us gdp

ECB decision in focus as US earnings season continues While central bank decisions and events have become increasingly relevant and followed, today's announcement could hold even more importance as it will precede next week's FED announcement where the US central bank is expected to announce the long awaited QE tapering. The ECB is unlikely to change it's rates at the moment but we could see further indications of what the central bank is planning and what it's economic outlook is heading into Q4 2021, particularly in Lagardes press conference shortly after the decision. The announcement will follow German CPI data and will precede the release of earnings report from two US mega caps (Apple and Amazon).   US GDP for Q3 expected to show significant slowdown Today's US GDP report for Q3 could be particularly impactful as it is expected to show a significant slowdown, another indication that rising costs, supply chain issues and restrictions are continuing to have a noticeable impact on the economy as a whole while affecting certain sectors more noticeably. It is possible that today's data could influence the FEDs upcoming decision where it is expected the US central bank will announce its QE tapering as the issue has been delayed several times. While annualized GDP growth is expected at 2.7%, down from 6.7% in the previous quarter, a significantly better than expected report could seal the deal on the upcoming QE decision.

Summary: Various Central Bank representative speakers are due. GDP data due to be released on Monday. This week is busy for the market in terms of news and release of data This week is a very busy day for the global markets as many calendar events are due including; European Central Bank (ECB) President Christine Lagarde, Bank of Englands (BOE) Gov Bailey and Federal Reserve Chairperson Jermone Powell all due to speak. The markets will watch these speakers and look for any clues regarding the future of monetary policy, interest rates and recession concerns. In addition to central bank announcements, there are many economic data releases due today that the markets will be watching closely as they will give an indication of the current economic situation, if it has worsened or improved. These economic data released include: US Pending Home Sales (MoM) for May, US Core Durable Goods Orders (MoM) for May, CB Consumer Confidence for June, Australian Retail Sales Data, US Crude Oil Inventories, China’s June Manufacturing PMI, German Unemployment Change for June, US Initial Jobless Claims, Some of the more prominent 3 star events include US GDP (QoQ) data for Q1, UK GDP (QoQ) data for Q1, UK GDP (YoY) data for Q1, Canadian GDP (MoM) data for April. Sources: investing.com

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

In the world of economics, we use many indicators to describe the situation of a farm. A lot of these are important, but GBP is really essential. Recently, the situation of the economies and markets has been influenced by interest rates. But what exactly can we learn from these data, decisions?   What is Gross Domestic Product (GDP)? We often Hear that some economy is expecting growth, but what does that mean? Read more: The US Economy Expects Growth (GDP) In The Last Quarter (Q3) | FXMAG.COM By definition, gross domestic product is the monetary value of all finished goods and services produced in a country during a specified period. GDP is an economic snapshot of a country that is used to estimate the size of an economy and its rate of growth. GDP can be calculated in three ways using expenditure, production or income. It can be adjusted for inflation and population to provide deeper insight.     What do we learn from GDP? It gives us some idea of where the national economy is going we can determine whether the economy is developing and how fast. It is thanks to this that we can learn about a recession or the growth or stagnation of farmhouses. Governments and other entities such as central banks can adjust their actions by knowing the results. If growth slows, they can introduce expansionary monetary policy to try to stimulate the economy. If the pace of growth is solid, they can use monetary policy to slow things down and try to fight off inflation. Moreover, it enables analysts to compare countries economically. However, it should not be treated as a hard economic indicator, because there are many gaps in this method of "measuring the economy". Since GDP is a direct indicator of the health and growth of an economy, companies can use GDP as a guide in their business strategy.   There are also types of GDP. The main ones are: Nominal GDP is an assessment of economic production in an economy that includes current prices in its calculation. All goods and services counted in nominal GDP are valued at the prices that those goods and services are actually sold for in that year. Real GDP is an inflation-adjusted measure that reflects the number of goods and services produced by an economy in a given year, with prices held constant from year to year to separate out the impact of inflation or deflation from the trend in output over time. GDP per capita is a measurement of the GDP per person in a country’s population. Per-capita GDP shows how much economic production value can be attributed to each individual citizen.   When a central bank lends money - what is interest rate? Interest rate is the amount a lender charges a borrower and is a percentage of the principal—the amount loaned. The interest rate also applies to the amount earned in the bank or the cashier from the deposit account. The interest rates charged by banks depend on many factors, such as the state of the economy. A country's central bank sets the interest rate each bank uses to determine the APR range it offers. When the central bank sets interest rates high, the cost of debt goes up. The high cost of debt discourages people from taking loans and slows down consumer demand. So it helps against inflation, but it is negative for borrowers because the cost of debt rises and sometimes it can be difficult to pay off. In the situation of some households, this state of affairs can cause financial problems, such as indebtedness to friends or elsewhere, and directly affects the standard of living.     Stimulating economies On the other hand, economies are often stimulated during periods of low interest rates because borrowers have access to cheap loans. Because the savings rate is low, companies and individuals are more likely to spend and buy more risky investment instruments such as stocks. This spending fuels the economy and injects capital markets. Simply put, for economies interest rates are crucial because they help stimulate their growth and also help in times of high inflation. Sources: Dictionary Of Economics And Commerce

Internationally, governments face a difficult challenge: supporting their citizens at a time when prices are rising dramatically, especially for necessities such as food and fuel, which have been deeply affected by the war in Ukraine. The Outlook The outlook for the global economy heading into 2023 has worsened, according to multiple recent analyses, as the ongoing war in Ukraine continues to hamper trade, especially in Europe, and as markets await a more complete reopening of the Chinese economy after months of destructive COVID-19 lockdowns. In the United States, signs of a tightening labor market and a slowdown in economic activity fueled fears of a recession. Globally, inflation picked up and business activity, particularly in the euro area and the UK, continued to decline. In June, inflation rose to a 40-year high of 9.1% and remained at 7.7% in October, well above the Fed's target of 2% a year. Fed Chairman Jerome Powell and his associates responded by raising interest rates from near zero in March to a range of 3.75% to 4%, with signaling indicators likely to exceed 5% for the first time since 2007. 2.6% in Q3 Gross domestic product in the US in the third quarter of 2022 increased by 2.6 percent. quarter-on-quarter (annualized), according to preliminary data from the Department of Commerce. This reading is higher than market expectations, as an increase of 2.4% was expected. This result was presented at the end of October (27.10.22) and this gave the Federal Reserve room to raise interest rates further. Forecast Expectations for the next reading are even more positive. GDP is expected to reach 2.7%. Source: investing.com How it is calcuated? The US uses a different way than European countries to compare GDP. They annualize their data, i.e. they convert short-term data as if they were to apply to the whole year, e.g. the monthly value is multiplied 12 times, and the quarterly value 4 times. For example, if GDP growth in a given quarter was 1%. compared to the previous quarter, the annualized growth rate was - to put it simply - slightly more than 4%. This means that we cannot directly compare data on GDP dynamics in the US to that recorded in European countries that publish data on economic growth dynamics without annualization. Recession? There is currently no recession in the US as it was not declared by the NBER, although the country entered a technical recession in the second quarter of 2022 with a second consistent quarter of negative GDP growth. However, there are several factors pointing to a growing likelihood of a recession in the coming months. Painful inflation can often persist without pushing the economy into recession. On the other hand, the actions of the US Federal Reserve (Fed), which sticks to a 2% price increase target, are increasingly likely to push the US into recession. Fed economists said it was a virtual coin toss as to whether the economy would grow or plunge into recession in 2023. Central bank staff cited rising pressure on consumer spending, trouble abroad and higher borrowing costs as short-term headwinds. Among the forecasts of a recession in the United States, there seems to be a growing consensus on its occurrence. However, there are some discrepancies as to how deep and how long it will be. Source: investing.com

