Stocks down, USD up

By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  


Investors continue to dump stocks and buy US dollars on looming uncertainty regarding whether the US government will be shut in three days. There is progress regarding a 6-week short-term funding deal, but getting an approval from the Senate will be a challenge. In the meantime, falling savings, rising theft and delinquencies hint at the growing cost-of-living crisis whereas the central banks' inflation fight is certainly not over just yet. 

The looming government shutdown talks continue feeding into a stronger US dollar. US politicians have agreed to a 6-week short-term funding to keep the government running for another month and a half, but getting approval from the full Senate will be a challenge with far-right Republicans' determination to 'shoot it down if it reaches the floor'.  

Turbulent FX Markets: Peso Strength, Renminbi Weakness, and Dollar's Delicate Balance

Finland's Innovative Methods Of Climate Protection | How Long Do You Have To Save To Buy A House?

Kamila Szypuła Kamila Szypuła 24.11.2022 11:19
As the markets look at the published report, the decisions taken by central banks, there are also instone news from various sectors. The main topic at today's article is climate protection. In this article: Women’s Entrepreneurship Day Climate change and protection Savings to buy a house Climate protection by Finland Acknowledge the contribution of women entrepreneurs UBS, at its tweet, is celebrated Women’s Entrepreneurship Day. We celebrated Women’s Entrepreneurship Day on November 19th, envisioning women entrepreneurs front and center as the next decade of wealth unfolds. Watch our full #UBSTrending episode for more. #shareUBS — UBS (@UBS) November 23, 2022 Women's Entrepreneurship Day is celebrated every year on November 19 to acknowledge, support and celebrate the contribution of women entrepreneurs and business leaders towards economic growth and the betterment of society. From year to year, the position of women in business is strengthening. It often turns out that women can run a business better or have better ideas for development. Celebrating such a branding can encourage women to take up the challenge of starting a business or applying for leadership positions. How to save the climate? Morningstar Inc tweets about climate change and protection. There's much buzz around greenhouse gas emissions and climate change. Yet other air pollution also poses big risks to human health and infrastructure.Here's what investors should know about risks in the shipping, steel, construction and other industries. — Morningstar, Inc. (@MorningstarInc) November 23, 2022 Most people are familiar with greenhouse gas emissions, which cause climate change. Climate change is a serious problem. The rise of this problem are the actions of people. The current generations have to fight what the previous generations caused. There is a lot of talk about protecting the climate and reducing the generation of pollutants. Companies produce a lot of pollution, and to be eco-friendly they need to know what causes climate damage and how to replace or simply reduce it. Tweet Morningstar can help you find a solution or expand your knowledge. How to get your place? CNBC tweets about savings to buy a house/apartment. Here's how long it would take a typical millennial to save enough to buy a home. (via @CNBCMakeIt) — CNBC (@CNBC) November 24, 2022 Everyone would like to have their own place. The cost scares everyone. To be able to make your dream of your own home, we need to spend a lot of time and savings. But how long and how much? The answer to this question is an individual question, but an averaged answer can help you estimate what pays better and what you should give up in order to achieve this goal. When making plans, one should also remember about the costs of current living, which in the current economic situation generates high costs and discourages or hinders saving. How Finland fight against climate change The IMF in its tweet raises the topic of climate protection. A small country can make a big difference. Here is how Finland is using innovation to fight climate change. #FandD — IMF (@IMFNews) November 24, 2022 Innovations are used in almost every area of life. The fight against climate change is a time-consuming and labor-intensive activity, and innovative ideas can accelerate the effectiveness of actions. Small countries like Finland are introducing their wood-based measures to protect our climate. While Finland's wood-based approach to climate change may not work for all countries—given climate differences and the trade-offs between agriculture and tree growth—it offers a timely reminder to rethink how we can harness nature to address the global challenge of climate change . It is worth looking at new ideas and analyzing how a given economy or region can take care of the climate.
EUR Under Pressure as July PMIs Signal Economic Contraction

Farmers In China Suffer From Covid Restrictions

Kamila Szypuła Kamila Szypuła 28.11.2022 11:53
The covid situation in China remains in the spotlight. The topic of interest rates is addressed this time from the point of view of an ordinary citizen, not economies and central banks. In this article: The impact of Covid restrictions in China on farmers Japan Software/IT Service Sector What to do with money with rising rates New user signups to Twitter Destroy crops Ole S Hansen tweets about the impact of Covid restrictions in China on farmers China’s strict Covid controls are leaving farmers with no option other than to destroy crops they can no longer sell, triggering concerns about food shortages and stirring outrage on social media via @markets — Ole S Hansen (@Ole_S_Hansen) November 28, 2022 The situation caused by the covid pandemic has significantly affected the codes of economies around the world. The recent spike in virus infections in China has prompted a strong response from the government, which has taken specific measures. From creating covid camps to strong restrictions. What is happening in the second world economy affects the situation on global markets and local markets. The author of the tweet emphasizes that this situation has a negative impact on farmers who are deprived of a market. Farmers, unable to sell and unable to store, decided to destroy the crops. Such actions will have an effect on food production, may increase imports and also directly increase costs for farmers themselves. Japan Software/IT Service Sector UBS tweets about Bank of Japan forecasts. What is the Bank of Japan’s outlook for the software sector? Find out the results of their short-term industry survey in our #UBSResearch report. #shareUBS. — UBS (@UBS) November 28, 2022 What is the Bank of Japan’s outlook for the software sector? The answer to that question is in this tweet. Investments do not have to take place in the financial markets. Investment is also an investment in development and science. We can expect Bank of Japan to plan investments in software. What to do with cash now? Morningstar Inc tweets about Christine Benz and Susan Dziubinski discussion about the best places to park your cash. A silver lining amid rising interest rates: Many savings vehicles now offer higher yields than they have in a long time.Watch as @christine_benz and Susan Dziubinski discuss the best places to park your cash while interest rates rise. — Morningstar, Inc. (@MorningstarInc) November 27, 2022 Fighting inflation is hard. Rising interest rates have a negative impact on the average citizen. Everyone tries to protect themselves financially, but in such situations it is difficult. Therefore, everyone decides to save as much as possible. It's important not to go overboard with cash savings, mainly because it's dead money when adjusted for inflation. An online savings account is a good option for those who are looking for a profit but need regular access to this money. Whether this option is the best can be found out from this tweet. 66% Up Reuters Business in its tweet recalls Musk's words. WATCH: Elon Musk said new user signups to Twitter were at an 'all time high,' averaging over two million per day in the last seven days as of November 16, up 66% compared to the same week last year — Reuters Business (@ReutersBiz) November 28, 2022 Ever since Elon Musk took over Twitter, there's been a lot of talk about it in the media. This time, information about new user signups to Twitter appeared in the media. They turned out to be high, which is why the new CEO boasts about it.
Nasdaq 100 Underperforms and Faces Key Resistance - Technical Analysis and Market Outlook

