark a fourth straight hike of 25 bp, as the RBA continues to fight inflation with steady but modest rate hikes. There are signs that rising interest rates are starting to bite the economy, with today’s retail sales release of -3.9% the latest reminder. The cash rate is projected to peak around 3.6%, although it could rise further if inflation remains stickier than expected. The employment market remains robust, allowing the central bank to continue raising rates as it sees fit. Read next: The US Judge Denied The FTC's Request, Giving The Meta An Important Victory| FXMAG.COM AUD/USD Technical AUD/USD faces resistance at 0.6962 and the round number of 0.7000 0.6841 and 0.6761 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

RBA decision out later - 25bp hike expected. Markets are pricing in more hikes this year in the US, with less easing by year-end Source: shutterstock Macro outlook Global Markets: US stocks continued to lose ground yesterday in the wake of Friday’s payrolls shock. The S&P500 dropped by 0.61%, and the NASDAQ was down exactly 1.0%. Balloon antics and the rising possibility of more trade restrictions may have weighed on Chinese stocks which also fell. US Treasury yields kept on rising. The yield on the 2Y note rose a further 18.4bp, with markets pricing in a good chance that Fed funds get to 5.25%, and that they only just start to edge down by the year-end. 10Y US Treasury yields rose a further 11.5bp to 3.64%. The USD remains bid, and EURUSD is currently trading at 1.0727. The AUD and GBP are both steadier than on Friday, but still slightly weaker than this time yesterday. The JPY has also drifted weaker, with more speculation about the Bank of Japan’s replacement for outgoing Governor Kuroda. Asian FX weakened across the board yesterday. Declines were led by the THB (-2.14%), KRW (-1.9%) and PHP (-1.33%) G-7 Macro: There was nothing of much note in the G-7 macro calendar yesterday. German factory orders were a bit better than had been expected in December, but still down 10.1%YoY. Eurozone retail sales were very soft (-2.7%MoM, -2.8%YoY). Germany’s December industrial production (consensus expectation is for -1.6% YoY) and the US December trade balance (-USD68.5bn expected) are also on the calendar. Australia: The Reserve Bank of Australia (RBA) will almost certainly raise the cash rate a further 25bp to 3.35% later today. The recent run of much higher-than-expected inflation means that today’s decision is firmly in the bag. Larger hikes do not seem probable, though the inflation story does likely keep the RBA hiking for longer than previously thought. We now see the cash rate rising to 4.1% before it peaks. China: The government has released a policy outline for building a high-quality country by 2025. The outline is very broad and covers many areas, including the service sector, technology, manufacturing and social governance. As such, it is a policy outline to grow the private sector and strengthen the government’s governance ability. “Quality” should form part of the goals set for 2023 by the upcoming “two sessions” meetings. It follows that the government should target both the growth rate (around 5%) and quality. These two targets will mean a possible further deterioration in the fiscal health of local government, a risk that is rising following Covid spending in 2022. Taiwan: Export and import data released today should contract by around 20%YoY, mainly due to weak global demand for semiconductors. This weakness should continue into 1Q23. The main question is whether this weakness will continue through the rest of the year, as the weakness in the US and European economies looks as if it may be less severe, but go on for longer this year. In this case, we could see a smaller but longer contraction in Taiwan’s trade. Japan: Japan released two data points this morning: labour cash earnings and household spending. The results were mixed.  Nominal labour cash earnings for December rose 4.8% YoY, which was more than had been expected (0.5% in November and 2.5% market consensus). This was the largest gain since 1997. We think this jump is only temporary as companies paid winter bonuses (7.6%YoY) to offset the recent spike in inflation. Basic salaries rose 1.9% YoY which is similar to the recent trend. Real cash earnings rose 0.1% YoY, the first rise in nine months. However, the increase in wages did not lead to an increase in household spending, which dropped -1.3% YoY (vs -1.2% in November, -0.4% market consensus). The three-month annualized spending figure did improve from the previous quarter, so we expect 4QGDP to rebound from the contraction in the third quarter.  We believe that today’s above-3% wage growth is a temporary boost and we need to see if it can be sustained for a while, which will be determined by the Spring wage negotiations. As we mentioned in our monthly report, the Bank of Japan won’t likely move as fast as most in the market hope. Philippines:  The Philippines reports headline inflation today.  Market consensus points to a 7.6%YoY increase for prices but we could see headline inflation settle higher at 7.8%YoY.  Although headline inflation is expected to dip from the 8.1% reported in December 2022, price pressures remain broad-based with high inflation reported for more than 70% of the CPI basket.  This type of broad-based inflation pressure should convince the Bangko Sentral ng Pilipinas (BSP) to increase policy rates next week. We expect a 25bp rate hike from the BSP as Governor Medalla keeps up the fight against persistent inflation.         What to look out for: RBA meeting and US trade Australia RBA meeting and trade balance (7 February) Philippines CPI inflation (7 February) Taiwan trade balance (7 February) US trade balance (7 February) South Korea BoP current account (8 February) India RBI policy meeting (8 February) US mortgage MBA applications (8 February) Fed’s Powell, Williams, Cook and Barr speak (8 February) Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Fed’s Kashkari and Waller speak (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

The Reserve Bank of Australia has hiked a further 25bp taking the cash rate to 3.35% - there is no suggestion that rates are close to the peak or that they will fall any time soon Governor of the Reserve Bank of Australia, Philip Lowe 3.35% Cash rate target +25bp As expected Hawkish statement In addition to hiking rates a further 25bp to 3.35%, the Reserve Bank of Australia (RBA) engaged in a spot of forward guidance in the statement that accompanied today's decision on rates. There are two key comments in this statement that leave us thinking that we were right to revise our cash rate target forecast to 4.1% recently, up from 3.6% previously, which was roughly where the market consensus lay before this meeting.  The first of these comments reflects the path the RBA sees for inflation, which is for only a very slow decline. "The central forecast is for CPI inflation to decline to 4¾ per cent this year and to around 3 per cent by mid-2025". The second comment is "The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary".  "The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary." - Philip Lowe, Governor, Reserve Bank of Australia Australian rates and inflation forecasts (ING) Source: CEIC, ING Caution - forward guidance! The RBA's inflation forecasts and their implication that rates will rise more and stay higher for longer are magnitudes different to our own forecasts (see chart) and also the prevailing market view before this meeting. In contrast, we believe that headline inflation will be back below 3% by the first quarter of 2024. So how can we be so far at odds with the RBA's outlook? The answer probably lies in the concept of "forward guidance". By stating that, in its view, inflation will stay high for a protracted period, the RBA is undermining any thoughts of easing later this year or early next. This will lift longer-term bond yields and short-term rate expectations. It will give the AUD a boost too. All of these things tighten financial conditions and will make it easier to bring inflation down. However, we may want to remind ourselves of the RBA's track record here. Even as Australian inflation was taking off, the RBA's guidance was that rates would not be raised from their cycle low of 0.1% until at least 2024. Well, that obviously didn't happen. Nor did wage growth need to exceed 3% for inflation to return sustainably to its target range on the way up. But then forward guidance does not have to be accurate to work. Indeed, if it does work, then it probably won't be accurate as credible guidance will help bring about a quicker adjustment of inflation. In short, we don't need to believe the RBA's forecasts and statements or adjust our forecasts to match them. We just need to be aware of their intentions. It is a very different approach to that taken by the US Federal Reserve's Chair, Jerome Powell. He recently expressed no interest in short-term market reactions to the Fed's meetings and statements. For Australian markets, the near term is likely to see some more support for the AUD from higher rate expectations, though it would only take a soft inflation report or some weak employment data for holes to start appearing in the RBA's assertions.  Read this article on THINK TagsRBA rate policy RBA rate decision Australian economy Australian bond yields AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

Summary:  US equities extended their losses while the USD continued to run higher on Monday as markets repriced the Fed’s path higher following Friday’s hot jobs report and Fed member Bostic’s hawkish comments bringing 50bps of rate hikes over the next two meetings back on the table. Eyes turn to Fed Chair Powell up later today if similar hawkish rhetoric will be maintained. RBA meeting ahead and key to watch if the door for further rate hikes is kept open. Oil prices are choppy but Gold strength is seen holding up despite a recent correction.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) extended losses, waiting for Powell’s interview and corporate earnings After the retreat triggered by a staggering employment report last Friday, US equities extended losses in a relatively uneventful day on data and news. Bond yields soared further on Monday and put pressure on stocks. Investors are also cautious about what Fed Chair Powell will say in an interview on Tuesday after the strong job data. Disney, PepsiCo, Uber, and DuPont are reporting this week. Nasdaq 100 dropped 0.9% and S&P 500 slipped 0.6%. Nine of the 11 S&P 500 sectors retreated, led by communication service, information technology, and materials. Tesla (TLSA:xnas) outperformed with a 2.5% gain after the EV giant raised the prices of its Model Y SUV. Dell (DELL:xnys) fell 3% following the computer maker shedding 5% of its workforce citing eroding market conditions. Newmont (NEM:xnys) plunged 4.5% after the gold mining giant make a USD17 billion offer for Australia’s Newcrest Mining (NCM:xasx). Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jumped further to reprice the Fed’s rate path Treasuries extended the post-job report sell-off, seeing yields on the 2-year soaring 18bps to 4.47% and those on the 10-year rising 12bps to 3.64%. Hawkish comments from the Fed’s Bostic, ECB officials, and Bank of England officials added additional pressure to the market which was already in motion to decline in price and rise in yields. Atlanta Fed President Bostic said the strong job report would probably mean that the Fed have to raise rates more than he had projected. Earlier in the day, the weakness in Treasuries started from spill over selling pressure on U.K gilts on hawkish comments from Catherine Mann, external member of the BOE’s Monetary Policy Committee and Huw Phill, chief economist of the BOE, suggest more rate hikes. ECB Governing Council member Robert Holzmann added to the hawkish pushback from central banks, saying “the risk of over-tightening seems dwarfed by the risk of doing too little”. Treasury and corporate supply are weighing on markets as well. About USD 13 billion corporate new issues came to the market on Monday and the Treasury is auctioning USD40 billion 3-years on Tuesday, followed by USD35 billion 10 years and USD21 billion 30 years on subsequent days. For today, all eyes are on Powell’s scheduled interview. The market is pricing in a 25-bp hike in March, followed by an about 80% chance for another 25bp hike in May, bring the terminal Fed Fund rate to above 5%. The rate cut expectation was shed further to 38.5bps as implied by the SOFR June-Dec spread. Australia’s share market earnings are beating US earnings growth, supporting the ASX200  Amid Australia’s reporting season kicking off, so far average earnings growth from the ASX200 companies are outperforming those in the S&P500. But also, stronger than expected earnings from the ASX200 companies so far have moved the market closer to its record all-time high. The market is under 1% away from trading at its highest level in history, and this is despite commodity prices falling this week amid a higher US dollar.  Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) deeper into consolidation The Hang Seng Index declined 2% on Monday, extending the benchmark’s retreat from the January 27 high to over 6%. Digital health platforms, mega-cap internet, tech hardware, EV, and Chinese developer names were among the biggest laggards. Alibaba Health (00241:xhkg), plunging 7.2%, was the biggest losers among blue chips, followed by Sunny Optical’s (02382:xhkg) 6.9%. Another i-Phones supplier, AAC (02018) also slipped 4% on signs of weakening demand for iPhones in China. Aluminum product maker China Hongqiao (01278:xhkg) dropped 4.5% after preannouncing a 40% decline in profits in 2022. EV names headed south, falling 2%-5%. HKEX (00388:xhkg) plunged 4.2% despite the Special Administrative Region’s Chief Executive in Saudi Arabia pitching Saudi Aramco to have a second listing in Hong Kong. Renewed geopolitical tension over the Chinese surveillance balloon incident, overall risk-off sentiment spilled over from pricing out some of the rate cut expectations in the U.S., and profit-taking after the sharp rises in the Hong Kong and mainland Chinese stocks weighed on the market. In A-shares, CSI300 dropped 1.3%, with Chinese white liquor one of the worst-performing industries, following reports of PICC Property and Casualty (02328:xhkg) limiting staff liquor consumption at business events. Mainland media speculated it as a sign that the Chinese authorities might do likewise at other large state-owned enterprises. Food and beverage, household appliance, construction materials, and non-bank financials were also laggards. Northbound flows registered a small net selling. FX: Dollar’s post-NFP strength extends further with focus turning to Powell After a hotter-than-expected US jobs report on Friday, Fed member Bostic’s comments on a potentially higher peak in the Fed Funds rate supported the US dollar overnight. Market pricing has seen an upward revision to terminal rate to 5-5.25% and Treasury yields continued to surge higher. The Japanese yen, being the most yield sensitive, suffered a double-whammy of higher US yields and chatter of a dovish new Governor at the Bank of Japan. USDJPY stayed close to 132.50 after jumping higher from sub-129 levels on Friday. AUDUSD pushed below 0.69 ahead of the RBA meeting (read preview below) while NZDUSD is still testing the 0.6300 handle. EURUSD plunged further to sub-1.0750 but GBP supported at 1.2000 as BOE’s Mann noted that the next step in the Bank Rate is still more likely to be another hike than a cut or hold. Crude oil (CLG3 & LCOH3) prices whipsawed A risk-off tone in the market following Friday’s US jobs report and hawkish comments from Fed’s Bostic saw oil prices slump lower earlier in the US session. Prices turned around later however as risks of supply disruptions rose after a catastrophic earthquake in Turkey has halted oil flow to the Ceyhan export terminal, which ships more than 1mb/d. Meanwhile, Saudi Aramco increased most prices for its flagship Arab Light grade against expectations of a cut, suggesting confidence in the demand outlook. WTI prices dipped towards $72 before a recovery to $74.50/barrel while Brent was up to $81/barrel, still far from resistance at $84.30. Gold (XAUUSD) strength continues to hold up despite a stronger dollar Gold prices saw a correction to drop back below $1900 after the hot US jobs report on Friday after the speedy run higher in the last several weeks. Stronger dollar and higher yields overnight again with hawkish comments from Fed’s Bostic continue to suggest there could be more downside for Gold in the near-term, but the $1870 support has continued to hold. This morning again, Gold is still testing that level, and if it continues to hold, it would send a signal about a weak correction within a strong uptrend. Next level of support at $1845 followed by $1828. Fed Chair Powell’s comments in the day ahead will be on watch. Copper awaiting Chinese demand recovery Copper led the base metals sector lower as the impact of the strong US jobs report last week lingered. However supply disruptions in Peru have helped to hold the key $4 support for now, and all eyes are on the pickup in activity in China. Aluminium briefly spiked after the reports suggesting the US was preparing to slap a 200% tariff on Russian aluminium. Russia is the world’s second largest producer of the metal and traditionally has accounted for 10% of US imports. However, imports fell to virtually zero in October last year. As a result, the tariff is expected to have limited impact on supply.  Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM What to consider? Hawkish remarks from Fed’s Bostic; Chair Powell due to speak today Atlanta Fed president Bostic (non-voter) spoke on Bloomberg, noting that jobs data from Friday raises the possibility of a higher peak rate, and his base case is still for two more hikes. Bostic also said the Fed could consider moving back to a 50bps hike if it needed to. Chair Powell will be speaking in Washington on Tuesday (1am SGT on Wednesday for Asia), followed by Barr, Williams, Cook, Kashkari, Waller and Harker over the course of the week. Japan’s nominal wage growth records highest growth in 26 years Japan reported a stronger-than-expected wage growth for December, with labor cash earnings of 4.8% YoY coming in above 2.5% YoY expected and prior revised higher to 1.9% YoY as well. This was the highest since 1997, and could potentially fuel speculation again that the Bank of Japan could consider shifting policy after the new Governor is appointed in April. Real cash earnings growth also turned positive, coming in at 0.1% YoY from -2.5% YoY previously and -1.5% YoY expected. RBA meeting ahead; a 25bps hike is likely to 3.35%, while some economists predict a 40bps hike The latest RBA indicators have been hot; surging Australian inflation, hotter than expected retail sales numbers, slowing employment (although unemployment is near five decade lows, at 3.5%), yet other metrics such as building approvals are soaring - seeing one of their biggest jumps in a decade. Meanwhile the RBA is contending with signs of a slowing economy; with the services sector in contractionary phase and retail spending falling. Still the RBA is likely to continue to hike rates to the highest in over a decade. A 25-bp hike is expected by most today. However guidance is key, as the market is now pricing the RBA for another ~37 bps of tightening, into a peak in either June or July, and then cutting in September. We’re watching AUDUSD and EURAUD with the AUD having nose-dived as commodity prices fell from their highs, while the USD gathers strength, with the dollar index breaking above 103 for the first time since early January. If the RBA hikes more than expected, a knee-jerk rally up the Aussie dollar is likely. US plans a 200% tariff on Russian Aluminium; yet prices continue to fall on a higher US dollar President Biden has yet to give the go-ahead, however it’s being reported the White House was mulling an outright ban. The 200% tariff is expected to have a limited impact on prices given Russia accounts for 6% of global aluminium. Aluminum prices held losses, largely pressured by a higher US dollar. In the US, Alcoa and Century Aluminum shares fell. In Australia keep an eye on Rio Tinto and Alumina. Investors may like to consider prices are paring back from their highs amid a higher US dollar, yet concerns linger that supply cannot keep up with demand for high purity aluminium. The same applies to most metals. There are risks of a further pull back in commodity pricing should the US dollar continue to run up, however, the market will likely once again focus back on fundamentals. So keep an eye on the US dollar. Outlook from European industrial giant Siemens to watch Siemens, one of Europe’s largest industrial companies, is expected to show revenue growth of 11% y/y and unchanged operating income compared to a year ago as cost pressures remain a key challenge for Siemens. Last quarter the order book and net new orders looked healthy, so the question is whether this will flow through into the outlook for 2023. Gold companies are in focus. World’s two largest gold miners are in talks to combine In case you missed it, the US-listed gold miner Newmont is attempting to acquire Australia’s gold mining giant, Newcrest in a bid that values the gold miner at $17bn. If the deal goes through it will reunite the two gold miners after being separated for over quarter of a century. It will also be the world’s biggest takeover of 2023. Overnight the Canadian listed Newcrest jumped 14%, ASX listed Newcrest shares jumped 9% yesterday. Importantly, the takeover offer reflects the world’s increasing appetitive for gold, given gold generally outperforms equites when the Fed pauses rate hikes. Among retail investors, many have been increasing their exposure to gold companies ahead of central banks easing. Nationwide strike in France today After a successful demonstration all over France on 19 January, trade unions are calling for new nationwide strike today against the government’s plan to push back the minimum retirement age to 64 and to accelerate a previous reform, called the Touraine reform, which provides for the extension of the required contribution period to 43 years by 2035. Before Covid, the government also tried to implement a pension reform which caused a massive wave of demonstrations across the countries – there was basically almost no public transport in main cities for weeks. This is still uncertain how long the strike will last. But the trade unions are planning to keep fighting as long as needed. Expect a blockage in several sectors (refineries, metro, rail transport, education). At the moment, we don’t think the strike will have a noticeable negative impact on GDP growth this quarter. We are confident France will avoid a recession this year – with a GDP growth forecast around 0.6-0.7%. This is not high but it is better than in many other eurozone countries.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Hawkish Bostic puts the focus on Powell – 7 February 2023 | Saxo Group (home.saxo)