Tomorrow has the last bit of potentially major market moving data as trading winds down for the holidays. Which means the figures could have implications for how the new year starts, as attention will come back to the economic outlook for the US in particular. There is still a strong majority of economists who expect the US to fall into a recession next year. That appears to also be the assessment of many CEOs, as the theme from last quarter's earnings was of cutting guidance and cautionary outlook. But where there is substantial disagreement is just how much of a recession there will be. Many couch those expectations around how the Fed will react to the data as it comes out. Charting the trend If businesses expect there to be a recession, they will hold back on investments and try to build up cash to weather the uncertainty. Which means they spend less, contributing to a slowing economy. A market downturn can be something of a self-fulfilling prophecy. Comments from the Fed that interest rates will keep rising also contribute to the general gloom. While expectations of slower growth can lead to slower growth, that usually doesn't tip over to be a full-blown recession. A so-called "hard landing" implies that the conditions expose an underlying issue that needs a market readjustment. Typically, recessions happen because of an excess of inventories. That can be because businesses got too overconfident and overproduced, or demand has been destroyed (for example, by a prolonged period of high inflation). Some important indicators Yesterday's consumer confidence figures helped boost optimism as they were trending in the right direction to avoid a hard landing. They were for the crucial period leading up to the holidays, in which there is an increase in spending. Consumer confidence hit an eight-month high. Additionally, inflation outlook fell to the lowest level seen in over a year. Both are seen as a sign that the US consumer is still healthy. The other side of the equation is how much money Americans are actually making and spending. Tomorrow is the release of November Personal Income, which is expected to continue to grow but slow the pace to 0.3%, down from 0.7% prior. Not surprising, personal spending is expected to follow a similar pattern, slowing to 0.2% compared to 0.8% prior. Slow growth is better than no growth Also tomorrow is the release of durable goods orders, which shows how confident businesses are in medium-term growth as they invest money on goods that take a long time to give a return on investment. Here things are a little less optimistic, as durable goods orders are expected to turn to negative -0.6% compared to 1.0% growth in the prior month. However, that is expected to be due to factors outside of the economy, as the core figure which excluded defense spending is expected to remain positive, though grow slower at 0.2% compared to 0.8% prior.

Let's find out what Matt Weller (FOREX.com, City Index) told FXMAG.COM team about Australian inflation and RBA decision, British pound and the US GDP. This week Australian CPI goes public, what do you expect from the print and the RBA decision on February 7th? The market is currently split between expecting the RBA to stand pat or raise interest rates 25bps when it meets in early February, so every economic report that hits the wires over the next couple of weeks will take on additional significance. The monthly AU CPI report showed headline price pressures remained sticky at 7.3% in November, the same as in Q3, and if inflation doesn't show signs of abating, it may tip the RBA in favor of a rate hike at its February meeting. Do you expect GBP may be somehow boosted by PMIs on Tuesday? After last week's disappointing December UK sales report, traders are keen for an update on how the UK economy has been performing in the new year, so the PMI release could absolutely have a big impact on the pound. With GBP/USD testing key longer-term resistance around 1.2450 as of writing, the odds may favor a pullback in sterling unless the PMI report shows unexpected strength. Read next: The price of Tesla has gained over the past week as we approach its earnings release. The price of the stock climbed 12.50% over a 5-day period | FXMAG.COM USA GDP is the big one this week, what asset could benefit the most from the lower/higher-than-expected print? Are you of the opinion GDP will be seriously taken into consideration by FED? GDP is, by definition, a lagging indicator of the performance of the underlying economy, so I wouldn't expect it to have a particularly big impact on many markets. For its part, the Fed is focused on more timely data, including the monthly jobs and inflation reports, and in any event, Jerome Powell and Company appear to have already settled on a 25bps hike for next week's meeting, so any impact on monetary policy is likely to be minimal.

As you surely know, there's a lot of macroeconomic and stock news to talk about, so we asked HF Markets Head Market Analyst about the Australian inflation print, RBA decision, British pound amid PMIs, the US GDP and, to some, the most tempting events of the near future - McDonald's and Apple Earnings. This week Australian CPI goes public what do you expect from the print and the RBA decision on February 7th? Australian inflation, as determined by the CPI print today, is expected to move higher to 7.6% from 7.3% on an annual basis, however the quarterly figure is expected to fall to 1.6% from 1.8%, the lowest level since January 2022, as the low Q4 2021 figure drops out of the calculation. The RBA decision on February 7 remains "in flux" as far as the current market expectations are concerned. 14bp appears to be priced in as AUDUSD breaches the key psychological 0.7000 level this week. However, Hawks are calling for 25bp and Doves will be pitching a "No Change" policy. Do you expect GBP may be somehow boosted by PMIs on Tuesday? UK PMIs were disappointing, with the important Services sector slumping to a 2-year low. Data showed a 48.0 reading against expectations of 49.7 with the sector remaining in contraction, along with the manufacturing sector which reported a slight uptick to 46.7 from 45.3. Adding to woes for the UK was news that government borrowing in December hit £27.4bn, a 30-year high, and that ONS productivity data was revised significantly lower, with the UK going from the fastest growing G7 nation to the second slowest. Read next: South African Petrochemical Company Sasol Is Moving Away From Fossil Fuels, Germany Again Refused To Send Tanks To Ukraine| FXMAG.COM USA GDP is the big one this week, what asset could benefit the most from the lower/higher-than-expected print? Are you of the opinion GDP will be seriously taken into consideration by FED? USA Q4 GDP should show a growth to 2.5% with a 2.6% clip for real final sales and a tiny $2 bln inventory addition that leaves a restrained $40 bln inventory accumulation rate. The Q4 sales climb should be led by a solid 3.4% pace for consumption, alongside an estimated 5.5% growth pace for nonresidential investment. The housing sector should continue to weigh on the economy, with an estimated -12.0% Q4 contraction rate for residential investment. The solid close for GDP growth into the end of 2022 bodes well for a soft-landing path in 2023, though expectations are for a -0.4% contraction rate for GDP in Q1, and the risks for growth in 2023 lie to the downside. All this said, the FED will be more interested in Friday's Core PCE Price Index and its possible m/m increase to 0.3% from 0.2%. Earnings season is underway: what do you expect from McDonald's and Apple next week? Next week is a huge week for Q4 Earnings, with the tech giants reporting, topped by APPLE, who report after the market closes on Thursday February 2. Apple shares are up 13% from January lows with the market expecting quarterly revenues of a colossal $122 bln and EPS (Earnings Per Share) to be around $1.93-1.96. The outlook for the key markets of the US and China will be key to how the shares perform from here. Earlier in the week (January 31 before the market opens) iconic restaurant chain McDonald's reports Q4 Earnings. Consensus EPS are in the range of $2.45-$2.51, with revenues expected to show a lift to $5.60 bln.