Participants Are Hungry For More Personalized Solutions

Franklin Templeton Franklin Templeton 10.02.2023 11:53
The retirement savings industry is at the dawn of a mega-trend that will define the next decade or more—personalization, according to Kevin Murphy, Franklin Templeton’s Head of Workplace Retirement Distribution. As an industry, we tend to overcomplicate things, which can be to the detriment of those we serve—hard-working Americans saving for their future financial independence. It’s a result of being in the industry for many years, and then taking for granted that our end clients understand random terms like auto-escalate, QDIA, 408b2, and the vague “managed accounts.” As we see it, this is not helping anyone. How do we fix it? Give workers not only what they need, but what they want. And, give it a name they understand. We can start with the facts. More folks need access to a workplace savings plan, and those who do have a plan need help and advice. And by advice, we don’t mean just investment advice, but SAVINGS advice. It’s fitting as we see that participants are hungry for more personalized solutions. Franklin Templeton’s 2023 Voice of the American Worker survey confirms that personalization goes a long way when it comesto the retirement savings behaviors of US workers. According to survey respondents, 78% of workers say they would be interested in more personalized 401(k) investment options tailored to their unique financial situation, while 77% confirmed a more personalized 401(k) investment option would encourage them to participate and/or contribute more to their retirement savings. And 75% responded that if their employer offered a customized managed account solution as an option in their 401k plan, they'd be more likely to stay in that plan if they retired or change employers. Of note, these statistics are emphasized even further for the Millennial generation, the largest portion of today’s workforce. “I can change, you can change, we all can change” – Rocky IV Target-date funds (TDF) have been a great benefit in recent decades, and they’ve done a great job helping many American workers save for their future, especially when used as a default or qualified default investment alternative (QDIA). However, we believe these vehicles have not evolved in a meaningful way since they became available in the 1990s—over 30 years ago. C’mon now—are your kids still playing Tetris on their Gameboys? We view TDF’s as stagnant and stale, never giving employees the ability to update their goals, or ever recommending an increase in their savings rate, or do anything besides put employees in a box. Managed accounts can plan a role in supporting improved savings behavior; in fact, participants in a managed account on average participate at a rate 2% higher than those with a TDF,1 which may have a meaningful impact over the long term. We believe we’re at the dawn of a mega-trend that will define the next decade or more of the retirement savings industry—PERSONALIZATION. It is all around us in our daily lives, so why isn’t it more widely available to 401(k) plan savers? The solution we have is not new, it just has a name that sounds like an ancient tool used by old stock brokers: “managed accounts.” One of the most common misconceptions we hear is “managed accounts are just an expensive target-date fund!” Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM Today’s solutions address previous objections We all have watched fees come down. For reference, we believe the all-in cost, including investment expenses of a blended investment menu (active and passive), can be less than 40 basis points (bps), which would include advice, technology and delivery fees. We believe getting those fees closer to 30 bps may even be possible. Also, the technology is getting better and creating an improved user experience. So is the quality of data recordkeepers can provide to create an even more personalized experience for participants. It’s not Tetris, and it’s not a Gameboy they’re using. All things being equal, especially price, wouldn’t most participants rather utilize a personalized portfolio than an off-the-shelf portfolio that does not use their unique goals (i.e., financial independence/what’s your number) as a key component of the decision-making process? We think so, and now’s the time to strategize on how we can best present these increasingly innovative solutions in a participant benefit-focused manner. Can you change  a name? It’s 2023. You can change anything. We’re going to make a bold proposal. Our focus should be on personalization, not “managed accounts.” And let’s be clear with the terminology we use, since we know language matters. Let’s commit to using the word “personalized.” Managed accounts can be a lot of things —a separately managed account in the wealth management world mainly. But what is it really in the 401(k) world? In our view, it is simply personalized savings advice and has very little to do with an “account,” which is just an operational vehicle. So, how about we change the name to better describe the potential benefit it provides to today’s US worker? “Personalized advice” or “personalized solution” or even “personalized portfolio” all come to mind. Many options exist as we modernize our language, and it’s increasingly clear to us that the time is now to do so. It’s time to be more descriptive about the type of solution we are providing: a personalized solution that helps many people achieve their number one goal: financial independence. Source: “Managed accounts” is a terrible name | Franklin Templeton
GBP/USD Eyes Further Gains as Pound Advances Against Dollar