Equity markets are treading water on Tuesday, as investors take a pause following quite an eventful week. Investors seem a little lost this week, disheartened by the jobs report in particular but also poor tech earnings and a still-hawkish Federal Reserve. The central bank may have softened its tone a little but once you take the economic data into consideration, the case for a couple more 25-basis point hikes is clearly there. That’s come as quite a setback following what has been a much more optimistic start to the year, in which interest rate expectations have been broadly pared back. But as was always likely to be the case, and will likely remain so this quarter at least, the data is going to be inconsistent and sentiment is going to reflect that. The path to peak inflation seemed very linear and sharp but the journey back to 2% is likely to be anything but. Clearly, there is a lot of underlying strength in the labour market that is going to make the case for pausing challenging, although I suspect there’ll be plenty of examples over the next couple of months that may make it seem more appealing. A slight hawkish shift from the RBA? The RBA is on a similar trajectory to the Fed now, even a little ahead, in that it’s on a meeting-by-meeting path and has been hiking in 25 basis point increments since October. That said, based on the language overnight, it would appear the light at the end of the tunnel may be dimming and the RBA could be laying the groundwork for a prolonged exit. Core inflation has remained stubbornly high and while a return to super-sized hikes looks unlikely, the expectation now for the next couple of meetings is that 25 basis point hikes are widely expected. Read next: EUR/USD Drop Below 1.0700$ And GBP/USD Drop To 1.967$, The Aussie Pair Holds Above 0.69| FXMAG.COM Tick and tick Bitcoin continues to look in a fairly strong position, having weathered the recent storm quite well. It remains not far from its highs and within the range it’s traded in for most of the last few weeks. Sentiment remains a dominant factor but what the community will likely be hoping for more than anything right now is for headlines to not turn against them and for cryptos to show some resilience. So far, both of those boxes are being ticked. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

After rebounding from the support of the MACD line on the daily chart, the price rose by 75 pips. Of course, the Reserve Bank of Australia rate hike from 3.10% to 3.35% also influenced the growth. But in general, there has been a strong reversal to strengthen the US dollar in the forex market, so the aussie's growth will be limited. Even the signal line of the Marlin oscillator has outlined a downward reversal on the way to the limit of the green zone. The consolidation under 0.6873, respectively under the MACD indicator line, will send the prices in a new wave of downward movement in the medium-term. On the four-hour chart, the price paused the corrective growth at the level of the January 31 low. This might be the limit. But if it crosses this level, the final stop and the reversal may occur from the MACD line near 0.7030. The signal line of the Marlin oscillator is on the zero line and waiting for a signal for further direction. That is, in the current situation on this chart, the oscillator is in the position to lead.     Relevance up to 03:00 2023-02-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334450

AUD/USD picks up bids to refresh intraday high. Risk profile improves on US-China, growth chatters amid a light calendar. China inflation, RBA Monetary Policy Statement eyed for clear directions. AUD/USD renews intraday top near 0.6965 as buyers benefit from the broad US Dollar weakness and the risk-on mood during early Thursday’s sluggish session. In doing so, the Aussie pair seems to prepare for the next day’s heavy data flow comprising China inflation and monetary policy statement from the Reserve Bank of Australia (RBA), not to forget the US consumer-centric data. For starters, the risk-positive headlines surrounding China occupy the driver’s seat to propel the risk-barometer AUD/USD prices. Important among them are the receding fears of the US-China jitters, following the China balloon shooting by the US, join the hopes of People’s Bank of China’s (PBOC) rate cuts and the restart of the China-based companies’ listing on the US exchanges to favor risk-on mood in the bloc. On the other hand, the pullback in yields could also be linked to the AUD/USD pair’s run-up, as the same weighs on the US Dollar. That said, yields rely on the market’s reassessment of the hawkish Fed talks as Chairman Jerome Powell hesitated in praising the jobs report but Fed Governor Christopher Waller, New York Federal Reserve President John Williams and Fed Governor Lisa Cook highlight inflation fear to suggest further rate increases from the US central bank. Furthermore, comments from the US diplomats such as Treasury Secretary Janet Yellen and President Joe Biden also amplified inflation concerns, as well as hopes of no recession in the US, which in turn suggests a safe side for the Fed to hike the benchmark rates. Read next: The GBP/USD Pair Climbed To Around 1.2100, The EUR/USD Pair Is Above 1.0700| FXMAG.COM Against this backdrop, US Dollar Index (DXY) traces softer Treasury bond yields to reverse the previous day’s recovery moves, down 0.22% intraday near 103.25 at the latest. That said, the US 10-year Treasury bond yields reversed from a one-month high to snap a three-day uptrend on Wednesday, pressured around 3.62% by the press time. Furthermore, the Asia-Pacific shares grind higher whereas the S&P 500 Futures ignore Wall Street’s losses to print mild gains by the press time. Looking ahead, the US Weekly Jobless Claims can entertain intraday traders while Friday’s RBA Monetary Policy Statement and China inflation data will be crucial for the AUD/USD pair traders to watch. That said, the RBA’s latest hawkish appearance and Beijing-linked optimism will be at test on Friday. Technical analysis AUD/USD run-up appears doubtful unless crossing the 21 and 10-DMA confluence near the 0.7000 psychological magnet.

Summary:  Choppy markets yesterday as the US market erased the prior day’s sharp rally in the ongoing struggle between bulls and bears after the S&P 500 recently cleared important resistance but has stalled out. Treasury yields also dipped after a very strong US 10-year treasury auction as the US yield curve is near its most severe inversion for the cycle. Elsewhere, oil prices have jumped sharply off recent lows over the last three days. What is our trading focus? US equities (US500.I and USNAS100.I): tight trading range Yesterday’s trading session did not confirm the cyclical growth bets in equities with S&P 500 futures erasing the prior gains on Powell’s tight labour market comments and the need for higher policy rates. It feels like the market is transitioning into a tighter range before getting new information on which to decide whether to continue to uptrend or reverse lower. The signs are leaning towards a cyclical uptrend, but the signal-to-noise level remains low across many macro indicators. Yesterday’s open price in S&P 500 futures at 4,167 is the key level to watch on the upside. Chinese equities: Hang Seng (HIG3) and CSI300 (03188:xhkg) lacked of direction Hang Seng Index and CSI300 bounced over 1% after a week-long consolidation. Xiaomi (01810:xhkg), surging 9.5%, was the biggest winner within the Hang Seng Index. Lei Jun, Chairman and founder of the mobile phone and electronic device maker, announced on Twitter in the form of Q & A with a Chatbot that the company is launching its Xiaomi 13 Series mobile phone on 26 Feb. Mobile phone hardware suppliers Sunny Optical (02382:xhkg) and AAC (02018:xhkg) surged 5.3% and 4.1% respectively. The technology space outperformed overall, with the Hang Seng Tech Index climbing 2.5%. In A-shares, food and beverage, communication, defense, and internet-of-things stocks led the advance. FX: Aussie gains stall; sterling outperforms After a strong run higher post-RBA, AUDUSD turned lower yesterday after taking a stab at 0.7000, but was choppy overnight in the Asian session, perhaps buoyed into early European hours by a bounce in metals prices. The key levels for that pair to the downside are the recent 0.6856 low and the 200-day moving average another 50 pips lower currently. USDCAD also returned back above 1.3400 despite the surge in oil prices, with the line of resistance for that pair near 1.3475. Sterling bounced off 1.2000 support in GBPUSD and managed a poke through 1.2100 but has found resistance in that area. The 38.2% Fibo retracement at 1.2120. UK GDP for Q4 will be released tomorrow. The EURGBP rally, meanwhile, has partially deflated after the pair broke well above the key 0.8900 area, trading near 0.8875 this morning and threatening a full reversal if it closes much lower in coming sessions. Crude oil (CLH3 & LCOJ3) prices rise on demand outlook Crude oil trades higher for a fourth day as last week’s long-liquidation-driven sell-off continues to be reversed as the dollar softens and on renewed optimism about the demand outlook for oil, especially in China and other parts of the world that may narrowly avoid a recession. The EIA reported US crude stocks building 2.4mln bbls in the latest week, contrasting the private data that indicated a draw of a similar magnitude. On the demand side, TotalEnergies sees oil demand will rise to a record this year, in line with the IEA’s messaging. Brent is currently trading above its 21-day moving average, currently at $84.95 - in WTI at $78.25 - with a close above likely to provide additional positive momentum. Gold (XAUUSD) trades steady but risk of further weakness lingers Gold remains supported around the $1860 level but so far the failure to break decisively higher to challenge support-turned-resistance in the $1900 area is raising concerns that a correction floor has yet to be found. The yellow metal erased earlier gains on Wednesday after Fed members reaffirmed the view that interest rates will need to keep rising to contain inflation. Since hitting a $1861 low last Friday, gold has been trading within an 18-dollar rising channel, currently between $1870 and $1888, and a break to the downside carry the risk of an extension towards $1828, the 38.2% retracement of the run up from early November. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) pulled back on a strong 10-year auction The reaction in the Treasury market was muted to the chorus of hawkish comments calling for higher for longer from Fed’s Williams, Waller, Kashkari, and Cook.  The action came in after a strong 10-year auction which awarded the notes 3bps richer than the market level at the time of auction and a strong bid-to-offer-cover at 2.66 times, increasing from 2.53 times in the previous auction. Yields on the 10-year fell 6bps to finish Friday at 3.61%. What is going on? Credit Suisse sees weak 2023 on significant outflows The Swiss bank reports this morning Q4 net income loss of CHF 1.4bn vs est. loss of CHF 1.1bn, but even worse the bank is expecting a substantial loss before taxes in 2023, but also expect to bounce back to profitability in 2024. Outflows in Q4 totalled CHF 111bn but deposits looked positive in January according to Credit Suisse. Walt Disney announces job cuts and $5.5bn cost-cutting plan The Walt Disney Company reported quarterly earnings after hours yesterday, with profits of 99 cents per share well north of consensus estimates of 74 cents and revenue growing 7.8% y/y to $23.5bn, also above estimates. Disney+ streaming service subscribers fell 1% in the quarter, mostly due to their Indian streaming service loosing streaming rights to cricket games. CEO Bob Iger announced a $5.5bn cost saving plan that will include a $3bn reduction in movie-production budgets and the axing of 7,000 jobs. Shares were up over 5% in late trading last night, near $117.80 per share. Uber shares gained 5% yesterday after reporting earnings. The rise in Uber accelerated yesterday, posting a new 10-month high after Uber reporting stronger than expected quarterly results. Uber expects its first ever year of profits, including for its ride and Uber Eats businesses. Uber reported its highest ever number of trips for the quarter at more than 2 billion and nearly 1mn trips per hour. Meanwhile Uber is also receiving more advertising dollars, and on track to achieve its $1bn ad revenue in 2024. A fourth activist investor joins the move to shake up Salesforce Three activist investors, Elliott Investment Management, Starboard Value LP, and ValueAct Capital Partners, have already put pressure on Salesforce’s management to cut costs and improve profitability. Wall Street Journal writes that a new activist investor Third Point LLC has now also taken a stake in the software maker. This group of investors will put enormous pressure on the software maker to improve results over the coming year. UK House Prices continue to drop sharply, according to RICS Survey. The UK RICS Price Balance survey registered a new low for the cycle at –47%, suggesting that nearly 50% more of surveyed estate agents are seeing falling prices than rising prices, the lowest number since 2009, during the financial crisis. This was slightly worse than expected and a drop from –42%, although estate expectations are improving with only 20% believing in a worsening outlook for the next 12 months versus 42% a month ago. European gas settles at 17-month low on mild weather outlook. The Dutch TTF gas futures, Europe’s natural gas benchmark, settled at €53.69 on Wednesday, its lowest close since September 2021, and around 25 euros above the five-year average for this time of year. A cold spell across Europe this past week have had no major impact on prices with ample supplies to meet demand, and forecasters are now looking for milder than expected weather for the rest of the month than previously expected. EU gas in storage remains 69% full and we may enter the injection season in late March near 60% and unprecedented high level, even compared with the recession hit 2020 when the level was 54%. Fed speakers call for higher rates A slew of Fed speakers were on the wires yesterday. While a broad chorus on higher rates was maintained, much of which has been the Fed’s message throughout, markets perceived the messages as hawkish primarily as the January jobs report is still keeping investors concerned. Importantly, all the four speakers last night are voting this year. Christopher Waller said rates may have to stay higher for longer. John Williams called the December dot plot a good guide, adding that rates are "barely into restrictive" territory. He also hinted at a slightly higher terminal rate of 5.0-5.5%. Lisa Cook said "we are not done yet." Neel Kashkari expects the peak to rise above 5% this year as services side of the economy is still hot. Market pricing of the Fed path still pretty much unchanged, with terminal rate priced in at just over 5.1%.  Read next: The GBP/USD Pair Climbed To Around 1.2100, The EUR/USD Pair Is Above 1.0700| FXMAG.COM What are we watching next? Sweden’s Riksbank to hike today – watching guidance after krona’s woeful weakness. EURSEK recently touched its highest level since the global financial crisis back in 2009, a rather unusual scale of SEK weakness, given strong global risk sentiment and an improved outlook for Europe. The new Riksbank governor Erik Thedeen warned on the concerns that rate rises and high inflation (which hit over 12% YoY a the headline and 10.2% for core inflation in December) are risks for Sweden’s financial system, suggesting that the central bank may be reluctant to continue hiking much more beyond today’s 50 basis point rate rise, which would take the policy rate to 3.00%. With 10-year Swedish government bonds trading with a yield south of 2.00%, the Swedish yield curve is even more steeply inverted than Germany’s, suggesting strong concerns for economic growth. RBA inflation forecasts due tomorrow as Chinese students set to return to AU The AUDUSD has had a volatile week, sentiment was lifted a bit overnight in Australia as the iron ore (SCOA) and copper prices moved up over 1% each. China recently docked its first Australian coal import shipment in two years. In what can only prove a boost to the Australian economy, almost 50,000 Chinese students are expected to arrive in Australia this month- ahead of the start of semester. This is due to Beijing’s government ruling that degrees earned online will no longer be recognized. Tomorrow, the RBA will issue its quarterly economic forecasts and policy outlook in Australia on Friday. Earnings to watch Today’s US earnings focus is PepsiCo and PayPal with analysts expecting PepsiCo to report revenue growth of 7% y/y and EPS of $1.64 up 7% y/y as the beverage and snacks business is resilient during inflation. PayPal earnings will an interesting to watch as Adyen in Europe yesterday spooked markets with a significant decline in the EBITDA margin on more hiring and investments in infrastructure. Analysts expect PayPal to report revenue growth of 7% y/y and EPS of $1.20 up 41% y/y. Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Economic calendar highlights for today (times GMT) 0830 – Sweden Riksbank Policy Rate 0945 – Bank of England Governor Andrew Bailey to testify 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1530 – US Weekly Natural Gas Storage Change 1900 – Mexico Rate Announcement 0030 – Australia RBA Monetary Policy Statement 0130 – China Jan. CPI/PPI   Source: Financial Markets Today: Quick Take – February 9, 2023 | Saxo Group (home.saxo)