European markets underwent another modestly negative session yesterday, weighed down by negativity from the other side of the Atlantic after US investors reacted negatively to a weak outlook from Microsoft. The Nasdaq 100 led the way lower initially, pulling sharply away from its 200-day SMA, however a late rebound saw the index close well off the lows of the day after the Bank of Canada raised rates by 25bps, as well as signalling a rate pause for the next few meetings, as they assess the impact of multiple rate hikes on the Canadian economy. It appears that markets reacted to this announcement on the basis that the Federal Reserve might look to do something similar when they meet next Wednesday, given that US markets turned around off their lows after the Canada rate decision was announced. This would be a huge assumption and could well end in tears next week. We certainly won't have to wait long to find out. Having seen Microsoft disappoint on guidance, attention quickly shifted to the next set of earnings numbers, notably Tesla after the bell, where we saw a similar focus on margins and guidance. As a result of yesterday's rebound in US markets, European markets look set to open higher this morning as we look ahead to today's US Q4 GDP.   Having started the first half of last year with two successive quarters of negative GDP growth, the US economy saw a return to positive GDP growth in Q3, of 3.2%, after a late upgrade from, 2.9% at the end of last year, with personal consumption coming in at 2.3%, a decent improvement on the 2% seen in Q2, and a significant improvement on the first iteration which only came in at 1.4%. Read next: McDonald's earnings: Currently, it is anticipated by several analysts that the EPS forecast for the quarter ending December 2022 is $2.44 | FXMAG.COM The upward revision higher came about as a result of a rebound in consumer spending, as well as higher government spending. As we look towards today's first iteration of Q4 GDP is seems quite likely that we'll see a slowdown from the strong performance in Q3. Expectations are for a modest slide to 2.5%, although with signs in recent months that consumer spending is slowing you might think that there could be considerable downside risks to that estimate. Despite these concerns the estimates for personal consumption are for an increase from 2.3% to 2.8%. Quarterly core PCE is expected to fall sharply to 3.9% from 4.7%.  Weekly jobless claims are also in focus after slipping to 190k last week and matching the lows seen last September. The slide in claims since the 241k peak in November suggests that the US labour market is still very tight, with little indication despite the recent announcements around job losses across the tech sector that the jobs market is deteriorating. That doesn't mean however that what we're starting to see in tech won't ripple out across the rest of the economy in due course. Expectations are for claims to edge higher to 205k.   EUR/USD – continues to range between the highs this week at 1.0927, and wider resistance at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area. GBP/USD – rebounded from the 1.2260 area yesterday retesting 1.2400 in the process. We need to see a move through the 1.2450 area to target further gains. Above 1.2450 could see a move towards 1.2600. A move below 1.2250 could see a move towards 1.2170.  EUR/GBP – pulled back from the 0.8850 area yesterday with resistance at the previous highs at 0.8900. Still have support above the 50- and 100-day SMA which we saw last week at the 0.8720/30 area. Below 0.8720 targets 0.8680. USD/JPY – slid back from trend line resistance from the October highs, which now sits at 131.00, earlier this week. Further declines could see a return to the lows at 127.20. We have interim support at the 128.20 area initially. FTSE100 is expected to open 19 points higher at 7,764 DAX is expected to open 88 points higher at 15,169 CAC40 is expected to open 36 points higher at 7,080 Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC To stop receiving market commentary emails from Michael Hewson, please reply to this email with 'Unsubscribe' in the subject line. CMC Markets is an execution-only service provider. 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According to Gary Thompson (FXOpen UK), lower print of the US GDP could make GBPUSD even more volatile. The expected print is 2.6%. FXMAG.COM: USA GDP is the big one this week, what asset could benefit the most from the lower/higher-than-expected print? Are you of the opinion GDP will be seriously taken into consideration by FED?  Gary Thomson, Chief Operating Officer at FXOpen UK: The forthcoming announcement which will reveal the GDP for the fourth quarter of 2022 in the United States is a very interesting metric specifically because this is the period of last year during which the previously rapidly increasing inflation rate actually slowed down, stopped and inflation began to reduce. Whereas a year ago, inflation was at a 50 year high, and double figures were being approached, inflation in the United States had declined to 6.5 percent in December. The reducing levels of inflation began in October, and by November 2022 the inflation rate was standing at 7.1 percent, therefore looking quite healthy compared to mainland Europe and the United Kingdom. In the United Kingdom, inflation remains at approximately 10%. Therefore, the Federal Reserve Bank may be unperturbed and not concerned with either reducing or increasing interest rates, largely because the inflation levels are now far lower than previously, but the economy is still slowing, therefore a conservative view may be taken. Read next: Trump Returns To Social Media, Meta Will Restore The Former President's Account| FXMAG.COM The labor productivity of the United States' workforce will be interesting during this period which shows strength in the US economy compared to its European counterparts, but of course lower inflation in the US means that North American companies need to pay more to their European suppliers and subsidiaries as the inflation remains high in those regions by comparison, potentially affecting corporate revenues. Therefore, GBPUSD values may be worth watching, as the British Pound has been very volatile against the Dollar recently and a lower GDP figure may exacerbate this. It is entirely possible that the overall economy may have actually slowed during the fourth quarter of 2022, and one particular forecast alludes to that already. Tomorrow, officials are expected to report that US GDP grew by 2.6 percent in the three months to December 31, according to a Bloomberg poll of economists, which, if this turns out to be correct, would represent a move lower from the 3.2 percent in the third quarter.