Maintaining Fiscal Discipline: A Crucial Imperative Amidst Economic Challenges

ING Economics ING Economics 15.06.2023 07:31
Fiscal discipline should not be up for debate We continue to believe that despite the year-to-date cash-flow based deficit reaching 81% of the full-year deficit target by May, the budget situation still looks manageable. However, we can pinpoint some key slippages, namely less inflow via indirect taxes on the revenue side and higher debt servicing costs on the expenditure side. Despite the year-to-date bleak performance, the government is committed to the 3.9% Maastricht-deficit criteria, but a slight adjustment might be needed to ensure that the target is met. The need for an adjustment significantly increases next year as both sides of the budget are more uncertain based on our gloomier outlook versus the government’s. In addition, the revival of the excessive deficit procedure in 2024 should alert policymakers that fiscal discipline should not be up for debate.   Budget and primary balance of general government (%)   Effective normalisation of monetary policy has started After extreme scenarios have been priced out, the central bank started effective normalisation in May, by cutting the rate of the O/N quick deposit tender by 100bp to 17%. The normalisation process started by emphasising the separation of market stability (ensured by the overnight tools) and price stability (cured by the base rate).   In this regard, a cut in the base rate is not on the table yet, as the merger of the effective rate with the base rate must happen first. We expect this convergence to be finalised by September, following which we see the first cut in the base rate in December.   However, as highlighted by the NBH, positive real interest rates are needed to support the disinflationary process, at which point we believe Hungary can turn its back on the era of negative real rates for good.   Benchmark policy rate and interest rate corridor   Labour shortage poses a structural problem We believe that labour shortage has evolved from a cyclical to a structural problem, which entails a long-term inflation risk, hence the need for a tighter monetary policy stance in the future. In this context, we have not seen widespread layoffs, which could explain the resilience of the labour market that, in our view, will continue.   The story is different for real wages. Amid sky-high inflation, March is the seventh consecutive month in which real wage growth has been negative, but we expect a turnaround in the fourth quarter. In our view, this is more likely to boost savings as households have already tapped into their savings to offset the impact of inflation. Therefore, this positive income shock implies less upside impact on inflation and more downside on GDP growth, in our base case.   Unemployment, job vacancy rate and wage growth   Current account deficit to show marked improvement Last year's energy crisis eroded the country's trade balance in goods, leading to a year-end current account balance of -8.2% of GDP.   As the energy issue appears to be easing this year, pressure on the current account from the import side is softening significantly, with the trade balance posting positive readings for the past three months. In addition, inflation has weighed on consumption and high interest rates held back investments, further reducing import demand.   Conversely, the export side carries huge growth potential, as new export capacities have improved significantly recently due to EV battery plants, while car manufacturers are dealing with large backlogs. With all these factors combined, we expect the current account to close this year with a balance of only -2.2% of GDP.   Structure of the current account (% of GDP)
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Recession Threat Looms as Student Loan Repayments Restart: Impact on Consumer Finances

ING Economics ING Economics 06.07.2023 13:23
Recession threat delayed, not averted This all appears to tally with the Federal Reserve’s own soft landing thesis, but we still see a high probability of a recession. Lending growth is slowing with the Fed’s Senior Loan Officer survey suggesting it could turn negative before the end of this year. Business confidence remains in recession territory based on data from the Conference Board and the National Federation for Independent Businesses, and we know that monetary policy operates with lags with the full effects of higher interest rates yet to be felt. A key reason that the economy has proved to be more resilient than we expected was consumers’ willingness to run down savings they had accumulated during the pandemic. We suspected they may choose to maintain larger savings buffers, while a $150bn surge in credit card borrowing since mid-2021, bringing the outstanding total to nearly $1tn, has additionally financed consumer largesse. But household savings and banks' willingness to lend are a dwindling finite resource and for many millions of Americans, the financial challenges are going to increase significantly over the next few months. That’s because as part of the deal to raise the US debt ceiling, the pandemic support for 43 million student loan borrowers has ended. From 1 September, interest is once again being charged on $1.6tn of outstanding debt and from 1 October payments restart. With the Supreme Court throwing out President Biden’s plans to forgive up to $20,000 of an individual borrower’s debt this means that from the start of the fourth quarter around 30 million of those 43 million borrowers will have to find an average of $350 per month to cover the loans - current students don't pay while some other borrowers have defaulted or have deferred. That works out at around $130bn in aggregate for a year in interest and repayment, equivalent to around 0.75% of consumer spending.  
US CPI Surprises on the Upside, but Fed Expectations Unchanged Amid Rising Recession Risks

European Consumers Concerned About Long-Term Inflation and Its Impact on Living Costs

ING Economics ING Economics 10.08.2023 08:55
Inflation’s here to stay, say European consumers Inflation is a major concern for consumers, and policymakers should worry that they think it's a long-term problem. Our latest ING Consumer Research survey indicates that people in eight European countries not only expect inflation to stay high for at least three more years but also expect those same goods to keep getting more expensive.   Food and energy prices top list of perceived inflationary pressures Households across Europe are worried that the so-called 'cost of living crisis' is here to stay. That's despite inflation rates in most European countries recently coming down, not least on the back of base effects and subsiding food and energy price pressures. Economists expect prices to fall further, but the consumers we've been speaking to in Germany, Belgium, the Netherlands, Spain, Luxembourg, Poland, Romania and also Turkey beg to differ. Most expect prices to stay well above what they consider 'stable' for at least three more years. And they also assume their inflationary pain points will stay the same.   These perceptions are concerning as far as they relate to future spending. We'll dive into the figures shortly, but our survey suggests three-quarters of people whose saving habits were impacted by inflation say they're saving less because they can't afford to or they're saving more to be prepared for future price increases. So, this should have a negative impact on discretionary spending. Only one in eight say they're saving less to spend their money now.  In a survey for ING Consumer Research, consumers were asked to compare the percentage of their net income they now spend on various groups of goods to what percentage they had been spending 5 years ago. Unsurprisingly, food and energy top the list; these items have also been leading official inflation statistics. This picture is roughly the same across participating countries, with Belgium and the Netherlands consistently producing some of the lowest numbers. In most eurozone countries, spending on savings and retirement provision suffered, whereas the non-eurozone countries had considerably larger fractions reporting increases rather than decreases.   Compared to 5 years ago, I now spend on:    
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Inflation Concerns: European Consumers Expect Long-Term Price Increases, Impact on Spending Habits