China's January inflation report, the latest RBA Statement on Monetary Policy and the US Michigan consumer sentiment are released today Source: shutterstock Macro and market outlook Global Markets: For the first time this week, we have seen some consistency from markets, as US stocks closed down for a second consecutive day after their roller-coaster ride earlier this week. There were some further Fed comments yesterday from Barkin along the lines of the Fed needing to “stay the course” on rates. But by now, such comments have to be viewed as part of the financial wallpaper and not contributing much to daily volatility. Bond yields reversed yesterday’s decline in yields. The 2Y US Treasury yield rose 6.1bp and the yield on the 10Y bond rose about the same to take it to 3.658%. EURUSD is fractionally higher than this time yesterday at 1.0737, though it briefly pushed through 1.0780 before retreating. The AUD followed a very similar path as did the GBP, though sterling did manage to hang on to more of its earlier gains. The JPY is also roughly unchanged from a day ago, after dropping to 130.345 at one stage, it is now 131.48. There is not too much to take away from the other Asian FX movements yesterday either. The PHP stands out as having done much better than the rest of the pack, rising 0.65%. The MYR stands at the other end of the spectrum, down 0.42%, but most of the rest are little changed on balance over the last 24 hours. G-7 Macro: 4Q22 Preliminary GDP in the UK is forecast to come in flat from the previous quarter. Canada releases labour market data, and from the US, we get the University of Michigan consumer sentiment and inflation expectations figures. Otherwise, it’s a quiet day. China: CPI inflation for January should continue to remain very moderate at around 2%YoY despite a rebound in service sector activity in January. PPI should still register a contraction on a yearly basis even though there was some pick up in steel prices recently as prices last year were even higher. The economy needs more industrial activity and infrastructure construction to push PPI high enough that the PBoC will need to increase interest rates, and that is very unlikely in 1H23, and also quite unlikely until 4Q23 or later. Australia: Adding some detail to the comments following their recent rate decision, the Reserve Bank of Australia (RBA) releases its “Statement on Monetary Policy” this morning. The main points to watch out for are justifications for the anticipated exceptionally slow decline in inflation back to the RBA’s target.   Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM What to look out for: US University of Michigan sentiment Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Australian dollar is unchanged on Tuesday, after starting the week with strong gains. In the European session, AUD/USD is trading at 0.6966. Australia’s Business Confidence jumps Australia’s NAB Business Confidence rebounded in January, rising from 0 to 6 and above the forecast of 1 point. Business Conditions rose to 18, up from 13 and higher than the forecast of 8 points. This follows three months of softening in late 2022. The NAB noted that firms are more optimistic about global growth and the jump in business conditions is a sign that the economy is more resilient than previously expected. The positive news failed to send the Aussie higher, as the markets are waiting for today’s US inflation report. Reserve Bank of Australia Governor Lowe will be on the hot seat when he appears before parliamentary committees on Wednesday and Friday. Inflation rose to 7.8% in December, its highest level since 1990. The RBA has hiked rates by some 325 basis points in 10 months, yet inflation isn’t showing signs of peaking. The RBA raised rates by 25 bp last week and Lowe has signalled that more increases will be needed to tame inflation. Inflation isn’t expected to fall to the RBA’s target of 2% to 3% until 2025. Lowe has faced a barrage of criticism in his handling of inflation and interest rate policy and it’s far from certain that he will be reappointed for another term. Lowe is likely to face a grilling from the committee members, who may be thinking that “something isn’t working here”. All eyes on US inflation The US releases January inflation later today. Inflation is projected to fall to 6.2%, down from 6.5%, but there is unease in the markets that headline inflation might be stronger than expected. The sizzling jobs report indicated that the US labour market remains strong and January has seen higher energy and used car prices. The markets aren’t as confident that the Fed will cut rates late in the year and if the inflation report is higher than expected, the markets could fully price in two more rate hikes. This would be a major shift towards the Fed stance, as Jerome Powell has been saying for months that the pace of rate hikes will likely be higher and longer than previously expected. Recent inflation reports have overestimated inflation and the US dollar has responded with sharp losses. Today’s inflation report will likely follow that pattern, and if inflation is weaker than expected, the dollar should lose ground. Conversely, the dollar should get a boost if inflation is higher than expected.   AUD/USD Technical 0.6962 is a weak resistance line, followed by 0.7080 0.6841 and 0.6761 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Some of the highlights in Asia next week include Australia’s wage data, the BoK meeting, Taiwan's export orders and Singapore’s CPI  Source: Shutterstock Australia's wage price index will provide direction for policymakers Australia is set to release fourth-quarter wage price index data on 22 February. This was a keenly watched data point in 2021 when the Reserve Bank of Australia (RBA) tied its cash rate target to wage growth rising to a level consistent with target inflation of 3.5-4%. In the last quarter, the wage price index grew by 3.1%, which means that there is still room to inch higher, while inflation is currently running at 8.4% YoY. If the wage price index grew by 1.0% in the fourth quarter from the third – as it did in the third quarter from the second, the index would finally reach 3.5%. Although this very lagging data point is mainly of academic interest, a rising number would still encourage hawkish rhetoric from the RBA. BoK to pause on Thursday? The Bank of Korea will meet on Thursday. We believe that the BoK’s rate hike cycle ended with the 25bp hike in January. But given that January's consumer price index picked up again, we are expecting the BoK to maintain its hawkish stance. China's loan prime rates to remain unchanged Chinese banks will announce possible changes to loan prime rates (LPR) next week. Given that the economy is recovering and that the People's Bank of China left the 1Y Medium Lending Facility rate (MLF) unchanged, we predict that the chance for a change in the LPR is small. Moreover, banks have been told by the government to offer lower interest rates on mortgages to provide support to the economy. This would result in banks not having enough room to squeeze net interest margins. Weak semiconductor demand could hurt Taiwan's economy Export orders and industrial production will likely give clues about how bad semiconductor demand was in January. We expect declines of around 10-20% year-on-year for both. Final GDP data should show a slight yearly contraction; the advance estimate was -0.86% YoY. We expect Taiwan to enter a mild recession in the first half of this year given weak demand for semiconductors, the main pillar of the economy. Read next: Tesla Will Make Supercharger Network, Visa Will Allow The Use Of Cryptocurrencies To Settle Transactions| FXMAG.COM Singapore CPI Inflation report We could see headline inflation tick lower, but core inflation will likely remain elevated at 5.2% YoY as the latest increase in the goods and services tax kicks in. Finance Minister Lawrence Wong announced a fresh round of subsidies to help households deal with the rising cost of living. Wong believes inflation will remain elevated for at least the first half of the year.  Persistent price pressures should keep the Monetary Authority of Singapore (MAS) in hawkish mode although it needs to strike a delicate balance as slowing global trade threatens to negatively impact the export sector.  Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets  

Equity markets are poised to open in the green once more on Thursday, continuing what has been a rather strange week of trade so far. We’ve seemingly gone from euphoria at the start of the year on the back of some really encouraging economic data to turning a blind eye to it when it suits. It’s all really quite odd, especially when other corners of the market are behaving in a more orthodox manner, which begs the question, what do equity (and crypto) traders know that the rest of us do not? In the last two weeks, we’ve had a red-hot jobs report, a more modest decline in inflation data, and a really strong retail sales release. As you would expect, that’s triggered a retreat in gold and an adjustment in bonds to account for rates likely rising further and maybe no longer falling later this year. That seems perfectly reasonable. While I am of the view that the pendulum has now probably swung too far the other way on rate expectations this year, I’m not quite as willing to ignore these releases as many clearly are. It could come back to bite them if we don’t see a swift cooling next month. Cause for concern for the RBA The Australian dollar has recovered earlier losses that came on the back of weaker employment figures. For a second straight month, the unemployment rate ticked higher and employment fell, alongside a slight downward revision to December on the latter. While this wouldn’t typically be considered good news, investors have been forced to accept the possibility of higher interest rates recently as inflation has stayed stubbornly high. A slightly looser labour market will alleviate some of those fears of inflation becoming entrenched, although more evidence will be required to appease RBA policymakers after the last couple of inflation prints. Markets are still pricing in a few more 25-basis point hikes over the coming months before cuts begin either late this year or early next. A further deterioration in the labour market could see those expectations pared back further. Oil preparing to break higher? Oil prices are very choppy at the moment, with traders having a lot to take in, be that a 500,000 barrel decline in Russian output in March, a strong Chinese economic recovery, and an uncertain global outlook amid ongoing monetary tightening, among other things. It would appear crude has settled into a range, although it continues to trade at the upper end of that recently which may indicate a breakout attempt is developing. A move above $89 could be a very bullish development and suggest a tighter market is being more heavily priced in, aligning with comments from OPEC on Tuesday. First big test Gold traders don’t share the enthusiasm in equity markets and the yellow metal has continued to trend lower in the aftermath of recent data releases. It ran into support around $1,830 on Wednesday, around the upper end of the first barrier to the downside. This sits around the 38.2% retracement of the move from the November lows to February highs and coincides with support and resistance in December and January. The bigger test arguably lies a little lower around $1,780-$1,800, should it get that far. A bright future for bitcoin? It’s been a fantastic 24 hours for bitcoin and one that could generate further enthusiasm for cryptos, with it hitting a new six-month high and breaking above another big moving average only days after a bullish rebound off the 200-day SMA. While regulatory crackdowns continue to drive some unease, there’s clearly a growing sense of relief that the worst is behind it for the industry and 2023 could be a much better year. The next big test falls around $24,500-$25,500, a break of which could convince any remaining doubters that the future is bright. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

It has been a busy session for the Australian dollar, which started the day with losses but has recovered. In European trade, AUD/USD is trading at 0.6919, up 0.23%. Mixed Australian data Australia delivered some mixed data earlier today. The headline Employment Change for January surprised on the downside at -11,500 after -14,600 prior, well below the forecast of 20,000. There was better news on the inflation front, as Consumer Inflation Expectations for February fell to 5.1%, down from 5.6% expected and prior. The Australian dollar initially declined after these releases but has recovered and eked out small gains. The Aussie had a miserable outing on Wednesday, falling 1.1%. This was courtesy of hawkish remarks from RBA Governor Lowe, which unnerved investors. Lowe appeared before a parliamentary committee and confirmed that further rate hikes are on the way. The central bank has tightened sharply but this has not brought down inflation. In December, CPI hit 7.8%, the highest level since 1990, which Lowe admitted was “way too high”. The double whammy of rising rates and red-hot inflation is squeezing households and businesses, but Lowe is insistent that the number one priority is to curb inflation and avoid inflation expectations from becoming entrenched. US retail sales surprised with a huge 3% gain in December, the largest gain since January 2022. This rosy reading comes on the heels of an inflation release that was higher than expected. These strong numbers should have been bullish for the US dollar, as the Fed will likely raise rates even higher in order to put a brake on the strong economy. Investors, however, shrugged off the inflation and retail sales data and sent equities higher on Wednesday with a “bad news is good news” view. With risk appetite still intact, the US dollar hasn’t been able to capitalize on the inflation and retail sales releases. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM AUD/USD Technical AUD/USD is testing resistance at 0.6929. Above, there is resistance at 0.7001 0.6846 and 0.6774 and providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Summary:  Equities headed lower after the hot US PPI report and hawkish Fed speakers Mester and Bullard bringing the market’s terminal rate projections up to 5.27%. US 10-year yields surged to a YTD high of 3.9% and the US dollar was broadly higher against all other currencies but the yen recovered some of its losses as the session ended. RBA’s Lowe touted more rate hikes as inflation reigns. Metals saw a rebound with Copper leading, while Gold was still close to $1830.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on a hot PPI and 50bps hike back on the table U.S. stocks opened sharply lower on a much hotter-than-expected PPI print. The benchmark S&P 500 and Nasdaq 100 managed to claw back all the losses until they reversed following Fed’s Bullard hit the tape at 3 pm New York time with hawkish comments signaling the door to return to a 50bp hike at the March FOMC is open. The Fedspeak hammered stocks across the board with all 11 sectors in the S&P500 declining. At close, the S&P500 was 1.4% lower and the Nasdaq 100 lost 1.9%. Tesla (TSLA:xnas) declined 5.7% following an announcement to recall over 300,000 cars due to a crash risk associated with its Full Self-driving Beta software. Shopify (SHOP:xnys) plunged 15.8% on revenue outlook missing estimates. Toast (TOST:xnys) dropped 22.8% after missing revenue miss. Twilio (TWLO:XNYS) jumped 14.3% on an earnings beat. Cisco (CSCO:xnas) climbed 5.2%. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) climbed on hawkish Fed and producer price inflation Yields on the 10-year surged 6bps to 3.86% on a large jump on the PPI print in January and hawkish comments from Fed’s Mester and Bullard who brought a 50bp hike back to the table at the March FOMC. The selling during the session concentrated in the longer-end of the curve in particular in the 10-year futures contract and 5-year futures vs ultra-long bond contracts steepening trades. The USD9 billion TIPS auction had a bid/cover ratio of 2.38, below 2.69 last time. Traders are cautious ahead of next week’s USD120 billion supply from the 2, 5, and 7-year Treasury note auction. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) failed to sustain an attempt to rally Hang Seng Index rallied as much as 2.4% in the morning before spending the afternoon paring gains and finishing the Thursday session only 0.8% higher from the previous day. Qiushi Magazine, a mouth-piece of the Chinese Communist Party, published an excerpt of President Xi’s speech delivered in December, in which the Chinese leader highlighted insufficient aggregate demand as the paramount challenge so expanding consumption is a top policy priority. Media reports of foreign hedge fund building long positions in Chinese equities added fuel to the positive sentiment. The news that President Xi will be visiting Iran, a foe country with the United States, and China’s Ministry of Commerce imposed fines and sanctions on U.S. defence companies, Lockheed Martin (LMI:xnys) and Raytheon Technologies (RTX:xnys) dented sentiment. Tech stocks outperformed with Hang Seng Tech Index gaining 1.8%. Online pharm platform shares surged on the news that the Chinese healthcare regulator is stepping up insurance coverage for drugs. JD Health surged 5.3%; Alibaba Health climbed 3.5%. Lenovo (00992:xhkg) jumped 6.7% ahead of reporting quarterly results. Chinese developers and property management services names gained. China Resources Mixc Lifestyle (01298:xhkg) rose 4.7%; China Overseas Land & Investment (00688:xhkg) gained 3.1%; Longfor (00960:xhkg) climbed 2.8%. In A-shares, CSI300 advanced as much as 1% in the morning but pared all the gains to close 0.7% lower. Semiconductor, non-ferrous metal, machinery, and defense names led the charge lower. The food and beverage and cloud-computing gaming space bucked the decline and outperformed. Albemarle –the lithium giant beat earnings expectations & gave a sparky outlook – paving a positive course for the lithium sector... ...as per our Quarterly Outlook. Albemarle, the world's biggest lithium company – in size, and scale (selling lithium to most EV makers) rose 4.7% after it delivered a stronger than expected sales outlook – with China’s reopening to provide extra momentum as demand for EVs picks up. It sees net sales growing to $11.3-$12.9 billion, and EBITDA getting as high as $5.1 billion. It expects to maintain positive cashflow even despite increasing capital expenditure. In Q4 - its earnings (EBITDA) swelled to $1.24 billion, beating expectations and marking a mega jump from $229 million (same time last year), as lithium earnings rose more than expected. Adjusted EPS also grew more than consensus expected with EPS, at $8.62. This paves a positive path for what we might expect from Allkem and Pilbara when they report results next week. Click here for Saxo’s lithium equity basket for stock inspiration. Tesla recalls over 362,000 cars for self-driving crash risks; Its shares remain ‘overbought’ Tesla shares fell 5.7% to $202.04, staying around seven-month highs. Although Tesla’s uptrend seems intact  - buying is slowing  - with the relative strength index (RSI) indicating we could see some consolidation here as the stock is in overbought territory. Tesla’s recall affects 362,758 vehicles, including certain Model 3, Model X, Model Y and Model S units manufactured between 2016 and 2023. Although Musk said it’s not a recall, even though Tesla’s full-self driving beta system “may allow the vehicle to act unsafe around intersections”, and increase collision risk if the driver does not intervene, Musk affirmed the issue will be remedies with a software update, by April 15. RBA Governor faces parliamentary grilling after Australian unemployment surprising rose RBA Governor Lowe today hinted that despite Australian unemployment rising to 3.7% in January up from 3.5% - it does not change its hiking guidance. Yesterday, he faced a Senate estimates hearing – saying the cash rate was unlikely at its peak. And today he is back on the podium, saying banks need to do better jobs of passing on rate hikes. Meanwhile Bullock said refinances of mortgages are really high, with consumers shopping around to get better deals. Amid diminishing corporate operational expenditure power  - the unemployment rate will likely pick up this year, in the face of rising inflation and unemployment, meaning Australia faces a staglationary environment. We will continue to watch the AUDUSD and the GBPAUD – as we think the UK BOE could sit on its hands with rate hikes, while the RBA will likley push ahead with hikes in the coming months. FX: Firm king dollar as yields rise; JPY recovers from lows   With US yields maintaining their upward trajectory, the dollar was firmer again on to reach fresh highs since 6 January. Hot PPI, still low jobless claims and Fed speakers opening the door to another potential 50bps rate hike underpinned. Quiet day ahead with no tier 1 data due and only Fed’s Barkin and Bowman speaking. USDCAD rose to 1.3480 amid weakness in oil prices while AUDUSD was flattish as metals prices recovered, despite a weak jobs data yesterday and RBA’s Lowe affirming more rate hikes. USDJPY rose to 134.50 overnight but was back closer to 134 in Asia. EURUSD continues to find support at 1.0650 as ECB speakers continued to highlight another 50bps rate hike at the March meeting. Crude oil (CLH3 & LCOJ3) heads for a weekly loss amid Fed concerns and inventory build Even as some signs of improving Chinese demand started to appear, the broader inflation and interest rate rhetoric nudging higher again this week weighed on crude oil and the commodity complex more broadly this week. A hot PPI overnight, along with Fed members now starting to open the door for another potential 50bps rate hike has further brought the Fed’s terminal rate pricing higher and US yields continue to rise. WTI prices dipped below $78 in Asia, with Brent around $85. Even as OPEC and IEA reports suggested possible uptick in demand as China reopens, US stockpile reports continued to dampen the demand outlook. Saudi Energy Minister Prince Abdulaziz bin Salman also said the current OPEC+ deal on output levels will remain in place until year-end and that he is wary of forecasts of much higher demand from China. Copper prices jump to two-week highs Copper prices rose higher on Thursday as the dollar rally took a bit of a breather before resuming again. Copper stockpiles on the Shanghai Futures Exchange fell for the first time in two months, suggesting that the Chinese demand is picking up. Growth in aluminium inventories also slowed, according to data from Shanghai Metals Market. This comes amid ongoing risks of further supply disruptions. Earlier this week, Freeport-McMoRan Inc suspended operations at its Grasberg copper mine in Indonesia due to landslides. This is adding to disruption to Peru’s output caused by social unrest. Copper prices rose to $4.15 before a retreat to $4.11 in Asia. The key $4 handle support continues to hold up. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM What to consider? Fed speakers boost the market pricing of Fed’s terminal rate Hawkish Fed speak prompted an upward shift in the Fed funds futures pricing for the terminal rate, but there is still more than one full 25bps rate cut priced in for this year. Loretta Mester said she saw a compelling case for a 50bp hike at the January FOMC meeting. A similar message was sent out by James Bullard too. However, both are non-voters although Mester may become a voting member this year if Austin Goolsby is appointed as Fed Vice Chair. Mester also added that she is not ready to say if the Fed requires a bigger rate rise at the March FOMC; said more upside inflation surprises could make Fed policy more aggressive and can accelerate the pace if conditions warrant it. Bullard also reaffirmed his terminal rate projection of 5.25-5.50%. With members still sounding the hawkish alarm despite the market pricing catching up with the December dot plot, it appears to be a signal that the March dot plot may see an upward revision. Hot US PPI further casts doubts on the goods disinflation narrative After the CPI report this week brought back concerns on the pace at which inflation is cooling, January PPI also saw a hotter than expected print. Headline rose 0.7% MoM or 6.0% YoY (vs. 0.4% MoM and 5.4% YoY exp) jumping from the prior month's -0.2% MoM print (revised up from -0.5%) but cooling from 6.5% YoY last month. Both goods and services prices increased, with goods rising 1.2% and services rising 0.4%. This has started to question the goods disinflation narrative and continues to support the thesis that services inflation is sticky. Price pressures were broad with ex food and energy measure also up 0.5% MoM from 0.3% last month and expected. Jobless claims still below 200k Initial jobless claims data was beneath expectations, and still beneath the watched 200k level, printing 194k against an expected 200k – still supporting the case for a tight labor market persisting. Continued claims were in line with expectations at 1.696mln, picking up from the prior 1.68mln. RBA Governor Lowe’s testimony focused on the need for more rate hikes The Reserve Bank of Australia chief Philip Lowe appeared for the second session of his testimony to the economic committee today, and the message emphasized that the RBA still needs to do more to bring inflation under control, despite acknowledging the impact on community. He said that business conditions remain above average and labor market is still strong. He was scrutinized not just on policy but also on transparency, especially after his closed door meetings with private bankers but lack of public address.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.     Source: Markets Today: Hot US PPI and Mester/Bullard boost Fed terminal rate expectations – 17 February 2023 | Saxo Group (home.saxo)