Amidst all the debate of whether the US is heading into a recession this year, we get the first look at last year's GDP figures. This could be the biggest market moving event of the week, especially if expectations are not met. And there is something of a wide range of forecasts. The Fed's GDPNow tool is saying it will be 3.5%, while the consensus among economists is that it will be 2.6%. That compares to the prior quarter's revised 3.2% result. But it's important to remember that just as a country can have a "technical recession", it can have "technical growth" as well. One of the main drivers for third quarter GDP growth was an unexpected decline in imports. Meaning that the trade calculation contributed to GDP, but only because Americans were buying less. It's all inflation's fault Given the context of high inflation at the time, it's logical Americans were buying less. At the time, the dollar was relatively strong, meaning that imports constituted deflationary pressures. Since then, the dollar has gotten weaker in anticipation that the Fed will stop raising rates. That means imported goods have increased in price, which could technically support a growing GDP figure. The other interesting factor is that a recent review of leading indicators by the Conference Board showed that all segments of the US economy were decreasing except for two. Those were employment and personal consumption. The unemployment rate remains remarkably low, just a couple decimals off a multi-decade low. But that is likely because it's still dislocated from covid. Where's the money coming from? Turning to address the personal consumption factor, Americans have been spending down their savings of late. More worrisome for the long-term resilience of the economy, they have been taking on increasing amounts of debt. Major US banks pointed this out in their latest earnings, as deposits have diminished. Concurrently, net charge-offs (a measure of distressed debt) have been creeping higher, as Americans struggle to pay for their credit cards. Read next: McDonald's earnings: Currently, it is anticipated by several analysts that the EPS forecast for the quarter ending December 2022 is $2.44 | FXMAG.COM The head of JPMorgan, who's rather pessimistic about the economic future of the US, pointed to the rate of savings among his bank's customers is dwindling and would run out by October of this year. If interest rates remain high, it would be much harder for people to take on debt to continue spending. The largest driver of the US economy, and one of only two positive sectors at the moment, is dwindling. Gauging the market reaction The market might not particularly like a good GDP figure, since that would imply the Fed could keep hiking in order to tame inflation. But, even if that hurts stocks, it could give the dollar a bit of a boost. Meanwhile, a disappointing figure could give the markets some relief over rate hikes, as it could be interpreted as a sign that the Fed's forecasts are a little too optimistic, and they might even have to cut rates in the near future. The Fed meets next week, and there is a pretty solid consensus that there will be just a 25bps hike. This is the last major data point before the meeting, because January NFP figures won't be released until the Friday after the FOMC. Therefore this data could be pivotal for expectations for the Fed.

The preliminary estimate for the fourth quarter showed annualised growth of 2.9% (quarter-on-quarter growth multiplied by 4). This is a slowdown from the previous period (3.2%) but better than expected (2.6%). Compared to the same quarter a year ago, the economy grew by only 1.0%, after 1.9% in the previous quarter. This growth is well below the trend rate (around 2% on average since 2000), reflecting the difficulties of growth in an environment of sharply rising interest rates. Stronger-than-expected GDP growth could be seen as good news for the stock market. Investors can bet that the economy is adjusting relatively well to monetary tightening. But this is a very fragile hypothesis, as strong growth in the current monetary cycle will allow the Fed to raise rates faster or further than previously expected. Much of the rise in the Nasdaq100 since the start of the year has been driven by expectations that rates will be cut before the end of the year, despite assurances of the contrary from Fed officials. Read next: Tesla reports decent results. EPS reaches $1.19, operating profit hit $3.9bn | FXMAG.COM In addition, the dollar index is hitting multi-month lows in the currency market, confirming that expectations of Fed dovishness are the main driver. The norm, in this case, would be for the dollar to strengthen in response to better-than-expected GDP growth data. The combination of data and market reaction makes it necessary to pay close attention to what signals the Fed will send out after next Wednesday's meeting.

We're past the US GDP release which exceeded the expectations. Instead of 2.6% growth, we saw a 2.9% print. Let's have a look at eToro's Pawel Majtkowski's comment on this release. USA GDP is the big one this week, what asset could benefit the most from the lower/higher-than-expected print? Are you of the opinion GDP will be seriously taken into consideration by FED? US GDP in the fourth quarter of 2023 increased by 2.9% (annualized - seasonally adjusted). This is a result better than the expectations of economists, who expected an increase of 2.6%. Growth slowed down slightly from 3.2% in Q3, but the data show that the US economy is still avoiding recession. Growth is driven by both US (up 1.4%) and global consumer spending in the form of US exports (up 0.6%). It is this unrelenting demand that keeps the economy from going into recession. Foreign demand for US goods is supported by a weakening dollar and China's growing opening up. However, at the same time, the value of unsold production in the form of inventories is growing (the largest increase, i.e. by 1.5%). The US real estate market is doing worse. Housing demand fell for the seventh quarter in a row, which is not surprising given the pace and scale of interest rate hikes. The weakness of the housing market is a big risk for the market, but this pessimism is slowly penetrating the wallets of average Americans. Read next: The Aussie Pair Is Holding Above 0.7100, The Major Currency Pairs Are Waiting For US PCE Report| FXMAG.COM This good data gives the Fed more room for maneuver in raising interest rates. However, the market pivot and the end of the hike cycle seems to be imminent. The market expects a rate hike at the next Fed meeting next week. However, the question remains whether interest rates will reach 5% (at the next meeting). The end of the series of interest rate hikes in the US is a chance for the markets to get out of the bear market and rebuild calmly. We anticipate that this process will take place gradually. Company valuations should improve while profits and financial results deteriorate. However, it is already evident that the results of American companies are better than expected and 65% of S&P500 companies that published results exceeded their previous forecasts.

We're happy to share Dominik Podlaski's, analyst at Bitget views on the RBA decision, British pound, the US GDP and earnings. This week Australian CPI goes public what do you expect from the print and the RBA decision on February 7th? Since the beginning of October we have had some relief at the global market, although it didn’t change the looming threat of recession. In my opinion, Australian CPI already peaked in October, so I expect it to lower down to 6.8%. On the other hand, I believe it won’t change the strict attitude of the RBA. 15th of December EBC followed FED hawkish approach. Klaas Knot, member of EBC from Denmark, declared the raise of interest rates by 50 points in February and March. The continuation of monetary policy tightening in Q2 is also probable. RBA governor Philip Lowe highlighted multiple times their main goal – “… target for monetary policy in Australia is to achieve an inflation rate of 2–3 per cent…” Therefore, in my opinion RBA will follow the USA and the EU in this case and we can expect a raise by half a percentage point. On top of that, I expect the following RBA meetings to have similar results. Read next: USA Q4 GDP should show a growth to 2.5% with a 2.6% clip for real final sales and a tiny $2 bln inventory addition | FXMAG.COM (Source: Reserve Bank of Australia (rba.gov.au)). Do you expect GBP may be somehow boosted by PMIs on Tuesday? This PMI may give GBP slight spike, especially if we will have reading over 50, what could mean major trend reversal. Right now, GBP it’s regaining some of its strength. Unfortunately, in the long term it won’t matter, as U.K. economy may be severely hit by recession, as economists predict. Goldman Sachs forecast a 1.2% contraction in U.K. real GDP over 2023, while other major countries may expect small (but still) expansion. Therefore I perceive incoming weeks as calm before the storm for GBP, as in my scenario it will surely follow the U.K. shattered economy. (Source: GDP - International Comparisons: Key Economic Indicators - House of Commons Library (parliament.uk)) FED won’t consider changing their plans after the announcement of GDP, as in this case even the good news for 2022 won’t be satisfying with the terrible GDP forecasts for 2023 In my opinion, we will see higher GDP than expected 2% - in Q3 and Q4 revisions we’ve seen stronger economic momentum than expected. Despite of this rather positive surprise it will still on the decreasing trend. Therefore, I expect safe haven assets, like gold, silver and platinum, to thrive. We may also see higher demand for Government Bonds, although the hawkish attitude of FED may lower the amount of investors looking for them. Higher than expected print may also be impulse for DXY to have a relief bounce, but I’m afraid it will still remain in the downtrend. (Source: Economic Forecast for the US Economy (conference-board.org)) FED won’t consider changing their plans after the announcement of GDP, as in this case even the good news for 2022 won’t be satisfying with the terrible GDP forecasts for 2023. Additionally, the GDP measurement is inflated by CPI and its lagging indicator, while FEDs decisions will have an effect in the near future. Therefore, in my honest opinion, the FED will remain strictly hawkish regardless of the GDP reading. Huge rounds of redundancies by Microsoft, Google, Amazon measured in thousands of employees raised many questions about their status Dark clouds gathered over market giants. Huge rounds of redundancies by Microsoft, Google, Amazon measured in thousands of employees raised many questions about their status. Therefore I don’t expect the earnings data to be impressive, but I wouldn’t be surprised if none of them actually witnessed shrinking revenue. Despite what the audience may be thinking in my opinion it’s not a sign of weakness, but an adaptation. In particular, they will need to do some positive PR after the redundancies and slowed down growth. During times of market despair strongest should make bold moves instead of counting on stable growth, and that’s what we can expect from them in the incoming weeks. Microsoft just’ve announced multibillion dollar investments with OpenAI – creator of ChatGPT. Therefore I expect nothing less from other giants but fireworks as well. (Source: Microsoft and OpenAI extend partnership - The Official Microsoft Blog)