ING Economics ING Economics 10.08.2023 08:58
Consumers expect more of the same We asked consumers to make an assumption about the percentage of income they'd be spending five years down the line compared with today. And this column chart looks remarkably similar across the countries we surveyed. Most consumers do not appear to believe in any sort of base effect. Instead, they expect to spend more of their income on those categories that have already seen the largest increases.   5 years ahead compared to now, I assume I will spend this much on...     Many can't afford to save anymore More than 80% of consumers reported changes in their savings behaviour, with the vast majority being related to rising prices. Being forced to reduce the amount that goes into savings was by far the most-selected answer in all countries. Depending on the circumstances, it might also make sense from an economic point of view to save less and spend the money on goods before they become even more expensive. But this is not a popular choice among consumers, who instead prefer to save more in order to be better prepared for rising prices. More than 20% in Turkey reported this. So, while spending on basic needs is likely to simply go up or down with prices and stay more or less constant in real terms, discretionary spending is going to be hit. If prices do come down faster than consumers expect, we might see a bit of a spending spree from those who were able to build up savings in preparation for higher prices that never came. But that's unlikely to affect the overall picture.     Which of the following statements best describes the influence that inflation has had on your saving habits?     Inflation is believed to stay high for longer, especially in Turkey Turkish consumers have a different kind of experience with inflation than the rest of Europe. So, it doesn’t come as a surprise that only 10% do not have an opinion as to when inflation numbers will come down to a level of price stability; at least 18% selected “I don’t know” in all other countries. Some Turkish consumers are sceptical; others are fatalistic. The number of 35% for “5 years or more from now or never again” is the survey’s largest, and so are the 10% who already consider current inflation levels to mean price stability, as they are at least a bit removed from 2022’s record levels.   When do you think official headline inflation in your country will come back down to a level that you would consider price stability?   Consumers' assessment of their financial situation shows little signs of improvement If you don’t believe that the most pressing economic issue will subside anytime soon, you most likely won’t expect things to get better, and European consumers don’t either. Ratings of their own current financial situation on a scale from 1 to 10 compute to an average of 5.4, ranging from 4.6 in Turkey to 6.2 in the Netherlands. Looking back on their situation five years ago, consumers give an average score of 5.9, with every country seeing a drop of at least 0.1. And the outlook is bleak: Consumers’ expectations for their situation in 5 years average out at 5.2, with no country expecting an upswing.   How would you rate the following?   Consumers were also asked to rate the financial situation of their own peer group and that of their country’s general population over the same time span. Their peers' finances rank a bit lower than their own, with lower percentages for the extreme ends of the scale and a higher one for “I don’t know”. But the nationwide picture looks alarming: Consumers rate their fellow countrymen’s finances five years ago at just a bit lower than their own. But the current situation and the future look much worse to them, with a drop twice as big as the one they experienced themselves. What’s striking about this finding is that consumers’ individual perceptions and expectations about inflation don’t appear to tally with what they expect for their economies as a whole. Inflationary pressures, not least in food and energy, have been dominating global news headlines since the war in Ukraine started. That sustained media focus on people’s troubles may well explain the discrepancy.
Factors Impacting Selena FM: Exchange Rates, Competitive Pressures, Raw Material Prices, Construction Market, and M&A Risks

Multifaceted Impact: Defense Industry, Metal Prices, and Environmental Trends Shaping SecoWarwick's Path

GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 16.08.2023 14:15
Defense industry Russia's aggression against Ukraine has translated into a significant increase in investment in armaments. Deliveries of equipment from western countries to Ukraine have necessitated the rebuilding of military capabilities, benefiting the arms industry. SecoWarwick has exposure to the arms industry through the supply of equipment primarily to the aerospace industry (jet engine components, landing gear, fuel installation, engine blades, turbine blades and brakes, fasteners and other critical components). Ultra-fast induction furnace (VIM) for aerospace and vacuum system for carburizing and hardening customized UniCase Master Custom.     Metal prices, environment, carbon footprint, savings Higher prices for industrial metals (steel, copper, aluminium) have proven to be a strong driver for the metalworking and metal forming industries. Higher raw material prices and the concept of a circular economy in the European Union (circular economy) are increasing interest in recycling and metal recovery. In addition, demand is supported by an increasing awareness of environmental impacts (see ESG, including CO2). Below are some examples of applications for SecoWarwick solutions:  NG-DRI steel transformation. Pressure, atmospheric and vacuum furnaces can be used for the 'zero-emission steelmaking' process. Currently, around 150mn tons of steel are produced in Europe, of which ~80mn tons are produced using blast furnace technology. Over the next 50 years, the rising costs of CO2 (on average, blast furnace technology produces more than 2t CO2 per ton of steel) and the cross-border tax (CBAM), which is being introduced from 2026, will encourage manufacturers to resort to zero-emission technologies like NG-DRI, or carbon capture). Potentially, in the case of SecoWarwick, this could be an opportunity to sell up to 300 units (several thousand units across Europe) over a five-year timeframe at a few million euros apiece (several billion PLN in sales in a few years). Use of SecoWarwick furnace with NG-DRI technology in collaboration with GreenIron   Increasing interest in recycled aluminum - electrolysis requires approx. 17,000 KWh per ton of metal to produce mined aluminum, while the energy intensity of recycled aluminum is ~300-350 KWh. The growing awareness of automotive corporations will drive the growth of the recycling market, especially when corporations start adding up Scope3 emissions. Aluminum and steel are likely to be the first metals for which corporations will be willing to pay significant premiums if the metal comes from recycling (increase in demand for scrap melting furnaces) Increasing the efficiency of production lines. Investment in savings on the energy raw material consumption side. For example, the Vortex furnace reduces component processing time by up to 30% compared to other technologies. The Jet Caster furnace halves casting crystallization time and increases production efficiency by 82% (40% reduction in energy intensity). The ZeroFlow furnace gives an 8x reduction in ammonia consumption in the nitrocarburization process.    no gas emissions when processing metals. The VECTOR furnace line uses no fossil fuels in the process and emits no greenhouse gases and no harmful substances.  production of amorphous metals, processing of titanium and rare earth metals in general, production of metal powders for 3D printing.
Understanding Gold's Movement: Recession and Market Dynamics