AUD/USD has touched a high of 0.6900 as the USD Index has surrendered its morning gains. Persistent inflation in the United States has bolstered the odds of more interest rate hikes by the Federal Reserve ahead. The minutes from the Reserve Bank of Australia might remain hawkish for further guidance as inflation has still not peaked yet. AUD/USD has negated the downside break of the H&S pattern and has shifted into a bullish trajectory. AUD/USD touched the round-level resistance of 0.6900 in the early European session. The Aussie asset has been strengthened as investors have shrugged-off uncertainty associated with US-China tensions and the launch of three projectiles from North Korea near Japan’s Exclusive Economic Zone (EEZ). The US Dollar Index (DXY) has surrendered its entire gains added in the Asian session and is looking to continue its downside journey ahead. Meanwhile, the risk appetite theme has regained traction, which is supporting the risk-perceived assets. S&P500 futures have turned volatile ahead of the market holiday on account of Presidents’ Day. People’s Bank of China maintains the status quo on interest rates The Australian Dollar remained in action after the People’s Bank of China (PBoC) kept its monetary policy unchanged. An interest rate decision of unchanged policy was widely anticipated as the Chinese economy is focusing on accelerating the economic recovery after remaining bound by pandemic controls. The People’s Bank of China has kept one-year and five-year Loan Prime Rates (LPR) unchanged at 3.65% and 4.30% respectively. It is worth noting that Australia is a leading trading partner of China and the continuation of expansionary monetary policy by the People’s Bank of China will strengthen the Australian Dollar ahead. Fresh concerns for higher US Inflation call for more rates by the Fed Last week, a majority of economic indicators cleared that it would be early for the Federal Reserve to announce a win in the battle against stubborn inflation as it is set to surprise the market ahead. The United States Consumer Price Index (CPI) landed higher at 6.4% than the projections of 6.2%, Producer Price Index (PPI) released at 6.0% higher than the consensus of 5.4%. And, the release of the monthly Retail Sales data at 3.0% against the consensus of 1.8% was the last nail in the coffin, which cleared that consumer spending is gaining traction. A note from Goldman Sachs states the investment banking firm expects the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market, as reported by Reuters. Spotlight shifts to Reserve Bank of Australia and Federal Reserve’s minutes This week, the release of the minutes from the Reserve Bank of Australia and Federal Reserve’s and Federal Reserve will lead from the front for the power-pack action in the Aussie asset. Federal Reserve policymakers are aware of the persistent nature of the US inflation, which is why hawkish guidance is expected on interest rates. The minutes from the Reserve Bank of Australia policy announced in the first week of February resulted in a ninth consecutive interest rate hike to 3.35%. Inflationary pressures in the Australian economy have not softened yet amid solid consumer spending, which is bolstering the case of hawkish guidance on the monetary policy. Later this week, Australia’s Labor Cost Index (Q4) data will remain in focus. The economic data is seen at 3.4% vs. the prior release of 3.1% on an annual basis. And, the quarterly data is seen lower at 0.7% against the prior release of 1.0%. AUD/USD technical outlook AUD/USD has negated the downside break of the Head and Shoulder chart pattern formed on a four-hour scale. The responsive buying active from the market participants has pushed the Aussie asset above the neckline of the aforementioned chart pattern plotted from January 10 low at 0.6860. The asset has scaled above the 20-period Exponential Moving Average (EMA) at 0.6888, which indicates that the short-term trend is bullish now. The Relative Strength Index (RSI) (14) has rebounded into the 40.00-60.00 range, which indicates that the asset is no more bearish now

Central banks are not to be envied in this cycle of monetary tightening! They have to choose between suppressing the highest inflation in decades and the danger of plunging their own economies into recession. What could be more difficult? Political pressure! The head of the Reserve Bank of Australia has faced unprecedented criticism for high rates. He is accused of intent to cause a recession and advised to choose his words when talking about continuing the cycle of monetary restriction. It is understandable that politicians are not happy with the high cost of borrowing, which limits credit, slows economic growth and creates problems in the labor market. Thus, in January, unemployment in Australia rose to an 8-month high of 3.7%, employers laid off 11,000 people, and the January figure was revised downward to -20,000. When justifying previous cash rate hikes, the RBA figured the strength of the labor market, but if scars from tighter monetary policy begin to appear, shouldn't the process be put on hold? Dynamics of Australian employment In fact, one report is unlikely to change the regulator's outlook. The central bank is doing the right thing, because Australian inflation is not slowing down. Under these conditions, it is necessary to continue the monetary restriction cycle. Yes, there is political pressure on Philip Lowe, but it can hardly be compared to Donald Trump's pressure on Jerome Powell. At one time, the former U.S. president called the Fed chairman America's enemy for his unwillingness to lower the federal funds rate. The central bank's independence is the key to continued monetary tightening, which is bullish for the AUDUSD. However, the main growth driver for the pair is the events in the global economy in general and China in particular. Read next: EY Will Review Darktrace Key Financial And Control Processes| FXMAG.COM Another liquidity injection by the People's Bank of China (PBoC) into the banking system worth 632 billion yuan indicates that the recovery of the Chinese economy after the lifting of the COVID restrictions is in full swing. Yes, the PBoC did not reduce key rates, but the local authorities have already done so for it, which in a directive order, obliged commercial banks to reduce mortgage rates. In fact, the PBoC should be thankful because monetary policy divergence could lead to a serious weakening of the yuan and capital outflows. It is crucial for Australia and its currency that its major trading partner gets better and is ready to provide half of the global GDP growth in 2023. The faster this process goes, the better for the AUDUSD bulls. Technically, a Wolfe wave reversal pattern formed on the daily chart of the analyzed pair. Its target is located near the level of 0.705. The formation of the pin bar with the long lower shadow is the evidence that the AUDUSD has found the bottom. As long as the Aussie is above $0.6886, it should be bought.   Relevance up to 11:00 2023-02-25 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335563

AUD/USD has shifted its auction profile below 0.6900 amid the risk-off mood. Federal Reserve policymakers have been citing it would be premature to consider a pause in the policy tightening spell this year. Reserve Bank of Australia also considered the option of a 50 bps rate hike as the Australian inflation has not peaked yet. AUD/USD has confidently shifted above the neckline of the Head and Shoulder formation, indicating a bullish reversal. AUD/USD has surrendered the round-level support of 0.6900 in the early European session as investors getting worried that higher interest rates by western central banks are getting nightmares for the producers. The market sentiment is turning risk-averse ahead of the opening of the United States markets after a long weekend. S&P500 futures have extended their losses as the renewal of higher inflation projections after a significant jump in US Retail Sales has triggered fears of more rate hikes beyond March. The US Dollar Index (DXY) is making deliberate efforts in shifting its auction profile above 103.70. The recovery move by the USD Index in the Asian session was higher confident, however, further range extension is facing pressure. This week, the show-stopper will be the release of the Federal Open Market Committee (FOMC) minutes, which will release on Wednesday. Investors are expecting a sheer hawkish stance on the interest rate guidance as Federal Reserve (Fed) policymakers have been citing it would be premature considering a pause in the policy tightening spell this year. This has trimmed demand for US government bonds. Lower demand for government bonds has propelled the 10-year yields above 3.85%. Hawkish Reserve Bank of Australia minutes fail to support the Australian Dollar It was widely anticipated that Reserve Bank of Australia Governor Philip Lowe and his mates would be advocating for more interest rate hikes as Australian inflation is critically stubborn. The Australian Consumer Price Index (CPI) has refreshed its multi-decade of 7.8% and is showing no signs of softening ahead in spite of the fact that the Official Cash Rate (OCR) has been already pushed to 3.35%. The message from the RBA minutes was clear that more interest rates are warranted as strong consumer demand is not allowing Australian inflation to soften from its peak. According to the RBA minutes, policymakers also considered the option of 50 basis points (bps) interest rate hike considering the persistence of inflation. The RBA members also highlighted that the Unemployment Rate is the lowest in the past 50 years and job vacancies are extremely high, which is delighting households for flushing surplus funds into the economy. Aussie PMI is out, US PMI is due yet Apart from the hawkish RBA minutes, upbeat preliminary Australian S&P PMI (Feb) data has also failed to strengthen the Australian Dollar. The Manufacturing PMI landed at 50.1, higher than the consensus of 49.9 and the former release of 50.0. The Services PMI scaled firmly to 49.2 versus the estimates of 48.4 and the prior release of 48.6. Economic activities in the Australian economy are accelerating despite higher interest rates by the Reserve Bank of Australia, which indicates that consumer demand is extremely robust. In Tuesday’s New York session, preliminary US S&P PMI numbers will be keenly watched. The Manufacturing PMI (Feb) is seen lower at 46.8 vs. the prior release of 46.9. And the Services PMI is seen at 46.6 against the former release of 46.8. There is no denying the fact that producers have trimmed their dependency on borrowings from commercial banks due to higher interest rates by the Federal Reserve. And are exploiting their retained earnings to avoid higher interest obligations. Firms have postponed their expansion plans, therefore, a continuation of contraction in economic activities is highly expected. FOMC minutes to guide further movement to the FX market ahead The minutes from the Federal Reserve will provide a detailed explanation of hiking interest rates by 25 basis points (bps) in the February monetary policy meeting. The street always tries to remain ahead of the Federal Reserve (Fed) policymakers. Therefore, the major focal point for investors in the Federal Open Market Committee (FOMC) minutes is the meaningful cues that could provide guidance on interest rates. Information on the terminal rate and targets for inflation will be keenly watched. AUD/USD technical outlook AUD/USD has shifted its business above the neckline of the Head and Shoulder chart pattern plotted from January 10 low at 0.6860 on a four-hour scale. The responsive buying action from the market participants negated the downside break of the above-mentioned chart pattern. The 20-period Exponential Moving Average (EMA) at 0.6900 is acting as a cushion for the Australian Dollar. The Relative Strength Index (RSI) (14) has rebounded into the 40.00-60.00 range, which indicates a bullish reversal. A break into the bullish range of 60.00-80.00 will trigger the bullish momentum.