As the US GDP release is almost here, we asked Dominik Podlaski (Bitget) to share his view on tomorrow's print - would we see a near 3% growth for the third time in a row? Until the FED has the inflation under control, it is expected to keep raising interest rates Dominik Podlaski (Analyst at Bitget): According to the top world economic analytics it is highly improbable US GDP will see such a reading for Q1 2023. It rather seems rational to see reading even below 0% in the Q1 with the lowest point in the late Q2 of 2023. The bounce we’ve seen in the second half of 2022 didn’t change the hawkish attitude of the FED and their plans for monetary policy tightening. FED statements and global economy forecasts suggest further decrease of US GDP in the first half of 2023.Despite interest rates being highest since June 2006 the inflation is still way too high over the desired level. Until the FED has the inflation under control, it is expected to keep raising interest rates. Therefore, there are forecasts of them reaching levels around 5.25% in 2023, which means the first half of the 2023 won’t bring relief to the markets. Read next: Litecoin blockchain has introduced a counterpart to the Ordinals protocol | FXMAG.COM In summary the effects of the inflation are already seen all over the world, but to have the markets flourish again we have to wait for the monetary tightening policy to have the effect. Until then both GDP and stocks will be under heavy pressure. Sources: https://www.kiplinger.com/personal-finance/banking/savings-rates https://www.conference-board.org/research/us-forecast

FXMAG.COM asked Michael Hewson, Chief Market Analyst at CMC Markets, for his view on the US GDP release. Does he think we would see a near 3% growth third time in a row? Michael Hewson: Despite the rise in interest rates, we’ve seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4, after a weak H1. The first iteration of US Q4 GDP saw the economy expand by 2.9%, which was above expectations of 2.5%. Personal consumption was a little disappointing, slipping back to 2.1%, which wasn’t that surprising given that November and December retail sales contracted. This trend will probably rebound in the January personal spending and income numbers. 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 US GDP hit 2.6%, slightly less than expected. Let's hear from David Kindley from Orbex, who comments on that print on FXMAG.COM request. Growth expectations are beginning to decline David Kindley (Orbex): US GDP came in slightly weaker than expected for the fourth quarter (Q4) at 2.6% versus the consensus of 2.7%. It should be noted however that the original estimate by the Commerce Department for Q4 was 2.9%; this indicates that growth expectations are beginning to decline. Meanwhile, looking at Q3, we saw a 2,6% expansion which marked a considerable deceleration from the 3.2% annualized growth recorded during the third quarter. In layman’s terms, the economy is entering a contraction phase, which is to be expected given the rising interest rates and the ultra-tight lending environment. All indications show that the Fed is planning a “controlled recession” for 2023 – 2024, but given the current volatile banking environment, any reversal in their monetary policy could push the stock markets higher.   Read next: The UK's economic output remains 0.6% below its late 2019 level, making it the only G7 nation yet to recover from the pandemic| FXMAG.COM

The US economy has grown by only 1.1% annualized in the first quarter of 2023. Personal consumption remains resilient, pointing to further growth. Replenishing of inventories should add to future growth. The inflation component has exceeded estimates with 4%, adding to rate hike pressures. A screeching halt for the US economy? That is what an annualized growth rate of 1.1% represents, but this time, there is much more than meets the eye. The world's largest economy expanded by less than 0.3% on a quarterly basis, but it has good excuses. And the US Dollar has even more reasons to rise. First, the US shopper remains relentless. Personal consumption is up 3.7% annualized, showing that higher interest rates have yet to deter the ongoing spree. Disposable income is high, and people are enjoying it. Secondly, inventories dragged GDP some 2.26% down. If inventories had stayed unchanged, annualized growth would have been over 3%. That is substantial. More importantly, when businesses deplete inventories in one quarter, they tend to replenish them in the next one. Third, the inflation component is strong -- PCE rose by 4% annualized, which is stubbornly high. That not only signals more rate hikes and a stronger US Dollar, but also shows that companies feel comfortable raising rates. And as a bonus, the separate weekly jobless claims figure showed a drop to 230K, good news for the US economy. With lower unemployment, higher inflation and strong growth, there is only one path for the US Dollar -- up. For Gold, higher rates mean weakness. For stocks, the news is more mixed. While higher rates are bad news, the underlying ongoing growth -- especially in consumption -- and the accompanying drop in jobless claims are good news. The final word belong to the Federal Reserve (Fed). Nevertheless, these figure not only confirm the upcoming 25 bps rate hike, but also open a wider door for another increase in June.