Understanding Gold's Movement: Recession and Market Dynamics

InstaForex Analysis InstaForex Analysis 30.08.2023 13:53
Gold is traditionally seen by investors as a hedge against inflation. However, it is not inflation that drives the XAU/USD quotes, but recession. In the spring, the precious metal confidently rose towards historical highs amid expectations of an impending downturn in the U.S. economy. However, a stable labor market and positive macroeconomic indicators suggested a soft landing. This led to a collapse in the price of gold during the summer. As autumn approaches, the cooling economy is once again translating into its rise. Disappointing statistics from the U.S. are a reason to buy gold. The weaker the data, the less likely the Federal Reserve will implement its June forecast and raise the federal funds rate to 5.75%. Regardless of how much Fed Chairman Jerome Powell argues otherwise in Jackson Hole.   Furthermore, once a tightening monetary policy cycle ends, a dovish pivot usually follows. Monetary expansion creates a favorable environment for XAU/USD. Dynamics of the federal funds rate and gold     In this respect, the sharp decline in consumer confidence from the Conference Board in August and the continued peak in job vacancies and layoffs in the U.S. labor market in June are alarming signs for the U.S. economy and great news for gold enthusiasts. The chances of the Fed raising borrowing costs in 2023 have once again dropped below 50%, which adversely affected the dollar and allowed XAU/USD to counterattack. In essence, asset managers who reduced their net short positions on precious metals to their lowest levels since mid-March were mistaken. Aswere investors who withdrew money from ETFs for 13 weeks in a row. They were betting on the highest yield of U.S. Treasury bonds in over a decade. However, as soon as the U.S. macro data began to deteriorate, U.S. debt market rates declined, and XAU/USD quotes went up.   Dynamics of market expectations on the Federal Reserve rate   What's next? Gradual cooling of the labor market, a sharp reduction in excess savings, and mortgage rates rising above 7% paint a picture of new cracks in the U.S. economy. The tightening of the Fed's monetary policy occurs with a temporary lag. The more time that passes since the beginning of the cycle, the more painful the monetary restriction will be. Under such circumstances, recession risks will increase again.   In the end, the markets will return to the original conditions that existed in the spring and pushed gold to $2,075 per ounce. However, there is another scenario. The U.S. economy will continue to pleasantly surprise; the likelihood of forming a new inflation peak increases, as do the chances of raising the federal funds rate to 5.75%. Technically, on the daily chart of the precious metal, there is a "Double Bottom" pattern. Thanks to this, gold broke above the EMA and has the opportunity to continue its rally towards the fair value of $1,962 per ounce. As long as prices hold above $1,929, traders should focus on buying.    
Czech Republic Economic Outlook: Anticipating the First Rate Cut

Czech Republic Economic Outlook: Anticipating the First Rate Cut

ING Economics ING Economics 01.09.2023 09:52
Czech Republic: The first rate cut is coming The Czech economy posted negligible quarter-on-quarter growth of 0.1% in the second quarter and the latest monthly data show moderate growth in industrial and retail sales after very weak numbers in the first half of the year. However, the picture is still mixed. Looking at the details, we see that the only real driver of the economy is the auto sector and demand from abroad. Thus, full-year growth looks like it will be weaker than we previously forecast, but we still expect a rebound in the coming months, which the early data are already suggesting. Inflation fell to 8.8% YoY in July and was in single-digit territory for the second consecutive month and the lowest in the CEE region. Disinflation should continue in our view in the coming months but at a much slower pace. In addition, fuel prices have surprisingly risen following the excise tax hike, pushing inflation 0.3-0.4pp above our earlier forecast. Even so, inflation should be in the 7-8% YoY range in September. However, thanks to the base effect, inflation will rise back above 8% in October and remain there for the rest of the year. In January, inflation is expected to fall into the 2-3% YoY range, close to the Czech National Bank's target, due to the massive base effect and seasonality. We continue to expect the Czech National Bank to cut rates by 25bp for the first time in November. However, there is a clear risk that the central bank will want to stay on the safe side and wait for the January inflation number. This would mean delaying the rate cut until the first quarter of 2024. On the fiscal side, we have seen a big turn to the positive side in recent months. The government budget deficit has stabilised and there is a good chance that the government will deliver on its deficit target. Moreover, the government is continuously discussing further savings for this year. For next year, parliament has already approved a consolidation package in the first round and a continuation of the legislative package can be expected in September. Given the government's majority in parliament, we expect approval during October.  
Key Economic Events and Corporate Earnings Reports for the Week Ahead – September 5-9, 2023