Chinese equities were boosted on Monday by a report from Goldman Sachs predicting that the MSCI China index could rally as much as 24% by the end of the year. BHP And mining stocks hope they are right because BHP announced a 32% drop in half-year profit as a result of rising costs and soft commodity prices, mostly hit by subdued activity in China. However, rising commodity prices is a scenario of catastrophe for global inflation, and the central bank expectations. The RBA The latest minutes from the Reserve Bank of Australia (RBA) showed that the Australian policymakers considered a 50bp hike at the latest meeting, before agreeing on a 25bp hike. Oil For now, though, oil bears defy all news of Chinese reopening. Yesterday’s rebound in US crude remained capped into the 50-DMA, a touch below the $78pb mark. Meta In the corporate space, Facebook’s Meta announced a plan to roll out paid subscriptions to compensate for the revenue loss from advertisements – which topped $10 billion last year after Apple changed its security settings. Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM The latter could give some boost to the revenues in the short run but it’s certainly a sign that Facebook is running out of ideas, and that’s not good for the longer-run perspective! Watch the full episode to find out more! 0:00 Intro 0:42 Chinese equities rally as Goldman predicts 24% rally this year 3:16 BHP hopes Chinese reopening will boost energy, commodity prices 4:02 But higher energy prices is bad news for most stocks 4:22 … and for central bank doves! 5:26 BoFA & JP Morgan bet against European stocks 6:38 Meta is like watching trainwreck in slow motion Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Facebook #Instagram #Meta #verified #account #China #stock #rally #commodity #energy #prices #crude #oil #BHP #earnings #inflation #RBA #Fed #expectations #AUD #USD #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

It hasn’t been the most thrilling start to the week but the good news is that it should improve from here as the US rejoins and the economic calendar fills out. We were basically treading water on Monday which is often the case on a US bank holiday. The fact that the calendar was as thin as it was elsewhere naturally doesn’t help and it may be no bad thing either. We’ve become so accustomed to relentless action in the markets this past year in particular that a day of calm can be a good thing. But don’t expect it to last. This week may not be as all-action as others we’ve experienced this month but there is still plenty for investors to get their teeth stuck into. Today is littered with economic releases throughout, with the PMIs being a key feature of that. At a time of such uncertainty over inflation, interest rates, and the economy, these forward-looking business surveys carry extra weight. And what’s more, they’re expected to show businesses are becoming less pessimistic which would be a small win but a win nonetheless. That said, the Japanese manufacturing PMI was expected to do just that and instead dipped much further into contraction territory. The decline was driven by lower output, new orders, and new export orders; once again indicating waning global demand and trade. The services survey was much better but that is being driven by improved tourism as restrictions were removed, and government support. All in all, there are more concerning signs than promising ones. Unnerved The RBA minutes from earlier this month highlighted how unnerved policymakers are by recent inflation developments, with a pause in tightening not even discussed despite that at one stage appearing to be where the central bank was heading. In fact, the debate centered around whether there was a need to accelerate the hiking cycle which may unsettle investors that have become more relaxed on the belief that the end is near. The message, often not heard, from policymakers around the world has consistently been that there’s more to do and that rates may need to stay higher for longer but investors have not always been receptive to that. That seems to be changing and a 50-basis point hike would have very much driven that home but the RBA instead opted for 25 this time, backed by the belief that monthly meetings allow for a more gradual exit. ​ Can bitcoin overcome major resistance? There is no shortage of optimism in bitcoin this year and it’s continuing to push higher again today. The cryptocurrency is trading close to $25,000, a huge test considering the scale of recovery we’ve seen in the last seven weeks. The region around $24,500-$25,500 was big on the way down so it will be a big psychological test this time around, too. But with bitcoin up around 50% already this year, you have to wonder how much further it can go. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Australian dollar is in negative territory on Tuesday. In European trade, AUD/USD is trading at 0.6876, down 0.50%. RBA minutes indicate concern over inflation The Reserve Bank of Australia keeps getting in the way of the Australian dollar. RBA Governor Lowe appeared before a parliamentary committee last Wednesday and confirmed that further rate hikes were on the way as inflation was still unacceptably high. The Aussie responded by dropping 1.1%. The RBA minutes were released today and members expressed concern at the upside risk to inflation, noting that there was “more breadth and persistence” in inflation. The hawkish tone of the minutes has boosted rate-hike bets but the Australian dollar remains under pressure over concerns that the RBA is having trouble getting a handle on inflation, despite its aggressive rate-tightening cycle. Again, the Aussie has responded with losses. How much higher will interest rates go? That will depend to a large extent on upcoming data, starting with Wednesday’s Wage Price Index for Q4. Wages are expected to have climbed 3.5% y/y in Q4, up from 3.1% and the highest level since September 2012. Wages are an important driver of inflation and higher wages will make it more difficult for the Bank to curb inflation. The RBA minutes also indicated that members debated whether to raise rates by 25 or 50 basis points. Ultimately, the RBA opted for a modest 25-bp increase, which brought the cash rate to 3.35%. The money markets are projecting a terminal cash rate of 4.25% by August, which means that the RBA will likely be busy in the coming months. We’ll also hear from the Federal Reserve on Wednesday, with the release of the minutes from the February meeting. The Fed didn’t have any surprises and raised rates by 25 basis points. The markets will be looking to see how close the Fed was to hiking by 50 basis points. If the rate decision was a close call, the US dollar could continue to rally. Read next: The Pound Gained After The Publication Of PMI Reports, Euro Is Below 1.07, USD/JPY Pair Is Above 134.50| FXMAG.COM AUD/USD Technical AUD/USD is testing support at 0.6907. Below, there is support at 0.6784 There is resistance at 0.7001 and 0.7124 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Extra caution is creeping back into markets, with geopolitical tensions picking up, and hotter than expected economic prints, with swaps now expecting the Fed to hike rates at the March, May and June meetings. Sentiment was also weighed by downbeat outlooks from Walmart and Home Depot. On a weekly chart, the S&P500 fell under its 50 day moving average indicating traders could exercise risk-off trading ahead. Australian listed Domino’s Pizza reported weaker than expected numbers and a soggy outlook, sending its shares down 20%, which will likely impact Domino’s shares listed globally. FOMC minutes and Rio results ahead. The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) fell ~2% while bond yields rose to new 2023 highs  The risk off tone was set by geopolitical tensions picking up -  as well as economic prints showing the US services and manufacturing PMIs improved more than expected – with swaps now projecting the Fed can keep pushing rates higher — with the market indicating 25-basis-point hikes are coming at the March, May and June meetings.  Sentiment was also weighed by downbeat outlooks from consumer spending bellwethers – Walmart (WMT) and Home Depot (HD). All while investors await Wednesday's Fed minutes release. Also ahead are earnings results from mining giant Rio Tinto (RIO), tourism and casino giant Ceazers Entertainment (CZR) and smartwatch and gadget business Garmin (GRMN). The three major indices shed at least 2%, with the Dow erasing 2023’s gains. On the weekly chart - the S&P500’s fell below its 50-day moving average –indicating there are more sellers than buyers – while also possibly indicating the market could potentially pull back. Pressuring sentiment - bond yields hit new 2023 cycle highs - with the 10-year note up 14 bps, while the dollar strengthened. Australia equities (ASXSP200.I) also seem pressured by the RBA’s fresh hawkishness  The Australian share market has fallen about 3.5% from its new cycle high that it hit on Feb 3. Pressure on the ASX200 comes after the RBA indicated it has more work to do to keep inflation and wage pressure in order. The ASX200 now appears to be pulling back, with Saxo’s Technical Analyst reinforcing the technical indicators suggest the ASX200 could drop further. However, if the ASX200 closes above 7,477, the uptrend can resume. Today, Origin Energy (ORG) is the best performer in large caps, up 13% after receiving a revised takeover offer from the Brookfield Asset Management-led group following months of due diligence. Meanwhile Domino’s (DMP) is the worst performer down 21% on reporting weaker than expected half year results. Meanwhile, BHP (BHP) shares are steady after reporting a stronger outlook yesterday. For more on BHP’s expectations for stronger fundamentals this and next year click here – also note BHP remains in a technical uptrend. Pizza chain Domino’s Pizza reports weaker than expected earnings amid inflationary pressures In the Australia session today, Domino’s reported underlying EBIT fell 21% Y/Y to A$113.9 million in the HY - with sales growth coming in weaker than expected and inflation also affecting earnings. Its European operations faced significant geopolitical disruptions, and the highest inflation levels across its business- while Asian sales were materially stronger than pre-Covid- but EBIT was lower. All in all, Domino’s financial metrics were down Y/Y, except its store count rose 16% Y/Y to 3,736 stores. The company also cut its half year dividend to A$0.674 per share. As for its - outlook that also disappointed -  as customer counts have not met expectations since December - especially in Europe and Asia  - which is lowering store profitability. New store openings will continue to grow in FY23 - but could be below Domino’s medium-term outlook for +8-10% growth. This implies there is less franchisee demand to open stores. That said, management is confident it will return to positive same store sales growth once customer demand increases. Domino’s Pizza (DMP) shares in gapped down in Australia , erasing 2023’s gains – taking DMP to A$57.97 – November 2022 levels. We will also be watching Domino’s in the US – DPZ, as well the London listed business – DOM.  To listen to our global team's take on markets - tune into our Podcast.     Source: Financial Insights: S&P500 falls below 50-day simple moving average on market pricing in more hikes. Domino's Pizza shares sliced | Saxo Group (home.saxo)

Summary:  Equity markets took it on the chin yesterday, dropping to a new 1-month low on the close and below the bottled-up range of the last few weeks as a fresh lift in the entire US yield curve weighed on sentiment. The S&P 500 Index closed just below the psychologically pivotal 4,000 level and the 200-day moving average lies a percent and a half lower. European equity markets have yet to show signs of contagion, but yields are steadily applying pressure there as well. What is our trading focus? US equities (US500.I and USNAS100.I): wage pressures and inflation pressures haunting again US equity futures moved big yesterday as the US 10-year yield hit 3.95%, the highest level since November, with S&P 500 futures declining 2% closing at 4,005 putting the 4,000 level into as play as we have highlighted for week. If S&P 500 futures decline below the 4,000 level, then the 200-day moving average at the 3,981 level will quickly be tested. Home Depot earnings release was received very negatively by the market sending its shares down 7% as the home improvement retailer indicates that the wage pressures are still excessive. This could accelerate the margin compression theme in equities when the Q1 earnings are out in April and May. FX: USD rebounds as US treasury yields lift to new highs The US dollar was modestly higher as US 10-year yields reached a YTD high and in close sight of the key 4% mark, closing at 3.95%. Higher-than-expected preliminary February PMIs in the US further faded recession concerns, bringing the market expectations of Fed terminal rate to a new high of 5.37%. The USD has also perhaps founds support from escalating geopolitical tensions as Putin suspended the Nuke deal with the US. GBP was the outperformer after very strong UK Flash Feb. PMIs (more belowø). GBPUSD touched highs of 1.2147 from 1.1987 before pulling back. AUDUSD was hurt by falling risk sentiment despite hawkish RBA minutes out yesterday and fell toward the range lows in the low 0.6800’s overnight, with the 200-day moving average a bit lower still. AUDNZD reversed sharply lower on the RBNZ’s surprisingly hawkish turn (more below). FOMC Minutes tonight in focus for the US dollar. Crude oil (CLJ3 & LCOJ3) still pressured lower Crude oil prices dipped further with dollar strength in play as the expectations of rate hikes from the Fed continued to ramp up. WTI crude traded close to $76/barrel while Brent was below $83. Geopolitical concerns still running high this week, potentially providing a floor to oil prices. Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere. Gold (XAUUSD) soft as maximum pressure applied by USD and yields Gold is slightly softer but holding up reasonably well, given the pressure from the stronger US dollar and US treasury yields rising to new highs for the cycle. The support zone below the recent lows is critical for the status of the trend in gold, as 1,800-1,810 was pivotal on the way up, and the 200-day moving average looms below at 1,776. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) lift to new cycle high US Treasury yields lifted to new cycle highs all along the curve as the Fed is priced to reach a terminal rate near 5.35% this year now (so effectively three further 25 basis point rate hikes expected from the Fed this year. A two-year auction was middle of the range in terms of bidding metrics, but well below the strong prior auction. The 10-year yield nudged higher to 3.95% yesterday, a new high since November of last year. A 5-year T-note auction is up today, and 7-year auction tomorrow. What is going on? Strong UK Services PMI not cooperating with the recession playbook The preliminary UK February PMI’s were released yesterday and suggest solid expansion in the UK’s Services sector, sparking a strong 17 basis-point surge in 2-year UK rates on the implications for further Bank of England tightening. The February reading for the services sector was 53.3 versus 49.2 expected and 48.7 in January, while the Manufacturing PMI reading was 49.2 versus 47.5 expected and 47.0 in January. More green shorts in the EZ data but… The EZ February PMIs are quite good at first glance. The French PMI composite was out at 51.6 versus prior 49.1 – this is a 7-month high and the first expansion above the 50 thresholds since October 2022. The German PMI composite is in the expansion zone too (at 51.1). But if we dig beneath the surface, this is not as good as expected. In France, the PMI report contains a warning about new export orders: “Overall, this marked a twelfth successive monthly decline in new export orders. Notably, manufacturers recorded the steepest slump since the first COVID-19 lockdown period in the first half of 2020”. We see a similar weakness in German data with a stagnation of exports to non-EU countries in January. Basically, in both cases, the order book and the manufacturing side look challenged while the services are the main drivers of the PMI composite. We still expect the eurozone will avoid a recession this year. Earnings recap: Walmart, Home Depot Despite beating against earnings estimates, Walmart’s profit forecast for this year fell short of analyst estimates and a cautious outlook suggested a lingering impact from the inventory build-up of last year as well as shifting consumer demand patterns considering the higher inflation and interest rates. Walmart shares recovered after gapping lower and closed higher for the session. It was a different story for home improvement retailer Home Depot, which missed expectations and gave a dull operating margin guidance – expecting FY operating margin at around 14.5% due to the extra wage costs, compared to an estimate of 15.1%. Home Depot shares plunge to close almost 7% lower and below the 200-day moving average. The results send a warning for other retailers like Target and Lowe’s due to report on March 1. Domino’s Pizza Enterprises crushed 23% in Australia after reporting earnings Dominos Pizza Enterprises is the Australian based franchise owner of Domino’s Pizza in Australia, New Zealand, Japan, Taiwan and several European countries. Its EBIT fell 21% Y/Y to A$113.9 million in the HY, with sales growth coming in weaker than expected as customers turned away from its higher prices. European operations faced significant geopolitical disruptions and were hit by the highest inflation levels across its business. Asian sales were materially stronger than pre-Covid - but its EBIT was lower. Guidance was weak and it cut its half-year dividend to A$0.674 per share. Domino’s Pizza shares fell 23% to A$54.71, which erased 2023’s gains. Australian wage growth comes in below expectations, AUD weaker Australian wage growth rose 3.3% YoY in Q4, slightly below the 3.5% expected and seen raising few new alarm bells at the RBA after evidence of a more precautionary hawkish shift recently. Construction data was weak in the quarter at –0.4% QoQ vs. +1.5% expected, but the Q3 data was revised up to 3.7% from 2.2%. Australian 2-year yields dropped 10 basis points, with money markets pricing a peak rate near 4.2% in August 2023. AUD weakened overnight, reversing back below 1.1000 in AUDNZD terms on a hawkish RBNZ meeting, while AUDUSD is heavy ahead of the range lows near 0.6800, with the 200-day moving average looming slightly lower still.  The next data the RBA will look at - will be next week’s release of retail sales, private sector credit and net exports of GDP.  RBNZ surprises hawkish, reaffirms expected terminal rate of 5.5% The RBNZ hiked the rate 50 basis points to take the policy rate to 4.75% and reaffirmed a forecast for the peak policy rate to reach 5.5%,  if over a longer period than previously. With recent disastrous floods raising expectations that the RBNZ might go with a smaller hike or no hike at all, this decision read hawkish and NZD sjumped versus the AUD and was somewhat resilient against the firmer US dollar. What are we watching next? FOMC minutes on tap today The minutes of the February 1st Fed meeting will be out later today (3am SGT), and will be key for the cues on inflation expectations and terminal rate forecasts as a gauge for what to expect in the dot plot in March. Still, the hotter than expected inflation print for January (both CPI and PPI) were released after the FOMC meeting and that has shifted the narrative to a hawkish. The criteria for a pause may be on the lookout, and whether that is any push to driving the market’s rate cut expectations further out. Earnings to watch Today’s key earnings release is Nvidia reporting FY23 Q4 earnings (ending 31 Jan) after the US market close with analysts expecting revenue of $6bn down 21% y/y and EPS of $0.81 down 32% y/y. With cryptocurrencies rallying lately there might be an upside surprise in the outlook as crypto mining activity might have increased the demand for GPUs. Wednesday: Rio Tinto, Genmab, Danone, Lloyds Banking Group, Iberdrola, Nvidia, TJX, Stellantis, Baidu, eBay Thursday: EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems Friday: BASF, Monster Beverage Economic calendar highlights for today (times GMT) 0800 – Sweden Riksbank Governor Thedeen to speak 0900 – Germany Feb. IFO Business Climate Survey 1800 – US 5-year US T-note auction 1900 – US FOMC Minutes 1910 – New Zealand Governor before parliament committee 2130 – API's Weekly Crude and Fuel Stock Report 2230 – US Fed’s Williams (Voter) to speak on inflation   Source: Financial Markets Today: Quick Take – February 22, 2023 | Saxo Group (home.saxo)