We asked Craig Erlam from Oanda to sharew his view on the surprising print of the US GDP. FXMAG.COM: The US GDP release is outstanding. Please share some of your thoughts. It seems that Fed Atlanta has rightly predicted the print, does it mean the release won't affect Fed decision? The second quarter onwards is likely to be very different, something that should soon become apparent in the monthly data Craig Erlam (Oanda): The GDP number covers an odd quarter which was deceivingly strong over the first couple of months due to weather distortions. The second quarter onwards is likely to be very different, something that should soon become apparent in the monthly data. Unfortunately for the Fed, that evidence is unlikely to come in time for the May meeting, weakening the argument for a pause. The GDP data feels quite dated, as it often does, and it likely won't be a reflection of the year as a whole. Read next: Cryptocurrency payments are steadily increasing, particularly as the DeFi market rebounds from the ‘crypto winter’| FXMAG.COM

The US economy expanded at a 1.1% annualised rate in the first quarter – lower than the 1.9% consensus – as business investment and a run down in inventories partially offset weather-boosted consumer spending and robust government expenditure. The headwinds from higher borrowing costs and reduced credit availability will weigh more heavily in 2H 2023 A crowded street in New York City 1.1% US annualised GDP growth in 1Q 2023   Lower than expected GDP disappoints as investment and inventories weigh heavily US first quarter GDP rose at a 1.1% annualised rate, below the 1.9% consensus figure and our own 1.5% forecast. The details show decent strength in consumer spending (+3.7% annualised). This was largely generated by the huge spike in spending in January as unseasonably warm weather prompted a surge in activity after cold and wintery conditions held back activity in December. Government spending was also strong, rising 4.7%, while net exports added 0.11pp to headline growth. It was the business sector that held back growth overall, with the investment story looking much weaker than expected. Non-residential fixed investment grew just 0.7% annualised while residential investment fell 4.2%, its eighth consecutive quarterly decline. Inventories then subtracted a huge 2.26pp from headline growth. Inventories have been very volatile over the past couple of years, but that is something we just have to live with until legacy supply chain issues and China disruptions abate. Stagflation fears are overstated, but recession looks increasingly likely In terms of the inflation story, the core PCE deflator for the first quarter rose 4.9% annualised versus 4.4% in the fourth quarter of 2022 and above the 4.7% consensus. This will no doubt bring headlines of stagflation given low GDP growth, and also suggests there is a risk that the deflator's month-on-month print (due out 8:30ET on Friday) comes in at 0.4% MoM rather than 0.3%. Of course, it could alternatively mean there were slight upward revisions to either January or February. Hopefully, it will indeed be an upward revision to January and instead, March comes in at 0.3% or lower and those stagflation concerns recede to some extent. Read next: Improvement in eurozone economic sentiment starts to level off| FXMAG.COM Looking to second quarter GDP growth, we have to expect a reversal in consumer spending given recent retail sales trends, while the softening in non-defence capital goods orders ex aircraft suggests business investment will remain subdued. Moreover, with CEO confidence in recession territory and the NFIB's small business optimism below the lowest levels experienced during the pandemic, corporate and small businesses in America are adopting a defensive posture, which means much less hiring and capital expenditure. Our current expectation is for second quarter GDP to record growth of 0-0.5%, with the clear threat of negative GDP prints in the third and fourth quarters as the most rapid and aggressive series of Federal Reserve interest rate increases in 40 years are more fully felt and the tightening of lending standards intensifies in the wake of recent bank stresses. Read this article on THINK TagsRecession Inflation GDP Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The GBP/USD currency pair was traded with low volatility on Tuesday but still managed to move upwards, while the euro currency stood still and decreased more than it grew. Thus, even on a completely empty Tuesday, the pound sterling found reasons to start moving north again.   The price has re-fixed above the moving average and is still very close to its local maximums, which also coincide with the annual maximums. The British currency still cannot correct down properly, which is especially visible in the 24-hour timeframe. Occasionally, there are downward corrections on the 4-hour timeframe, but in most cases, they are purely formal.   The logic of the movements needs to be improved. Two weeks ago, when the Bank of England unexpectedly raised the rate by 0.5% for many, the pound did not grow. But yesterday, when it was a holiday in the States, it added about 40-50 points. The British economy is still weak and is holding out with the last of its strength not to slide into a recession.   US GDP exceeds forecasts by 0.7% and shows a value of +2% q/q. The Bank of England's rate continues to rise but is still lower than the Fed's. The British regulator can raise the rate several times but will likely stay within the Fed's rate. All this suggests that even if the dollar doesn't have strong reasons to grow now, it certainly has no reasons to fall. However, in most cases, we continue to observe the pair's growth. Only business activity indices in the manufacturing sectors can be highlighted for the first two days of the week. In the US and UK, the indices fell synchronously for June and have long been below the "waterline" of 50.0. Again, the pound did not have an advantage over the dollar due to macroeconomic statistics.     Thursday and Friday promise to be "stormy"! The week's most important events are concentrated in its last two days. Today, of course, the Fed's minutes will be published. In the European Union and Britain, the second estimates of business activity indices for June will become known, but all these are secondary data. It is unlikely that the Fed's minutes will surprise traders who are already confident in a rate hike in July, as well as after Jerome Powell's five speeches over the past weeks, in which he laid everything out. Therefore, the main movements are planned for Thursday and Friday, when the ISM, ADP, unemployment benefit claims, the number of job openings, NonFarm Payrolls, and the unemployment rate will be released in the US.   As we can see, almost all reports are related to the labor market, which the Fed continues to monitor closely, and which has a priority for the regulator and the market. However, even if the reports are disastrous (which is currently hard to believe), the Fed will not change its plans to raise the rate.   And for the GBP/USD pair, it doesn't matter at all. The pound grows for a reason and without. If statistics from overseas turn out to be weak, it will merely get a new reason to grow against the dollar. If the statistics from the US turn out to be strong, we will see a new pullback down, a maximum of 100 points, and the Fed's position on the rate will not change. Thus, the market's local reaction could be significant.   In the medium term, these reports will not affect the situation in the market. The average volatility of the GBP/USD pair over the last 5 trading days is 94 points. For the pound/dollar pair, this value is "medium." Therefore, on Wednesday, July 5, we expect movement within the range limited by levels 1.2612 and 1.2800. The Heiken Ashi indicator's reversal down signals a possible new downward movement wave.    