US Jobs Data Signals Potential Fed Pause as Savings Dwindle

ING Economics ING Economics 01.09.2023 10:18
Jobs day!  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   August ended on a downbeat note for the S&P500 and on an upbeat note for the US dollar as, even though the Federal Reserve's (Fed) favourite gauge of inflation, PCE, came in line with expectations in July for both the core and headline figures – and even though the core PCE posted the smallest back-to-back rise since late 2020, the supercore services inflation – very closely watched by Mr. Powell and team, and that excludes not only energy but also housing, rose by the most on a monthly basis since the year began. Plus, personal spending remained strong – in line with the GDP data released earlier this week.   Digging deeper, the personal income fell slightly, meaning that Americans continue to tap into the reserves to continue spending. But the good news for the Fed is that the consumer spending at this speed could continue as long as the savings are available. And according to the latest data, personal savings in the US fell from 4.3% in June to 3.5% in May. Before the pandemic, the savings level was close to 9%. In conclusion, savings are melting, housing affordability is falling, mortgage rates are up, low-income Americans reportedly fall behind their important payments like rent, and the main street gives away signs of suffering. But the GDP remains above 2%, above the long-term trend which is thought by the Fed to be around 1.8%, and the scenario of soft landing is what the market is pricing convincedly.  Jobs day!  The US jobs data shows signs of loosening but the numbers are still at historically strong levels. Due to be released later today, the US unemployment rate is expected to remain at a multi-decade low of 3.5%, and the US economy is expected to have added around 170K new nonfarm jobs in August. In the last twelve months, the US economy added almost 280K jobs on average. If today's data comes in line with expectations, the last 12-month average will still remain close to 270K monthly job additions on average. Historically, we expect NFP to fall to around 50K per month a few months into recession. So, to tell you that: we are not there just yet.   Today, a softer than expected NFP figure, a slight deterioration in the unemployment rate, or softer-than-expected wages data could further cement the idea that the Fed will skip a pause at the September meeting, and maybe at the November as well. So far, the US Treasuries have had their best week since mid-July. The US 2-year yield retreated to 4.85%, while the 10-year yield flirted with the 4% mark for the first time in three weeks. But who says a rapid jump, also says a rising possibility of a correction. One thing is sure, we don't expect any major central banker to call victory on inflation just yet...  European inflation sticks around 5.3% due to rising energy  Latest CPI estimate showed that Eurozone inflation stagnated at 5.3% in August due to the sticky energy costs, versus a fall to 5.1% expected by analysts. Inflation in France for example accelerated at a much faster pace than expected in August, while the latest PMI numbers showed weakness in activity. German retail sales also fell faster than expected in July, whereas inflation in Germany also ticked higher last month. The combination of weak economic data and sticky inflation is a nightmare scenario for the European Central Bank (ECB). The ECB should raise the rates to continue fighting inflation, even though the underlying economies are under pressure. Today, the final PMI figures will likely confirm the ongoing slowdown. The EURUSD gave back most of its weekly advance after yesterday's inflation data, hinting that the market is worried that further ECB hikes will further damage economic activity. The bears are tempted to retest the 200-DMA support. If they are successful, the next natural bearish target stands at a distant 1.0615, the major 38.2% Fibonacci retracement on past year's rally, which should distinguish between the continuation of the actual positive trend and a bearish medium term reversal.   More stimulus from China  This week's PMI data showed that the Chinese manufacturing contracted at a slower pace, and today's Caixin PMI showed that it stepped into the expansion zone in August, whereas the Chinese services PMI fell short of expectations and the wave of further bad news, like Country Garden announcing an almost $7bn loss in H1, talk of the company's yuan denominated bond default, Moody's downgrading of the firm to Ca and Evergrande's wealth unit saying that it couldn't make payments on its investment products due to a cash crunch, combined to the existing and worsening property crisis get the People's Bank of China (PBoC) to announce lower payment requirements for first and second-time house buyers, and to encourage lower rates on existing mortgages. But it won't improve the situation overnight. The CSI 300 is closing a week PACKED with fresh stimuli on a meagre note.   Crude rallies  The barrel of American crude jumped more than 2% yesterday and is consolidating above the $84pb level. The next bullish targets stand at $85pb, the August peak, and $89pb, in the continuation of an ABCD pattern. But the rally can't extend above $90 without reviving global inflation expectations and recession worries, which would then start playing against the bulls. 
Metals Exchange Inventories in China Decline: Copper, Aluminium, and Nickel Stocks Fall

Turbulent Times Ahead: US Inflation on the Rise Ahead of September FOMC Meeting

ING Economics ING Economics 11.09.2023 10:35
Next week in the US, the last major reports will be released ahead of the September FOMC meeting. The general theme is likely to be higher inflation than seen as of late. All eyes will also be on UK wage data, which will be key for locking in another rate hike from the Bank of England. In Poland, we expect to see CPI to drop below 9%   US: The general theme likely to be higher inflation It is a very big week for US data as the last major reports ahead of the Federal Reserve’s September FOMC meeting come in. Consumer and producer price inflation, retail sales and industrial production are all due, with the general theme likely to be higher inflation than seen of late versus weaker activity relative to recent trends. Nonetheless, Federal Reserve officials are seemingly of the mindset that they will likely pause interest rate hikes again and re-evaluate in November with just 2bp of policy tightening priced for later this month. For inflation, we look for fairly big jumps in August’s month-on-month headline readings with upside risk relative to consensus predictions. Higher gasoline prices will be the main upside driver, but we also see the threat of a rebound in airfares and medical care costs, plus higher insurance prices. These factors are likely to also contribute to core CPI coming in at 0.3% MoM rather than the 0.2% figures we have seen in the previous two months. Slowing housing rents will be evident, but it may not be enough to offset as much as the market expects. Nonetheless, the year-on-year rate of core inflation will slow to perhaps 4.4%. We are hopeful we could get down to 4% YoY in the September report and not too far away from 3.5% in October. We would characterise these relatively firm MoM inflation prints as a temporary blip in what is likely to be an intensifying disinflationary trend. Indeed, it was interesting to see the Fed’s Beige Book characterise recent consumer spending strength as being led by tourism expenditure, which had been "surging". But the general sense was that this would be "the last stage of pent-up demand for leisure travel from the pandemic era". Moreover, other spending was softer, "especially on non-essential items". This may well show up in the retail sales report. We already know that auto volume sales fell quite heftily too, but remember this is a value figure and that higher prices, particularly for gasoline, will help keep overall retail sales just about in positive territory. But with savings being rapidly exhausted and credit card delinquencies on the rise, there are concerns that weaker numbers are coming – particularly with student loan repayments restarting, which will add to financial stresses on the household sector. Rounding out the reports, we expect industrial production to be much softer than the 1% jump seen last month. Manufacturing surveys continue to point to contraction, and weakness in the component could offset a bit of firmness in utilities and mining/drilling activities.      
Unlocking the Future: Reforms in Korea's FX Market Amid Demographic Shifts