The AUD/USD currency pair continues to decline steadily, despite hawkish signals from the Reserve Bank of Australia. The minutes of the RBA's February meeting, published yesterday, reflected the strong attitude of the regulator's members, who expressed their willingness to raise the interest rate within the next few months. The central bank refuted circulating rumors of a possible pause. But AUD/USD traders actually ignored this message: the aussie continues to follow the greenback, which, in turn, continues to strengthen its position across the market. What the RBA minutes say The AUD/USD pair was under pressure a few weeks ago after the release of key data on the growth of the Australian labor market in January. The data turned out to be weak in all respects: the unemployment rate rose to 3.7%, and the increase in the number of employed again turned out to be in the negative area. With a growth forecast of 20,000, a decrease of 11,500 was recorded. The negative dynamics of this indicator was due solely to the decline in full-time employment, while the part-time employment indicator, on the contrary, showed a strong growth. Note that the December Australian non-farm report also reflected the worsening situation in the labor market, so many analysts assumed that the minutes of the February meeting of the RBA would be dovish, even despite the growth of inflation indicators (consumer price index in Q4 unexpectedly exceeded forecast values). But the document published yesterday was clearly hawkish. In particular, the text of the minutes indicated that the Governing Council was considering a 25 or 50 basis point rate hike in February. The option of a pause was not considered at all. Recall that the RBA slowed down the pace of tightening of the monetary policy (up to 25 points) as far back as last autumn, that's why the announced option of a 50-point hike, which was "on the table" of the members of the regulator, demonstrates the hawkish attitude of the central bank. It signals that the RBA is considering two scenarios: either the central bank maintains the current pace or doubles down on the effort, returning to a 50-point rate of increase. That said, the minutes indicate that the further pace and duration of monetary tightening will "depend directly on incoming data and the Board's assessment of the inflation and labor market outlook." This is a rather streamlined phrase, which suggests that the RBA has "tied" its further decisions to the dynamics of inflation growth. In general, the document released yesterday reflected the intention of the RBA to raise the rate not only in March, but also in May (it is too early to talk about further prospects). At the same time, judging by the text of the February minutes, the central bank is considering two options: raising the rate by 25 points or by 50. Thus, the central bank de facto ruled out the option of a possible pause and guaranteed the maintenance of a hawkish rate at least until the end of the spring. Such hawkish attitude should promote the development of the upward trend. However, the aussie has received support from the RBA at a time when the greenback is gaining momentum across the market. Waiting for Fed minutes At the end of the U.S. session on Wednesday, another important document will be released: the minutes of the Fed's February meeting. The hawkish tone of this document may provide additional support to the U.S. dollar, which already feels quite confident against the background of strong non-farm payrolls and the combative mood of many representatives of the Federal Reserve. For example, one of the most influential members of the Fed—New York Fed President John Williams—has repeatedly stated that the regulator is likely to raise the rate to 5.5% (previously, the final level was assumed at 5.1%). At the same time, he urged the Fed to keep the rate at a high level "for several years." In one form or another, the hawkish position was voiced by other representatives of the Fed. The general essence of the voiced messages is that the regulator "has a lot of work to do" to control inflation. Conclusions The apathetic reaction of AUD/USD traders to the hawkish minutes of the RBA suggests that the Aussie is trading in the wake of the U.S. currency. The U.S. dollar, in turn, enjoys support from the Fed, whose representatives have tightened their rhetoric in response to a slowdown in inflation. Such a fundamental background contributes to the further development of the downward trend. Technically, the pair on the daily chart has overcome the 0.6850 support level (upper boundary of the Kumo cloud on D1) and is currently falling towards the bottom of the 68th figure. The next price barrier, which acts as the nearest target for the downward movement, is 0.6770. The main target of the downward trend is the level of 0.6720 (the lower boundary of the Kumo cloud on the same timeframe)   Relevance up to 10:00 2023-02-23 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335794

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

Australia's GDP and inflation both come in below expectations. Upcoming, China and other Asian PMI reports and Indonesia's inflation  - a busy day in Asia Source: shutterstock Global Macro and Markets Global Markets: Further uncertainty plagued equity markets yesterday. Both the S&P 500 and NASDAQ did trade up during the session but failed to hold on to gains and both ended slightly down from the previous day’s close. Chinese equities were mixed, with the Hang Seng making a 0.79% decline, while the CSI 300 pushed up 0.63%. US Treasury yields reversed the previous day's declines and the 2Y yield rose 3.8bp, while the 10Y was basically unchanged at 3.92%, though was as high as 3.98% at one stage. The USD is a bit stronger than this time yesterday, trading at 1.0578 against the EUR currently, though it was also a choppy session, and it rose above 1.064 before retreating. The AUD has also been very choppy, but currently is a bit down on this time yesterday, at 0.6732, and it is a similar story for most of the G-10 currencies. Big on volatility, but low on direction. That just about sums up the Asian FX group, where, with the exception of the THB, which lost 0.69% yesterday, and the PHP, which gained 0.36%, most of the other currencies lie pretty close to where they were a day ago. G-7 Macro: Disappointing French and Spanish inflation data yesterday has encouraged thoughts of a 4% refi rate from the ECB and we get some additional German CPI inflation numbers today that could cement these thoughts. US Conference Board data showed confidence weakening from the previous month. The manufacturing ISM index later today is a timely reminder that payrolls is looming, though due to the shortness of the last month, will not be released until next Friday. Considering what payrolls did to markets last month, it is no wonder markets are a bit jittery. Australia: 4Q22 GDP came in a lot weaker than had been expected rising just 0.5%QoQ, though thanks to upwards revisions to previous data, the year-on-year rate managed 2.7% as expected. We have also had January 2023 CPI inflation data. And that too came in softer than expected, at 7.4%YoY, after last month's surprise surge to 8.4%.  India: India delivered 4.4% YoY growth in 4Q22, which equates to a 6.7% YoY growth rate for 2022 as a whole. The release also shows growth momentum remaining strong as India heads into 2023, and we anticipate another 6%+ growth figure this year. China: Official PMI data for February help fill the data vacuum of the Lunar New Year period until we get the next hard data releases in a couple of weeks. We are expecting the PMIs to support a view of a modest recovery in February after a stronger January.   Indonesia:  Inflation is set for release today.  The market consensus points to inflation ticking higher to 5.4%YoY (from 5.3%) although core inflation could inch lower to 3.2% (from 3.3%).  Bank Indonesia recently declared victory in the inflation fight, keeping policy rates untouched at the last policy meeting.  With BI indicating it would not be hiking rates anymore this year, the IDR is expected to come under additional depreciation pressure.  What to look out for: China manufacturing and non-manufacturing PMI China PMI and Caixin PMI (1 March) Indonesia CPI inflation (1 March) US ISM (1 March) South Korea industrial production (2 March) Hong Kong retail sales (2 March) US initial jobless claims (2 March) Japan Tokyo CPI inflation and Jibun PMI services (3 March) China Caixin PMI services (3 March) Singapore retail sales (3 March) US ISM services (3 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

A double whammy of slowing growth and moderating inflation, but it won't be enough to get the central bank to pause next week Governor of the Reserve Bank of Australia, Philip Lowe 0.5% 4Q22 GDP growth QoQ sa Lower than expected 4Q22 GDP growth slows, and looks like it will slow further Despite some stronger private investment data earlier in the week, which led to the consensus of forecasters revising up their expectations for today's GDP release, the published growth figure actually came in quite a bit weaker than the 0.8% quarter-on-quarter expectation, growing only 0.5% from the previous three months.  Following some slightly softer monthly labour reports, is this finally conclusive evidence that the economy is slowing? It certainly looks that way.  Contribution to QoQ GDP Growth Source: CEIC, ING Consumer spending falling, inventories rising To work out what exactly is going on, we've calculated the contributions to quarter-on-quarter seasonally adjusted GDP growth broken down into some of its main constituents, to see what is weakening, and what is holding up better, and compared this over the last three quarters.  When you do this, you see that the total GDP growth rate has declined at a very steady pace over the last few quarters. Much of that decline can be laid at the feet of private consumption, the growth rate of which has dropped steadily over this period. Helping to pull the total down this quarter, net exports were also a drag.  Somewhat worryingly, the fourth quarter GDP growth total would have been closer to zero had it not been for some inventory building, some of which will probably prove to have been involuntary, and will reverse in the coming quarters.  So in short, it does look as if there is more to this than just some statistical noise, and we could be looking at a sub 0.5% QoQ figure for the first quarter. Inflation falls are broadly spread Source: CEIC, ING Inflation also fell sharply January inflation also dropped sharply following its surge higher in December, dropping to 7.4%, a full percentage point below the December figure.  We have performed a similar breakdown of the inflation numbers to see what is driving this result, and what we find is very different to the GDP numbers.  Whereas the GDP figures appear to have some obvious drivers for the latest weakness, this is much less apparent in inflation, where the contributions to inflation have remained very steady, but slightly weaker across a wide range of components. Even the reversal of the big surge in holiday prices, which helped lift the inflation rate in December, had a relatively modest impact on the inflation rate in January. The recreation sub-component which encompasses holiday travel dropped back 0.3pp in terms of its overall contribution to the inflation total. Accounting for the rest of the drop in today's inflation rate, were small declines across a wide range of items.  That actually sounds like a more solid slowdown in inflation than if it were just the result of, say, food price swings or gasoline costs for example. And indeed, the inflation rate excluding volatile items fell to 7.2% from 8.1%, suggesting that this was a fairly broad-based, though at this stage, modest, decline in core inflation.  Should the RBA take notice? Combined with the GDP numbers, these latest inflation figures may prompt thoughts of a different tack by the Reserve Bank of Australia, coming just a week before its next rate-setting meeting. However, we think this would be a bit premature. And financial markets seem to agree.  For one thing, the inflation rate, though sharply down, remains well above 7%, a rate that hardly indicates a pause is likely anytime soon. Moreover, today's drop in inflation, though broad-based, only reverses last month's spike, so we really aren't any better off yet, even if the signs for further declines are a little more promising. And finally, the RBA at its last rate-setting meeting provided very strong forward guidance that suggested inflation would not return to its 2-3% target range until 2025. This is a forecast we completely disagree with, but that is irrelevant to the fact that the RBA will want to maintain its hawkish credentials right up until the point that either the market calls its bluff or policymakers drop the pretence and admit things are going better than they had predicted.  Markets have scaled back their expectations for RBA tightening following today's figures, and the implied peak rate from cash rate futures in October has dropped back to  4.182% from 4.275% the day before. But markets are still pricing in a much greater than 50% chance of a rate hike next week, and after some initial weakness, the Australian dollar has shrugged off the data and has appreciated for most of the day.  Read this article on THINK TagsReserve Bank of Australia RBA rate policy Australian inflation Australian economy AUD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

AUD/USD is struggling to extend recovery above 0.6760, upside looks favored amid the risk-on impulse. Federal Reserve might turn more hawkish if US ISM Manufacturing PMI delivers a surprise jump. A sense of relief has been observed by the Reserve Bank of Australia as inflation has softened significantly. AUD/USD looks failing to turn bullish despite a responsive buying move amid an Inverted Flag formation. AUD/USD has stretched its V-shape recovery move above to near the 0.6760 resistance in the early European session. The Aussie asset witnessed a sell-off in the Asian session after the release of the downbeat Australian Gross Domestic Product (GDP) and a sheer decline in the monthly Consumer Price Index (CPI). The downside bias in the Australian Dollar faded after the release of the upbeat Caixin Manufacturing PMI data, which infused fresh blood into the Aussie and resulted in a V-shape recovery. S&P500 futures have turned positive after recovering significant losses posted in the Tokyo session, portraying a sheer recovery in the risk appetite theme. The US Dollar Index (DXY) has refreshed its day low below 104.47 as investors have ignored the uncertainty associated with hawkish Federal Reserve (Fed) bets. Also, the safe-haven assets are struggling to find a cushion as investors have underpinned the risk-on mood. Contrary to the positive market sentiment, the return offered on the 10-year US Treasury bonds looks still solid around 3.94%. RBA senses relief as Australian Inflation softens and GDP trims Investors dumped the Australian Dollar in the Asian session after the Australian Bureau of Statistics reported significantly lower monthly Consumer Price Index (CPI) figures than anticipation. The monthly Consumer Price Index (CPI) (Jan) dropped significantly to 7.4% from the expectations of 8.0% and the prior release of 8.4%. A mammoth decline in the inflation data is going to provide a big relief to Reserve Bank of Australia (RBA) policymakers. The Reserve Bank of Australia has been making efforts in bringing down inflationary pressures by the continuation of policy tightening. Reserve Bank of Australia Governor Philip Lowe has already pushed its Official Cash Rate (OCR) to 3.35% in order to tame the stubborn inflation. And, more rates must be in pipeline to achieve price stability sooner. Apart from the monthly CPI, Australian Gross Domestic Product (GDP) (Q4) has dropped to 0.5% from the consensus of 0.8% and Q3 figure of 0.6%. On an annualized basis, the GDP has remained in line with expectations at 2.7%. A decline in GDP numbers also showcases lower demand from households, which will trim inflation projections ahead as producers will be forced to scale down the prices of their offerings. Upbeat Caixin Manufacturing PMI strengthens the Australian Dollar It was widely anticipated that China’s manufacturing sector will outperform after the rollback of strict lockdown measures. Chinese administration and the People’s Bank of China (PBoC) are dedicated to spurring economic recovery by improving domestic demand. The IHS Markit reported the Caixin Manufacturing PMI data at 51.6, higher than the expectations of 50.2 and the former release of 49.2. Apart from that, China’s National Bureau of Statistics (NBS) Manufacturing PMI (Feb) landed higher at 52.6 vs. the consensus of 50.5 and the prior release of 50.1. The Services Manufacturing PMI exploded to 56.3 against 54.4 released in January while the street was anticipating a downbeat figure at 49.7. It is worth noting that Australia is the leading trading partner of China and a sharp recovery in the Chinese economy is also supportive of the Australian Dollar. ISM Manufacturing PMI- the next trigger for the US Dollar The street is awaiting the release of the United States Institute of Supply Management (ISM) Manufacturing PMI data. As per the consensus, the economic data is seen at 48.0 from the former release of 47.4. Apart from that, the New Orders Index that conveys forward demand is expected to rebound to 43.7 from the prior figure of 42.5. It is worth noting that the Manufacturing PMI is in a contraction phase consecutively for the past three months. A figure below 50.0 is considered as a contraction in the extent of activities. Federal Reserve policymakers are expected to keenly watch the PMI figures as a surprise upside could strengthen the expectations of more hikes ahead. AUD/USD technical outlook Despite a responsive buying action near the round-level support of 0.6700, the outlook for AUD/USD looks gloomy as the asset is forming an Inverted Flag chart pattern. The chart pattern indicates a sheer consolidation that is followed by a breakdown. Usually, the consolidation phase of the chart pattern serves as an inventory adjustment in which those participants initiate shorts, which prefer to enter an auction after the establishment of a bearish bias. The 100-period Exponential Moving Average (EMA) around 0.6760 is acting as a barricade for the Aussie bulls. Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, indicating a consolidation ahead

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

The Australian dollar is showing strong gains for the first time in a week. AUD/USD is trading at 0.6764 in Europe, up 0.53%. Australia’s inflation eases Australia’s inflation fell to 7.4% in January, down from 8.4% in December and below the estimate of 8.0%. Australian Treasurer Jim Chalmers said that he was “cautiously hopeful” that inflation has peaked, but inflation still remained the economy’s biggest challenge. The GDP report was not as positive, with a gain of 0.5% q/q in Q4, below the Q3 gain of 0.7% and the forecast of 0.8%. On an annualized basis, GDP slowed to 2.7% in Q4, down sharply from 5.9% in the third quarter. The RBA’s rate-hike cycle has slowed economic activity and is responsible for the drop in inflation as well as the soft GDP. The central bank will have to consider how aggressive it should be with regard to future rate increases. Inflation needs to come down much further, but further rate hikes raise the risk of the economy tipping into a recession. The RBA is expected to raise rates by 25 basis points next week but may pause at the April meeting if the data, particularly inflation, allows the Bank to take to a breather. The Aussie received a boost today from strong Chinese PMIs. Manufacturing and Non-manufacturing PMIs improved in February and beat expectations, with readings of 52.6 and 56.3, respectively. A reading above 50.0 indicates expansion. China is Australia’s largest trading partner and a stronger Chinese economy means greater demand for Australian exports, which is bullish for the Australian dollar. China’s transition from zero-Covid to reopening the economy has gone well so far and a rebound in China is important not just for China and the region but for the global economy as well. Read next: Euro Is Rising, USD/JPY Falls Below 136.00, The Aussie Pair Also Gains| FXMAG.COM AUD/USD Technical AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The Reserve Bank of Australia (RBA) meeting will be the highlight for the week while several regional economies report inflation data Source: Shutterstock More confirmation needed before pausing rate hikes in Australia Following the larger-than-expected decline in January’s inflation figures, coupled with a slowdown in GDP growth in the fourth quarter, we expect that the upcoming RBA meeting is going to be much more interesting than has been the case recently. Although the January inflation rate had dropped a full percentage point, inflation still stands at 7.4% year-on-year – way higher than the RBA will be comfortable with. The RBA will want to see confirmation of a downward trend in inflation, not just a reversal of seasonal spikes to even consider pausing its current 25 basis point per meeting tightening strategy. The softer-than-expected 4Q22 GDP number was encouraging but we would need to see confirmation from other data to conclude that a slowdown is underway, and of a sufficient magnitude to see inflation fall back within the RBA’s 2-3% target range. Consumer prices expected to fall in Korea Consumer inflation is expected to fall to 4.9% in February (vs 5.2% in January). The recent increase in utility fees likely raised prices for eating out and manufactured products. On the other hand, gasoline prices continue to decline and the impact of the drop in jeonse prices (rental) is expected to appear in the index. Thus, we expect consumer prices to cool out gradually in February. Foreign reserves and trade data from China China will report its February foreign exchange reserves data next week. The weaker yuan should lead to some capital outflows for the month and a slight fall in foreign exchange reserves.  As capital flow channels have widened via stock and bond connects, capital movements in 2023 will be more reflective of exchange rate movements. China will also release international trade data for January and February. We expect the yearly contraction to continue for exports and imports in the first two months. Import growth should contract less than exports due to strong consumption demand in China. However, imports for processing trade should continue to be affected by slowing global demand. Trade data and CPI from Taiwan Taiwan will report trade data for February. Both exports and imports should continue to be in yearly contraction, around 15% to 20%. This reflects falling demand for semiconductor chips as global demand weakens. Meanwhile, Taiwan's CPI inflation should edge lower as the economy faces external demand headwinds that should have driven wage growth lower.  This trend should allow the central bank (the Central Bank of the Republic of China) to pause its rate hike cycle. The central bank will likely be watching the Fed fund rate movements closely. There is a possibility that the CBC could cut interest rates in the fourth quarter. Philippine inflation to sustain upward trend? Price pressures in the Philippines remain evident and we could see another month of elevated inflation. The January report caught many by surprise and we could be in for another upside surprise for headline inflation again. We expect headline inflation to be 8.7%YoY or higher as food inflation is still expected to be substantial. This should prompt another rate hike from the Bangko Sentral ng Pilipinas (BSP) at its March meeting although BSP Governor Felipe Medalla signalled his preference for only a 25bp rate hike given the supply-side nature of the price increases.   Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