Asia Morning Bites Expectations for a tweak to the Bank of Japan's (BoJ) yield curve control (YCC) policy rise as Tokyo inflation remains high in July.   Global Macro and Markets Global markets:  The main market development yesterday stemmed from the more dovish commentary from the ECB, which in contrast to the attempt by Jay Powell the previous day to keep thoughts of tightening alive, seemed to suggest that this may be the peak in Europe. EURUSD dropped to 1.0978, and this pulled most other G-10 with it, helped also by stronger-than-expected GDP figures out of the US that dampened thoughts of rate cuts next year. The AUD dropped to 0.6709, Cable fell to 1.2794. But the JPY, bucked this trend, with possible tweaks to the yield curve control program at today’s Bank of Japan (BoJ) meeting (see also below), the JPY has strengthened to 139.271. The MYR and THB also made some decent gains yesterday, but the CNY weakened 0.34% to 7.1675 as optimism about stimulus measures continued to fade. Bond markets saw the spread of US yields widen over European yields. Germany’s 2Y govt yields fell 5.2bp yesterday to 3.033%, while US 2Y Treasury yields rose 7.7bp to 4.928%. And there was a large rise in US 10Y yields too, which pushed up 13.1bp to just under 4% and briefly traded above the 4% level. The equivalent German bond yield fell 1bp to 2.467%. Equities did not like the prospect that rates in the US may stay elevated thanks to rising prospects of a soft landing. Here, a bit of bad news might actually go down better than continued macro resilience. Both the S&P 500 and NASDAQ dropped by 0.64% and 0.55% respectively. Chinese stocks were mixed. The Hang Seng made a decent gain of 1.41%, but the CSI 300 lost 0.13% on the day. G-7 macro:  There was no shortage of macro excitement yesterday - first the ECB meeting which is covered by our European team here. Europe’s main policy rate is now 3.75%, which remains well below inflation, so on some measures, is barely even restrictive, and one of the reasons why our Eurozone economists don’t believe the ECB is done with hikes just yet. Christine Lagarde may not have shut the door to further hikes, but she has undoubtedly opened one to possible pauses should that be deemed appropriate by the run of data. One other tweak to their policy was to reduce the remuneration of minimum reserves to zero. The 2.4% annualized GDP growth rate from the US was also a surprise yesterday. The consumer spending figures did slow from 1Q23, but at 1.6%, were better than had been forecast. And the continued signs of slowing inflation were evident in the decline in the PCE deflator’s annualized growth rate to 3.8% from 4.9%. James Knightley describes this “Goldilocks: release here.    Japan: Tokyo inflation stayed at 3.2% YoY in July for a third month, which was higher than the market consensus of 2.9%. Even more surprising is that core inflation, excluding fresh food and energy, actually rose to 4.0% YoY (vs 3.8% in June, 3.7% market consensus). This shows that, unlike other major economies, Japan’s inflation hasn’t yet reached its peak. The only item to fall was utilities (-10.8%) thanks to the continued energy subsidy program. On a monthly comparison, inflation accelerated 0.3% MoM sa in July (vs 0.2% in June) and we saw a pickup in service prices of 0.4% while goods prices continued to rise 0.2%.  Headline inflation will continue to go down slowly due to base effects and falling global commodity prices, but core inflation will remain high for a considerable time. The BoJ is set to announce its policy decision in a few hours later today following this inflation surprise. We expect the BoJ to leave its policy rates unchanged, but we think there is a good chance of a YCC policy change at today’s meeting, which is a non-consensus view - the market believes that October is more likely. If the BoJ seeks to normalize its policy in the future, we think that delaying a YCC policy adjustment will create a larger burden for them. For a more detailed view of BoJ policy, please see here. The BoJ will also release its quarterly macro outlook today, and the focus will be the inflation outlook for 2024. We think that this is how the BoJ will assess the sustainability of inflation in this cycle and will be a good indicator against which to estimate the timing of the BoJ’s first rate hike move. South Korea:  Industrial production fell -1.0% MoM sa in June (vs revised 3.0% in May and -0.9% market consensus). Semiconductor output has now increased for four months in a row which is quite different from the industry’s reduction plan, and inventory data suggest that high-value chip output may have increased while general chip production slid. Also, shipments of semiconductors rose 41.1%. We believe that the chip cycle is bottoming out slowly. Meanwhile, vehicle output dropped quite sharply -12.9% but after having risen solidly for the previous three months, it seems likely that the auto sector is taking a breather for the time being. Forward-looking investment data were soft, which suggests that investment in the current quarter will continue to contract.   What to look out for: The BoJ and US core PCE Japan BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)

The EUR/USD pair has been caught in turbulence amid conflicting fundamental signals, causing the price to move sideways. Market participants still need to unravel this tangle of contradictions to determine the price's direction. Currently, traders are driven by emotions, experiencing a rollercoaster-like ride. The verdict of the Federal Reserve and the US GDP The results of the Federal Reserve's July meeting were not in favor of the greenback. Bulls returned to the 1.1150 resistance level (the Tenkan-sen line on the 1D chart) and tested it. However, when it comes to the overall outcome, it would be more accurate to say otherwise: the market interpreted the results of the July meeting against the US currency, while the Fed's verdict can be viewed from different angles. The US central bank avoided specifics, especially regarding the future prospects of tightening monetary policy. According to Fed Chair Jerome Powell, everything will depend on what new economic data shows: the September meeting may end with either a rate hike or keeping rates unchanged. Such rhetoric disappointed dollar bulls, as recent inflation reports came out in the "red," reflecting a slowdown in inflation in the US. It is logical to assume that if July's inflation follows the trajectory of June's, the September rate hike will be in question. These conclusions put significant pressure on the greenback – the US dollar index hit a weekly low, declining towards the 100 level. However, the situation changed drastically. Dollar bulls once again saw a "light at the end of the tunnel" thanks to the latest US GDP report. The data significantly surpassed forecasts.   According to preliminary calculations, US GDP increased by 2.4% in the second quarter, with a growth forecast of 1.8%. It is worth mentioning that the first quarter's result was recently revised upwards: the initial estimate showed a 1.3% growth in the US economy, while the final data showed a different result of 2.0%. The Bureau of Economic Analysis report (US Department of Commerce agency) indicates that this growth was driven by increased consumer spending, government and local government spending, growth in non-residential fixed investment, private investment in equipment, and federal government spending. Consumer spending, which accounts for two-thirds of the economy, increased by 1.6% in the second quarter, while government spending increased by 2.6%. EUR/USD sellers are back in action In addition to the GDP report, dollar bulls were also pleasantly surprised by another indicator.   Durable Goods Orders in the US increased 4.7% in June, compared to forecasts of 1.3%. This reading followed the 2.0% increase recorded in May. Orders for durable goods excluding transportation also rose by 0.6% last month. This component of the report also showed a positive outcome, as most experts expected a more modest growth of 0.1%.   As a result, hawkish expectations regarding the Fed's future actions have increased in the market. According to the CME FedWatch Tool, the probability of a 25 basis points rate hike in September is nearly 30%, whereas after the announcement of the July meeting's outcome, this probability fluctuated in the range of 19-20%. Such an information background contributed to the "revival" of the greenback.   The US dollar index fully recovered all lost positions, rising to the middle of the 101 level. Consequently, the EUR/USD pair plummeted and hit two-week price lows.       The European Central Bank also played its role in this. Following the July meeting, the ECB raised interest rates by 25 basis points but did not announce further steps in this direction.   Similar to the Fed, the ECB indicated that one additional rate hike from the central bank would now depend on key economic data, primarily inflation. According to ECB President Christine Lagarde, the central bank has "turned off the autopilot" – decisions on interest rates will be made from meeting to meeting and will be based on "inflation forecasts, economic and financial data, and the underlying inflation dynamics."   It is worth noting that after the previous meeting, Lagarde had directly announced the rate hike at the July meeting. Conclusions The latest US reports, as well as the outcomes of the ECB's July meeting, "redrew" the fundamental picture for the EUR/USD pair. There is one more important piece of the puzzle remaining: the core PCE index, which will be published at the start of the US session on Friday, July 28th. However, for another upward reversal, this indicator must deviate significantly from the forecasted value (naturally, in a downward direction), with experts predicting a declining trend to 4.2% (following the May increase to 4.6%).   From a technical perspective, you can consider short positions on the pair after sellers overcome the support level of 1.0950 (Tenkan-sen line on the weekly chart). In such a case, the next bearish target for EUR/USD would be at 1.0850 – the upper band of the Kumo cloud on the 1D chart.  