Unlocking the Future: Reforms in Korea's FX Market Amid Demographic Shifts

ING Economics ING Economics 12.09.2023 08:59
Looking more closely at the FX market, Korea has seen value in accumulating sizable FX reserves to provide protection against financial turmoil. However, the government has accelerated efforts over the past few years to adopt a more market-friendly approach and to lift restrictive policy measures. These have improved the efficiency of the capital market along with Korea’s international investment position, which has shifted from a net debtor to a net creditor position amid growing concerns over a rapidly ageing population. The challenge for Korea is that right after the Asian financial crisis its merchandise surplus drove the current account surplus, but ageing is a potential cause of the decrease in savings and the current account surplus. Given that Korea has been experiencing one of the fastest demographic changes, there is a possibility that the current account balance will turn into a deficit in the near future. It thus becomes more important for policymakers to establish a virtuous circle of a current account surplus and net foreign asset accumulation, which is one of the major motives behind the ongoing FX market reform efforts.    The reforms Starting with a pilot in early 2024, the largest of the proposed FX reforms is to open up the onshore interbank FX market to Registered Foreign Institutions (RFIs). Currently, the onshore KRW market is only open to local institutions based onshore in Korea. These local institutions can also access the offshore Non-Deliverable Forward market. This means that, unlike the curves in Malaysia, the onshore and offshore KRW forward curves trade very close to each other. The biggest benefit here, however, is that RFIs could quote deliverable KRW forwards to their offshore customers and then clear those with an approved local broker in Korea.  The next biggest reform is the extension of FX trading hours. The current onshore trading hours of 0900-1530 KST will be extended to 0200 KST - a couple of hours after the London close. We hear that local Korean banks in Seoul are preparing to run night shifts to meet this need.   Further proposals centre on the development of market infrastructure in line with global FX markets (aggregators, third-party settlement), plus administrative measures for the new relationships between RFIs and locals and adjustments to the regulatory system. Structural reforms of Korea's FX market     Source: Korean Ministry of Economy and Finance
US Housing Market Faces Challenges Due to Soaring Mortgage Rates

US Housing Market Faces Challenges Due to Soaring Mortgage Rates

ING Economics ING Economics 25.09.2023 11:04
US housing feels the squeeze from high mortgage rates A tripling of US mortgage rates constrained both the demand and supply of housing, leaving existing home sales at post-GFC lows. Mortgage rates will rise further in the wake of the market's reaction to yesterday's Fed forecasts, further constraining activity.   Market acknowledges the risk of a final hike, but it will depend on the data The Fed's messaging of higher for longer interest rates has been taken on board by financial markets, with the dollar strengthening and the yield curve shifting higher in the wake of yesterday's decision. Nonetheless, the market remains somewhat sceptical on the prospect of the final 25bp interest rate rise that the Fed's forecasts signalled for this year, with the pricing for November's FOMC meeting only being 8bp with 13bp priced by the time of the December meeting. The jobs market remains tight, as highlighted by low jobless claims numbers today, but we continue to believe that core inflation pressures will slow meaningfully, the economic outlook will soften, and the Fed won't end up carrying through. The jobs market is always the last thing to turn lower in a downturn and there are areas of more obvious weakness.  For example, US existing home sales fell 0.7% MoM in August to a level of 4.04mn rather than rising the 0.7% MoM as the market expected. This is due not only to weakness in demand but also a complete collapse in properties available for purchase. The affordability issue is front and centre here, with prices having risen nearly 50% nationally during the pandemic, but demand has obviously been crushed by the fact that mortgage rates have tripled since the Federal Reserve started hiking interest rates. But this surge in borrowing costs is constraining the supply of homes for sale as well - people who are locked in at 2.5-3.5% mortgage rates cannot afford to give them up. They can't take the mortgage with them when they move home, so even if you downsize to a smaller, cheaper property, you are, in all likelihood, going to end up paying a higher monthly dollar mortgage payment.   We're in a crazy-sounding position Consequently, we are in a crazy-sounding position whereby the number of housing transactions is on a par with the lows seen during the global financial crisis, yet home prices are rising. This should be a boon for home builders, but note the big drop in sentiment and housing starts seen earlier in the week. The drop-off in prospective buyer traffic is making builders cautious. Mortgage rates at 7%+ will obviously do that over time, but it may be another sign of the household sector starting to pull back at the margin now that the Fed believes pandemic-era savings are close to being exhausted.   Existing homes sales transactions and home prices   Leading index still indicates recession can't be ruled out Meanwhile, the US leading economic indicator, which combines a range of other numbers, including jobless claims, orders, average work week, the yield curve and credit conditions, posted its 17th straight monthly decline. As the chart below shows, the index at these sorts of levels has been a clear recession indicator in the past, but for now, GDP growth is strong.   Leading index versus GDP (YoY%)   Our view remains that this strength in activity has been caused primarily by households running down pandemic-era accrued savings aggressively and borrowing more on credit cards. But with savings obviously being finite - note the Fed's Beige Book citing evidence of the "exhaustion" of these savings - and consumer credit harder to come by and certainly less affordable than it was, the cashflow required to finance ongoing increases in spending will have to increasingly come from rising real income growth. Rising gasoline prices will erode spending power while student loan repayments, strikes and the prospect of a government shutdown will add to the financial stresses on millions of households, so we will need to see substantial wage increases for everyone - not just auto workers - to keep this growth engine firing.  Given this situation, we not only think the Fed will leave rates at their current levels, we also see the potential for more rate cuts next year than the 50bp currently being signalled by the Federal Reserve.
A Bright Spot Amidst Economic Challenges