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

Mortgage rates are expected to rise again for the 10th straight after the Reserve Bank board meeting on Tuesday. Interest rates The Reserve Bank has raised the official interest rate in the last nine consecutive meetings, raising the cash rate from 0.1 percent in early May last year to 3.35 percent after its first meeting this year in February. Financial markets and economists expect RBA Governor Philip Lowe to announce another quarter-point increase in the cash rate on Tuesday afternoon, while signaling even more rate hikes for the rest of the year. This means the Reserve Bank is poised to raise official interest rates to a new 10-year high of 3.6 per cent to quell cost-of-living pressures that have forced record numbers of Australians to hold multiple jobs to make ends meet. What's more, the March interest rate hike may not be the last one this year. The three major banks predict interest rates will receive three 0.25 percent increases in March, April and May. If the prediction comes true, Australia will face its highest cash exchange rate in 11 years. The main reason The reason the RBA is raising interest rates is to keep inflation under control. Inflation hit a three-decade high of 7.8 percent in December, well above the RBA's target rate of 2 to 3 percent. After the first monthly meeting in February, Dr. Lowe noted that further interest rate hikes may be needed to overcome inflation. Problems in the housing sector Declining levels of new mortgages and home approvals show that the RBA's aggressive monetary policy tightening is causing pain across the housing sector. Over the past week, the number of indicators suggesting problems in the housing market has increased. According to the Australian Bureau of Statistics (ABS), home loans fell 5.3% in January, after falling 4.3% in January. in December. Over the past 12 months, they have fallen by a record 35 percent. The number of first home buyers taking out a loan fell to its lowest level in five years. Loans to first-time buyers fell 8.1 percent in January after falling 4.1 percent in December. These loans are down 57.5 percent from their peak in early 2021 and are now 27.5 percent lower than their immediate pre-COVID level. The decline in lending contributes to a sharp decline in home approvals, which fell 27.6 percent in January. It was the largest monthly decline since at least 1979. If interest rates continue to rise to the projected peak of 4.1 percent, mortgage holders will be left with a very expensive bill. While the immediate future looks bleak, both economists and banks estimate the central bank could start cutting interest rates within a year. There are also signs that the job market is starting to cool down Job vacancies as measured by ABS fell to 440,100 in December, down 11.2 percent or 55,100 from September's level. There was also a decrease of 0.4%. percentage of job vacancies in the entire economy. The overall labor market remains tight, but data suggest people are struggling with cost of living pressures. The number of people working in multiple jobs increased by 1.7 percent to a record high of 925,000, with the percentage of people working in multiple jobs increasing to 6.8 percent of all employees. The highest number of people in positions are employed in the sectors of education and training, healthcare and administrative support.

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

Summary:  The US Treasury yields have started the week softer, but the narrative that the Fed’s hawkishness is priced in by the market may be put to test as Chair Powell appears for testimony and the US jobs data for February comes out in the week ahead. China’s modest growth targets for 2023 set at the weekend meetings may spur some caution and further policy announcements remain on watch. In addition, central bank meetings from Australia, Canada and Japan are likely to create short-term FX volatility, while company earnings from Trip.com, CATL, JD.com, Oracle and others will be on the radar. Powell’s testimony and US jobs data to keep markets wobbly The next test of the US economy comes at the tail end of this week as the February jobs data is reported. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Bloomberg consensus expectations point to another strong jobs report after the blowout report of January, with headline jobs expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. The unemployment rate is expected to remain unchanged at 3.4%, while wage growth is projected to accelerate. Most early indicators such as the business surveys from S&P pointed to an acceleration in hiring, while applications for unemployment benefits remained historically low.  Ahead of Friday’s jobs report, investors will also be watching Congressional testimony from Fed Chair Jerome Powell on Tuesday and Wednesday. He is expected to keep a hawkish stance in light of the strong data over the last few weeks. US yields and the US dollar can continue to run higher in that case, but if the message from Powell remains neutral then equities could continue to rally again. RBA expected to be more aggressive with its tone on Tuesday and Wednesday The RBA is expected to hike rates again by 25bps. However, the key is to watch RBA commentary - and if the RBA continues with its more hawkish tone. Consider the RBA’s aggressive rhetoric of making further hikes has pressured the Australian equity market, with the market now expecting interest rates to peak at 4.2% in September, with potentially no rate cuts this year. Should the RBA maintain its aggressive shift, the Aussie dollar (AUDUSD) could knee-jerk higher. RBA Governor Philip Lowe speaks the next day, on Wednesday, at the AFR Business Summit. Key agenda items to watch on China’s Two Sessions this week The key events to watch on the agenda of the National People’s Congress (NPC) this week are the presentation of the state institution reform proposal on Tuesday and the announcements of the appointment of top leaders and senior officials from Friday to Sunday. The NPC will conclude next Monday morning, March 13. China’s outstanding aggregate financing expected to rise as loans and bond issuance picking up While seasonality may drive a fall in new aggregate financing in February from January, the year-on-year growth of the outstanding amount is expected to pick up steam due to increases in bank loans and government bond issuance. The growth in CPI is expected to slow to 1.9% Y/Y in February from 2.1% in January and PPI to contract further to -1.3% Y/Y but the week’s highlight in the data front will be on the aggregate financing. Bank of Japan Governor Kuroda’s final meeting This week will be the last Bank of Japan meeting for its current Governor Kuroda, and there remain risks that he may part with sparks. Inflation and wage growth continue to pick up pace in Japan, even though growth signals have been bleak lately and are relying on a strong pickup in Chinese demand. Incoming Governor Ueda has also signaled policy continuity, with hints that he echoes Kuroda’s views on inflation being externally-driven and likely to come off soon. Tokyo CPI for February also came off its January highs, but mostly driven by PM Kishida’s subsidies that reduced the electricity price burden. If Kuroda ends his term with a very dovish tone, that could spell trouble for yen, especially if US yields continue their run higher this week. Company news to watch this week All eyes will be CATL - which is Tesla’s battery supplier and the world’s largest battery maker. The market is expecting revenue growth of above 80% and full-year EPS of 2.65. We think CATL’s results could be a pleasant surprise to the market, given it sold its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. CATL’s outlook will also be watched closely – as a guage of how much car makers battery costs could rise in 2023. Adidas results will also be on watch. As reported in Saxo’s Quick Take on Friday, the company accrued a large amount of Yeezy sneaker-inventory after Adidas abruptly ended Ye’s partnership. After a poor string of results, analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn.Also on watch, are CrowdStrike (CRWD), Campbell Soup (CPB), JD.com (JD) and Oracle (ORCL) results. We cover what’s worth watching with these industry proxies in our Week Ahead report, which you can access here. The world’s largest commodity miners go-ex-dividend; which could trigger a rise in volatility   Woodside goes ex-dividend on March 8, followed by BHP and Rio on March 9. For investors it means they will  have a volatile week, while option holders of these stocks won’t see a change. For other investors implications and what else to know, click here.   Macro data on watch this week: Monday 6 March South Korea CPI (Feb) Eurozone S&P Global Construction PMI (Feb) Germany S&P Global Construction PMI (Feb) United Kingdom S&P Global/CIPS Construction PMI (Feb) Eurozone Retail Sales (Jan) United States Factory Orders (Jan) Tuesday 7 March South Korea GDP (Q4, revised) Australia Trade Balance (Jan) China (Mainland) Trade (Feb) Australia RBA Cash Rate (7 Mar) Germany Industrial Orders (Jan) Taiwan CPI and Trade (Feb) United States Wholesale Inventories (Jan) Fed Chair Powell’s Testimony Before Senate Wednesday 8 March Japan Current Account (Jan) Germany Industrial Production and Retail Sales (Jan) Eurozone GDP (Q4, revised) United States ADP National Employment (Feb) United States International Trade (Jan) Canada Trade Balance (Jan) United States JOLTS Job Openings (Jan) Canada BoC Rate Decision (8 Mar) Fed Chair Powell’s Testimony Before House Thursday 9 March Japan GDP (Q4, revised) China CPI, PPI (Feb) Malaysia Overnight Policy Rate United States Initial Jobless Claims Friday 10 March Germany CPI (Feb, final) United Kingdom monthly GDP (Jan) United Kingdom Goods Trade Balance (Jan) United States Non-Farm Payrolls, Unemployment, Average earnings (Feb) Canada Unemployment Rate (Feb) Japan BOJ Rate Decision (10 Mar) China M2, New Yuan Loans, Loan Growth (Feb) Earnings on watch this week: Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit, Cathay Pacific Thursday: CATL, Deutsche Post, JD.com, Prada Friday: Daimer Truck, AIA Group, Oracle, DiDi Global   Source: Saxo Spotlight: What’s on the radar for investors & traders this week? | Saxo Group (home.saxo)

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

Summary:  Today we look at the strong comeback in equity markets Friday as yields dipped sharply, providing some relief after the recent strong ramp higher. Still, it is interesting to note that inflation expectations may be undergoing a sea change as well, which has come to the aid of gold. Elsewhere, we gauge the market reaction to China's policy signals, note the busy week ahead on the central bank front, with the RBA up tonight, Fed Chair Powell out speaking in testimony before Congressional panels tomorrow and Wednesday and the Bank of Japan on Friday, which will be Governor Kuroda's final meeting. This and much more on today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: Podcast: Bulls celebrate yield dip. Heavy central bank calendar this week | Saxo Group (home.saxo)

The Australian dollar is under pressure at the start of the new trading week. AUD/USD is trading at 0.6735 in Europe, down 0.50%. RBA expected to hike by 25 bp The RBA is widely expected to raise rates by 25 basis points on Tuesday, which would bring the cash rate to 3.60%, the highest level in a decade. The RBA’s aggressive rate tightening cycle has not been as effective as the central bank had hoped, as inflation has been stickier than expected. Australia’s monthly CPI for January dropped to 7.4%, down from 8.4% a month earlier. This drop indicates that rate hikes are having an impact on the economy, but there is a long road ahead before inflation falls back to the RBA’s target of 2-3%. There was some positive news on Monday, as the Melbourne Inflation gauge for February showed a drop in core inflation to 4.9% y/y, down from 5.3% in January. The headline figure remained unchanged at 6.3% y/y. Australian Treasurer Jim Chalmers has said he is “cautiously hopeful” that inflation has peaked, but it’s likely that the RBA will have to hike rates at least one more time before it can hit the pause button. Investors will be keeping a close eye on Governor Lowe’s rate statement, which will likely be hawkish given the stubbornly high inflation levels. Any hints about the need for further rate increases would likely be bullish for the Australian dollar. In the US, it promises to be a busy week. The key events are Fed Chair Powell’s semi-annual testimony before Congress and the nonfarm payroll report, both of which could move the US dollar. The markets will be keeping a close eye on Powell’s remarks and whether he will sound less hawkish, given the recent string of unexpectedly strong US releases. Nonfarm payrolls sizzled in January with 517,000 new jobs, but this is expected to be a one-time bump, with the estimate for February standing at 200,000. The surprisingly resilient labour market has the Fed concerned about wage pressures, and a strong wage growth release could raise expectations for further rate hikes.   AUD/USD Technical AUD/USD is testing support at 0.6749. Below, there is support at 0.6660 There is resistance at 0.6862 and 0.7025 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The week started with worries that China setting its growth target to 5%, a meagre target for a post-pandemic kick-off, could mean a slower global growth ahead.   Today, the latest, and mixed trade figures further raised a couple of eyebrows regarding whether we are expecting too much from China. The decline in Chinese exports was less dramatic than expected, but imports fell more than 10% in February from a year ago.     Nasdaq's Golden China Dragon index kicked off the week down, while the S&P500 was better bid at the open, with gains up to 1%. But the gains melted to the close and all three major US indices closed Monday's session flat to very slightly positive. Still the S&P500 is heading to Powell's semi-annual testimony above the 4000 mark.   Today, all eyes and all ears are on  Federal Reserve (Fed) Chair Jerome Powell and what he thinks about the latest set of economic data.   Since the latest FOMC meeting, we saw a blowout NFP number, an uptick in inflation figures, lower-than-expected decline in the S&P500 earnings, and overall encouraging economic activity data.   And that's a problem. The fact that the US jobs market, or economic activity don't react to higher Fed rates is a problem for Fed, because it makes the Fed's arms less efficient for fighting against inflation. Many would argue that changes in rates take time to filter into the economy but the Fed's tightening campaign began in November 2021 - 17 months ago, the rate hikes began roughly a year ago. It's about time we start seeing the impact of higher rates through data.   Alas, half-a-million NFP read, with the lowest unemployment rate of the past half a decade and uptick in inflation are indeed worrying.  US crude above 100-DMA  Disenchanting growth target from China was expected to keep the oil bears in charge of the market, but the 100-DMA got surprisingly cleared to the upside yesterday.   Warning of tight global supply and rising Chinese demand from CERAWeek conference and Estonian foreign minister's idea that the EU should halve the Russian oil cap helped pushing the price of a barrel above the critical 100-DMA level.   Tight global supply, war, sanctions on Russia oil and the rising Chinese and global demand tilt the balance for higher oil prices in the medium run. But higher energy prices mean higher inflation, and higher inflation means tighter monetary policies which, in return, increase the global recession odds, and could weigh on oil prices.   Elsewhere  The Reserve Bank of Australia (RBA) raised the rates by 25bp as expected and said that there could be more rate hikes on the pipeline depending on the data, but the AUDUSD slipped below 67 cents.   The EURUSD extended gains and flirted with the 1.07 mark yesterday on the back of a surprisingly softer US dollar into Powell's testimony.   Gold sold off into the $1860 mark.   Hawkish Powell could reverse losses in the dollar later today. 

AUD/USD has failed to capitalize on the hawkish RBA policy. The RBA continued the 25 bps rate hike spree and pushed the OCR to 3.60%. Australia’s monthly CPI indicator suggests that inflation has peaked. The AUD/USD pair is displaying a sideways auction in the early European session after a Reserve bank of Australia (RBA)’s monetary policy-inspired volatility. The Aussie asset looks vulnerable above the 0.6700 support despite the upbeat market mood. In the interest rate decision, RBA Governor Philip Lowe pushed the Official Cash Rate (OCR) by 25 basis points (bps) consecutively for the fifth time to 3.60% to sharpen monetary tools in the battle against persistent Australian inflation. RBA’s Lowe cited “The monthly CPI indicator suggests that inflation has peaked in Australia,” as reported by Reuters. Further downside in the US Dollar Index (DXY) looks likely amid the absence of recovery signs after printing a fresh day low near 104.16. S&P500 futures have reported more gains, indicating that investors have underpinned the risk-appetite theme. AUD/USD is showing a tad longer consolidation in the range of 0.6700-0.6784 on an hourly scale. The 50-period Exponential Moving Average (EMA) at 0.6737 is acting as a major barricade for the Australian Dollar. A slippage by the Relative Strength Index (RSI) (14) in the bearish range of 20.00-40.00 is indicating a downside momentum ahead. A downside move below March 01 low around 0.6700 will drag the Aussie toward December 07 low at 0.6669 and December 20 low at 0.6629. In an alternate scenario, a confident break above March 01 high at 0.6784 will send the asset toward the round-level resistance at 0.6800 followed by February 06 low at 0.6855. AUD/USD hourly chart  

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

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

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

Disenchanting growth target from China was expected to keep the oil bears in charge of the market, but the 100-DMA got surprisingly cleared to the upside yesterday. Forex Stocks closed flat and the dollar softened. The Aussie fell after the Reserve Bank of Australia (RBA) announced 25bp hike and the EURUSD flirted with the 1.07 mark. Fed Today, all eyes and all ears are on Federal Reserve (Fed) Chair Jerome Powell and what he thinks about the latest set of economic data. Since the latest FOMC meeting, we saw a blowout NFP number, an uptick in inflation figures, lower-than-expected decline in the S&P500 earnings, and overall encouraging economic activity data. The S&P500 is above 4000 into Powell’s testimony, and the dollar is soft. Could Jay Powell reverse that? Watch the full episode to find out more! 0:00 Intro 0:38 Chinese stocks under pressure, US stocks zen pre-Powell 3:02 Powell will sound hawkish but investors may chose not to listen 6:24 US crude clears 100-DMA resistance 9:00 FX update: RBA hikes, Aussie falls, dollar bulls in retreat Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #Powell #testimony #inflation #jobs #economic #data #China #growth #target #energy #crude #oil #RBA #rate #decision #USD #AUD #EUR #XAU #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      

It’s shaping up to be another relatively flat day in the markets as investors turn their attention to Capitol Hill ahead of Jerome Powell’s first testimony. The Fed Chair will appear before the Senate Banking Committee later today to testify on the semi-annual monetary policy report. These events naturally attract a lot of attention but the reality is the Chair’s performance is usually quite polished and uncontroversial, and the occasion itself can drag on and frequently venture away from topic. In other words, we shouldn’t assume we’re about to get fireworks from Powell. What may make this occasion different is the fact that there’s so much uncertainty around the outlook for interest rates and inflation. While the Fed has maintained that rate hikes must continue, the economic data from January has forced markets to adjust to that reality too so there’s every chance we get a hawkish offensive from Powell. Considering the likelihood of the January data being a blip rather than a trend, I think it would probably be wiser for Powell to maintain his previous tone as he may risk spooking the markets but if the FOMC truly is weighing up a 50 basis point hike this month, this would be a good opportunity to lay the groundwork for it. Nearing the end The RBA appeared to soften its tone once more after hiking rates by another 25 basis points today. The central bank is now of the opinion that inflation has peaked and so multiple rate hikes may no longer be the base case. That said, the RBA will decide meeting by meeting and a lot can change in between. Markets are now pricing in at least one more hike in the cycle and maybe two. The Australian dollar is a little lower on the day as the decision was perceived to be a dovish hike. Some promising signs Chinese trade data highlighted some modest improvements but remain quite weak overall. The drop in imports can possibly be attributed to some one-off factors including Covid exit waves and the Lunar New Year and the data will surely improve over the coming months as the economy returns to normal. Exports remained under pressure, although the number was better than expected, indicating still soft global demand which aligns with what we’ve seen recently elsewhere. Hanging on in there Bitcoin has been in consolidation since Friday’s sell-off with traders seemingly fearful of further ripple effects but still willing to hang on for now just in case. It’s been a fantastic year for crypto so far but events late last week were a quick reminder of the challenges facing the industry in the short term and the consequences of that. There’ll also be an eye on Powell’s testimony today as it may influence overall risk appetite in the markets. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Today we look at the choppy equity market failing to extend the upside momentum for now as we triangulate mid-range ahead of a series of event risks, among these two days of Fed Chair Powell testimony starting today. Overnight, Australia's RBA announced a dovish hike, clearly looking for excuses to pause its tightening regime - is this a policy mistake in the making? We also look at evidence on what may have driven China's about-face on stimulating its economy, crude oil, natgas and wheat & other grain markets and much more. Today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.  

The Australian dollar continues to lose ground and is sharply lower on Tuesday. In the European session, AUD/USD is trading at 0.6676, down 0.81%. Earlier, the Australian dollar fell as low as 0.6674, its lowest level since December 23rd. RBA delivers a ‘dovish hike’ There were no surprises from the RBA, which hiked rates by 25 basis points and raised the cash rate to 3.6%. This marked a fifth consecutive increase of 25 bp, as the central bank continues to raise rates in modest increments in a bid to curb inflation without choking economic growth. This rate decision was noteworthy in the language of the rate statement, which suggested that the RBA could be nearing the end of the current rate cycle. The statement removed a reference in the February statement to needing to raise rates “over the months ahead”, and instead stated that “tightening of monetary policy will be needed to ensure that inflation returns to target. The markets picked up on this change in language as a dovish signal. As well, the statement explicitly said that inflation had peaked, another hint that multiple rate hikes may not be needed. The dovish tone of the statement has sent the Australian dollar considerably lower today. In the US, Federal Reserve Chair Powell testifies today on the semi-annual monetary policy report. The Fed has been consistently hawkish about the need to continue raising rates and the markets have aligned their expectations closer to the Fed. It was only a few weeks ago that the markets were projecting a pause followed by rate cuts, but this has changed to expectations for three more rate hikes this year. There is a lot of uncertainty in the air about inflation and interest rates after a host of stronger-than-expected data in January, such as a blowout employment report. These strong numbers may have been a blip, and it will be interesting to see if Powell reiterates a hawkish stance and ignores the January numbers. The markets are widely expecting a 25-basis point hike at the March 22 meeting, but a 50 bp increase cannot be discounted, as the Fed has said that the pace of rate hikes could be ‘higher and longer’.   AUD/USD Technical AUD/USD is testing support at 0.6749. Below, there is support at 0.6660 There is resistance at 0.6862 and 0.7025 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Australian dollar has stabilized on Wednesday after a dreadful outing a day earlier. In the European session, AUD/USD is trading just below the 0.66 line. AUD/USD sustained its second most bearish day this year on Wednesday, with a staggering decline of 2.1%. Earlier today, the Australian dollar touched a low of 0.6567, its lowest level in four months. A combination of a dovish rate hike by the Reserve Bank of Australia and hawkish comments from Fed Chair Powell sent the Australian dollar reeling. The RBA hike of 25 basis points was practically business as usual, but investors picked up on the removal of a reference to raising rates “over the months ahead”, a possible signal that the RBA could be near the end of the current rate-tightening cycle. The rate statement explicitly said that inflation had peaked, clearly a dovish signal from policy makers. Earlier today, Governor Lowe used a second “p” word which weighed on the Australian dollar, saying that a pause in rate increases was closer. Does that mean that the April meeting will be a “one and done”? Perhaps, but Lowe has said previously that the Bank will make its rate decisions on a meeting-by-meeting basis, after evaluating the data. This means that the next inflation and employment reports will have a critical impact on what the RBA does at next month’s meeting. In the US, Fed Chair Powell remained in hawkish mode in his testimony on Capitol Hill. Powell pointed to the recent string of strong releases and said the Fed would likely need to raise rates more than it had anticipated. Powell said that the Fed would evaluate the need to increase the pace of rate hikes based on the “totality of the data”. The remarks caused a huge shift in market pricing, with the likelihood of a 50-bp at the March 22 meeting rising to 70%, up from 25% prior to Powell’s testimony, according to the CME Group.   AUD/USD Technical 0.6565 is a weak support line. Below, there is support at 0.6402 There is resistance at 0.6626 and 0.6749 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US The labor market is still strong but is showing signs it is ready to soften as wages cool.  Wall Street will pay close attention to the February inflation report.  Disinflation trends are struggling here and a hot report could not only lock the Fed into boosting their hiking pace but possibly lead markets into expecting a higher peak rate.  Headline inflation is expected to slow from 6.4% to 6.0%.  The monthly inflation rate is expected to edge lower from 0.5% to 0.4%, while the core reading is expected to hold steady at the 0.4% pace.  While the inflation report will get the majority of the attention, traders should also pay close attention to the February retail sales data which should show consumer spending is weakening.  Housing data is expected to remain weak, while a couple of Fed regional surveys (Empire/Philly) should show manufacturing data remains deeply in contraction territory. Friday’s release of consumer sentiment is expected to hold steady, while many traders will pay close attention to see if inflation expectations continue to retreat.  With the Fed’s blackout period quickly approaching, only Bowman will make an appearance on Tuesday at the Community Bankers Event in Hawaii.  Eurozone The ECB is widely expected to raise interest rates by 50 basis points on Thursday but it’s what comes next that investors will be most interested in. This makes the new economic projections that are released alongside the decision, and the press conference, arguably the most important things to watch out for. UK Labor market figures on Tuesday are the standout release next week but it’s the spring budget a day later that people may be most interested in. The fact that the UK is not already in recession will come as a big surprise to many and one of the benefits of that may be a little extra fiscal headroom for the Chancellor. Unfortunately, giveaways may be few and far between for a number of reasons that may make holding off more appealing to the government.  Russia The CBR is expected to leave interest rates unchanged at 7.5% on Friday. Inflation has been declining but remains far above target which may encourage the central bank to stay on hold for now.  South Africa It’s a little light on economic data next week with manufacturing production and retail sales the only notable indicators on Tuesday and Wednesday, respectively.  Turkey No major data or events next week.  Switzerland It’s a little quiet next week but the focus will remain on what the SNB will do on 23 March, especially after the inflation overshoot in February. Markets are still pricing in 50 basis points with a small chance of 75. China The National People’s Congress (NPC) has made a more conservative forecast of 5.0% GDP growth in 2023. Recent economic data has shown a strong recovery in the economy, confirming expectations for an early recovery but softening expectations for fiscal and monetary stimulus. The lifting of the zero-Covid policy has led to a surge in business activity, reduced operational interruptions, and robust data on commercial activities.  Powell’s testimony this past week lifted the US dollar against the Chinese yuan pushing the pair close to the psychological level of 7.0000 which may attract attention once more.  Focus next week will remain on the data including retail sales, industrial production, fixed asset investment, and unemployment. India Markets are pricing in one more rate hike in the tightening cycle at the next meeting on 6 April but next week’s inflation data could change that. Recent trends around the world have seen more rate hikes being priced in and India is no exception after the inflation jump in January. If it doesn’t prove to be an anomaly, further hikes could be priced in. Australia & New Zealand Next week offers the Australian unemployment rate, employment change, and change in full-time employment on Thursday. From New Zealand, we’ll get fourth-quarter GDP data on Wednesday and we’ll also hear from Assistant Governor, Karen Silk on Sunday Japan There isn’t much on the agenda next week, with the minutes of the Bank of Japan’s January monetary policy meeting on Wednesday arguably the highlight. Minutes are often viewed as being outdated but nowhere is this more true than in Japan, where those of the January meeting are released after the March meeting has taken place. For that reason, it would take something extraordinary for them to have a big impact on the markets.  Kazuo Ueda, the new governor of the BoJ who will take office in April, recently stated that it is not a good time to abandon the current policy considering the current economic environment. He supports its continued commitment to massive quantitative easing and is not expected to significantly adjust the yield curve control, which has limited the attractiveness of the yen. Singapore Unemployment data on Monday is the only economic release this upcoming week. Economic Calendar Sunday, March 12 Economic Events New Zealand Food Prices Japan BSI Manufacturing Index Monday, March 13 Economic Data/Events India CPI  Mexico Industrial Production New Zealand REINZ House Sales Australia Westpac Consumer Conf, NAB Business Confidence BOE’s Dhingra speaks Tuesday, March 14 Economic Data/Events Fed’s Bowman Speaks at Community Bankers Event in Hawaii UK Claimant Count Rate, Jobless Claim Change, ILO Unemployment Rate Swiss Producer and Import Prices Italy Industrial Production India Wholesale Prices South Africa Mining Data BoJ Minutes of January Meeting BoJ Outright Bond Purchases Riksbank in hearing on the annual report, monetary policy Wednesday, March 15 Economic Data/Events US Empire Manufacturing, Retail Sales, PPI, NAHB Housing Market Index, MBA Mortgage Applications, Business Inventories, Net Long-term TIC flows China PBOC 1-year MLF Rate, Industrial Production, Retail Sales, Fixed assets, Nw Home Prices  UK Chancellor Hunt delivers annual budget EIA Crude Oil Inventories Sweden CPI  France CPI Poland CPI Italy Unemployment Rate, General Government Debt South Africa Retail Sales  India Trade Data New Zealand GDP  Australia Employment Change Thursday, March 16 Economic Data/Events US Initial Jobless Claims, Philly Fed Business Outlook, Import and Export Prices, Housing Starts, Building Permits Canada Wholesale Trade Sales ECB Rate Decision: Expected to raise Main Refinancing Rate by 50bps to 3.50%  ECB President Lagarde holds a post-rate decision press conference BOE releases Ipsos inflation survey  Japan Industrial Production Sweden Prospera’s Inflation Expectations Survey Czech Current Account Poland Current Account Swiss SECO March Forecasts New Zealand Q4 GDP  Riksbank Business Survey, Floden speaks UK OBR briefs on budget Japan Trade Balance Australia Employment Change Singapore Non-Oil Domestic Exports Friday, March 17 Economic Data/Events US Industrial Production, Leading Index, University of Michigan Sentiment, Canada Industrial Product Price Eurozone CPI, OECD Publishes Interim Economic Outlook Sweden Unemployment Rate Baker Hughes Rig Count Russia central bank (CBR) rate decision: Expected to keep rates steady at 7.50% Sovereign Rating Updates Turkey(Fitch) Belgium (S&P) Spain (S&P) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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

The AUD/USD pair updated its 4-month price low last Friday, hitting 0.6567. The bears managed to end the trading week within the 65th figure, despite the general weakening of the U.S. dollar. At the beginning of the current trading week, the buyers took the initiative but their achievements remain relatively modest. On Monday, the pair sharply surged to 0.6720, but by the end of the trading day it retreated to the 66th figure, where it drifted. The Aussie seems to be the outsider on the backdrop of the other major currency pairs. For instance, the pound gained almost 300 points against the greenback, and the yen gained 400 points. The Australian dollar, in its turn, could not take advantage of the situation to the full extent: the buyers of AUD/USD are wary of the upward price surges and take profit at the first opportunity (thus canceling the upward momentum). This skepticism towards the Aussie seems an echo to the March RBA meeting, the outcome of which was not in favor of the Australian dollar. The RBA is getting ready to draw a line Reacting to the outcome of the Reserve Bank of Australia's latest meeting, the AUD/USD pair plummeted almost 200 pips despite hawkish decisions by the central bank. The regulator increased the interest rate by 25 points (i.e., to 3.60%) and simultaneously announced that the central bank will discuss further tightening of monetary policy. However, the formal results did not impress traders, while the rhetoric of the accompanying statement disappointed AUD/USD buyers. The RBA significantly softened the wording of the final communique. For example, the text of the February statement was very straightforward. The Central Bank then indicated that in the coming months, the regulator will need to further increase the interest rate "to ensure the return of inflation to the target level." While the March text of the accompanying statement looks completely different. In particular, the central bank refused to talk about future interest rate hikes and instead applied a more vague wording, noting only the need for further tightening of monetary policy. Such a verbal signal was interpreted by the market unambiguously—as a softening of the RBA's rhetoric. In addition, the Reserve Bank announced another important phrase—that inflation in Australia has reached its peak. Recall that the consumer price index in January fell sharply to 7.4%, with an estimate decline at 8.1%. At the same time, the RBA drew attention to the slowing growth of the Australian economy: according to the latest data, the volume of Australian GDP in Q4 2022 increased by only 0.5% against the forecast growth of 0.8%. In other words, the tone of the RBA's rhetoric was clearly "terminal." According to a number of currency strategists (in particular, Societe Generale), the Reserve Bank will announce a pause in rate hikes at the next (April) meeting. The Australian jobs report, which will be published Thursday, March 16, may play a certain role in this. Australian Jobs Report According to preliminary forecasts, the unemployment rate in Australia in February will decrease to 3.6% after a slight increase in January to 3.7%. The employment growth rate should enter positive territory (after two months of being below zero). According to forecasts, almost 50,000 jobs were created in February. The Australian consumer inflation estimates (a good indicator of current household inflation sentiment) is also expected on Thursday. According to forecasts, this indicator will again demonstrate a downward trend, reaching 4.9% (the lowest value since March last year). Conclusions Despite the upward corrective pullback, the downward trend for the AUD/USD pair is still in force. If the above macroeconomic reports come out in the "red zone," the Aussie will come under additional pressure, as the likelihood of a pause from the RBA will increase again. In general, the current dynamics of AUD/USD is indicative: the Aussie could not build on the success even against the background of the extremely weak positions of the greenback. All this suggests that as soon as the USD stabilizes (for example, if inflation in the United States starts to gain momentum again), the downward trend will resume, as the Aussie will not be able to pull the price up by itself. The technical picture tells the same. The pair on the daily chart is between the middle and lower lines of the Bollinger Bands indicator, as well as below all lines of the Ichimoku indicator (including the Kumo cloud). The main target of the downward movement in the medium term is the lower line of the Bollinger Bands indicator on the D1 timeframe, which corresponds to 0.6530.   Relevance up to 10:00 2023-03-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337533