A Bright Spot Amidst Economic Challenges

Ipek Ozkardeskaya Ipek Ozkardeskaya 25.09.2023 11:05
A bright spot If there is one bright spot in Britain with all this, it is the FTSE100. First, the rising energy prices are good for the energy-rich FTSE100. Second, softer sterling makes these companies more affordable for international investors, who should of course think of hedging their sterling exposure, and third, more than 80% of the FTSE100 companies' revenues come from oversees, which means that when they convert their shiny dollar revenues back to a morose sterling, well, they can't really complain with a stronger dollar. Consequently, if a more dovish BoE is bad for sterling, the combination of a hawkish Fed and a dovish BoE and a pitiless OPEC is certainly good for the FTSE100. The index has been left behind the S&P500 this year, as the tech rally is what propelled the American index to the skies, but that technology wind is now turning direction. The FTSE 100 broke its February to September downtrending trend to the upside and is fundamentally and technically poised to gain further positive traction, whereas, the S&P500 is heaving a rough month, with technology stocks set for their worse performance this year, under the pressure of rising US yields, which make their valuations look even more expensive.   Interestingly, the US 2-year yield peaked at 5.20% after the Fed's hawkish pause this week and is back headed toward the 5% mark, but the gap between the US 2-year yield and the top range of the Fed funds rate is around 40bp, which is a big gap, and even if the Fed decided not to hike rates, this gap should narrow, in theory. If it does not, it means that bond traders are betting against the Fed's hawkishness and think that the melting savings, the loosening jobs market, tightening bank lending conditions and strikes, and restart of student loan repayments and a potential government shutdown could prevent that last rate hike to happen before this year ends. And indeed, activity on Fed funds futures gives more than 70% chance for a third pause at the FOMC's November meeting, and Goldman Sachs now sees the US expansion slow to 1.3% from 3.1% printed in the Q3. KPMG also warned that a prolonged auto stoppage may precipitate contraction. And if no deal is inked by noon today, the strikes will get worse.   One's bad fortune is another's good fortune  The Japanese auto exports surged big this year, they were 50% higher in yen terms. The yen is certrainly not doing well, but yes, you can't have it all. That cheap yen is one of the reasons why the Japanese export so well outside their country. And in case you missed, the BoJ did nothing today to exit their hyper-ultra-loose monetary policy. They didn't even give a hint of normalization, meaning that the yen will hardly strengthen from the actual levels. In the meantime, Toyota, Mitsubishi and Honda shares are having a stellar year, and the US strikes will only help them do better. 
Stocks Down, USD Up Amid Looming Government Shutdown Concerns

Stocks Down, USD Up Amid Looming Government Shutdown Concerns

Ipek Ozkardeskaya Ipek Ozkardeskaya 27.09.2023 13:04
Stocks down, USD up By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank     Investors continue to dump stocks and buy US dollars on looming uncertainty regarding whether the US government will be shut in three days. There is progress regarding a 6-week short-term funding deal, but getting an approval from the Senate will be a challenge. In the meantime, falling savings, rising theft and delinquencies hint at the growing cost-of-living crisis whereas the central banks' inflation fight is certainly not over just yet.  The looming government shutdown talks continue feeding into a stronger US dollar. US politicians have agreed to a 6-week short-term funding to keep the government running for another month and a half, but getting approval from the full Senate will be a challenge with far-right Republicans' determination to 'shoot it down if it reaches the floor'.   The S&P500 fell to the lowest levels since the beginning of June and the Stoxx 600 could slip below 445 due to slowing European activity, waning Chinese demand, the European Central Bank's (ECB) pledge to keep the monetary policy tight until inflation comes down significantly. The euro's depreciation makes inflation harder to ease along with rising energy prices.     After a few sessions of consolidation, and despite a more than 1.5-mio-barrel build in US crude inventories last week, US crude is upbeat this morning, again. The barrel of American crude is trading above the $92 level, as the European nat gas futures flirt with the 200-DMA. The EURUSD lost around 6.5% since the July peak. Oversold market conditions call for consolidation, or recovery, yet appetite in the US dollar remains too strong to let the other currencies breathe. And if this is not enough bad news, the EU is now investigating the degree to which China has subsidized EV manufacturers. Tesla is clearly in a hot seat, but not only. Some European carmakers including Renault and BMW also have joint ventures in China and will be probed. The cherry on top, VW announced to cut EV output at German sites due to lacking demand. All this to say, there is little place to go in the market other than the FTSE 100, which could at least take advantage of the energy rally.     The combination of higher energy and stronger dollar has well pushed inflation in Australia to 5.2% in August, up from 4.9% printed a month earlier -which was a 17-month low. We could see a similar upturn in global inflation metrics due to rising oil prices. The Eurozone data will soon be coming in. Unfortunately for the Aussie, the uptick in inflation won't prevent it from getting smashed against the US dollar. The pair will likely test and take out the September support of 0.6360

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