Australian inflation falls to 4.9% US GDP expected to rise to 2.4% The Australian dollar has edged lower on Wednesday after sharp gains a day earlier. In the European session, AUD/USD is trading at 0.6473, down 0.10% on the day.   Australia’s inflation slips to 4.9% There was good news on the inflation front as July CPI fell to 4.9% y/y, down from 5.4% in June and below the consensus estimate of 5.2%. Inflation has now fallen to its lowest level since February 2022. Core inflation, which has been stickier than headline inflation, gained 5.8% in July, down from 6.1% in June. The markets are widely expecting the Reserve Bank of Australia to hold rates at the September 5th meeting and the drop in the headline and core inflation readings could well cement a pause. Inflation remains well above the RBA’s 2% target, but it is an encouraging sign that inflation continues to move in the right direction.   Soft US numbers send Aussie sharply higher The Australian dollar sparkled on Wednesday, climbing 0.80% and hitting a one-week high. The uptick was more about US dollar weakness than Aussie strength, as the US posted softer-than-expected consumer confidence and employment data on Wednesday. US consumer confidence took a hit as the Conference Board Consumer Confidence Index fell to 106.1 in July. This was a sharp drop from the August reading of 116.0 and marked a two-year low. JOLTS Job Openings fell to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. This was the sixth decline in the past seven months, another sign that the strong US labour market is showing cracks.

Euro-dollar at important support By Ipek Ozkardeskaya, Senior Analyst |Swissquote Bank   The week started on a cautious note as stocks in Asia mostly sold off following a rough week in the US, where the Federal Reserve's (Fed) hawkish pause triggered a fresh wave of worries that the rates would stay higher for longer. The US 2-year yield bounced lower after hitting 5.20%, yet the US 10-year continues its journey higher and hit 4.50% on Friday. The S&P500 slipped below its ascending base since last October, fell below its 100-DMA, and closed the week at the lowest levels since June, having recorded the worst performance over the week since the banking crisis in March. BoFA said that equity investors are dumping stocks at the fastest level since last December, and Morgan Stanley warned that stocks are now 'fragile'. Indeed! More fragile than the S&P500 are the rate sensitive technology stocks, and the small cap stocks. The growing divergence between the S&P500 and Russell 2000 index is also flashing 'recession', on top of the heavily inverted US yield curve.  Elsewhere, the UAW strikes will broaden to all GM and Stellantis parts plants in the US, which means that 5600 more workers will join the movement (Ford will likely be spared, for now, as some good progress is made on negotiations with the UAW) and the US will shut down by the end of the week if politicians fail to pass a dozen of bills. The latest US GDP update will fall in this chaotic environment, but the expectation is a positive revision from 2.1% to 2.3%.  In the currency markets, the US dollar extends gains. The dollar index entered the bullish consolidation zone after the Fed kept the possibility of another rate hike before the year ends on the table when it met last week, and said that the rates will likely stay higher for longer next year.   The EURUSD tested an important Fibonacci support last week, the major 38.2% retracement level which should distinguish between the positive trend building since last year, and a slide into the bearish consolidation zone. There is a stronger case for further euro weakness than the contrary. Released last Friday, the preliminary September PMI figures were mixed; the Eurozone manufacturing further slowed but German numbers hinted at some improvement. This week, we will see how the recent slowdown impacted the inflation dynamics in September. Headline inflation in the euro area is expected to have slowed from 5.2% to 4.5% this month, a slowdown that would defy the rising energy prices and the euro depreciation. Core inflation is seen softening from 5.3% to 4.8%. Any softness in inflation figures should give further support to the euro bears, while higher than expected numbers, which I believe could be the surprise of this week could revive the European Central Bank (ECB) hawks, but will hardly prevent the euro from seeking into a deeper depression, as further ECB action would also mean a bigger hit on economies. That's a fear that will likely keep euro bulls away from the market for now.  On the corporate calendar, Micron Technology and Nike will be releasing their latest quarterly results, and TotalEnergies Investor Day Event will gather happy industry players as US crude consolidates gains above $91pb with no big sign of a significant downside correction.  

The currency pair EUR/USD showed absolutely no movements on Thursday—no reaction to important events. In our previous articles, we've already mentioned that people can have different opinions about what happened yesterday. On one hand, it's not uncommon to see meetings where no significant decisions are made, but the pair starts moving in different directions afterward. On the other hand, there were no significant decisions made yesterday, and Christine Lagarde's rhetoric was maximally bland and uninteresting. Therefore, the market had nothing to react to, and it all seems logical. However, this week, there is very little logic in the pair's movements. On Monday and Tuesday, there were movements of such strength that it feels like the ECB meeting actually happened on Monday, not on Thursday. In other words, the market considered business activity indices much more important than the ECB meeting and the US GDP report. The technical picture over the past day, of course, has not changed. How could it change when there were essentially no movements? The price is once again below the moving average, but that doesn't stop it from resuming its rise today and forming a third corrective wave. The fact that we didn't see further depreciation of the pair on strong statistics from across the ocean could indicate the market's mood for a new corrective wave. However, we want to note that the current area where the pair is located is quite dangerous for traders. Both buy and sell signals are forming in this area. The pair seems like it should be falling, but it may correct a bit more. On the 24-hour time frame, the price is "dancing" around the important level of 1.0609 and the critical line. On the 4-hour time frame, it crosses the moving average about once a day. All of this just confuses traders. The ECB didn't evoke any emotions in the market. In principle, there was no intrigue regarding the ECB meeting.     Market participants were 100% sure that the key rate wouldn't change, and therefore, the other two rates wouldn't change either. Expecting strong statements from Christine Lagarde, who spoke twice this week, was very difficult. What could Lagarde say? "We are tightening monetary policy again!"? Or "We are lowering the key rate!"? Neither the first nor the second option had anything to do with reality. In the end, Ms. Lagarde stated that "rate cuts were not discussed at the meeting," and in the future, rate decisions will be made based on incoming information. The ECB will continue to closely monitor GDP, inflation, and core inflation indicators and regularly assess the impact of current monetary measures on the economy. In essence, we didn't hear anything new. The market already knew all of Lagarde's statements by heart. And the statement about not considering rate cuts sounds like mockery. How can there be any easing when inflation exceeds the target level by more than double? As for the market's reaction, it could have provided insights into how the market perceives the received information. However, the reaction was practically non-existent, so we can't draw any conclusions here either. We believe that the strengthening of the dollar will continue in the medium term, especially after yesterday's strong package of statistics from across the ocean. We believe that the Federal Reserve has a much better chance and real opportunities to raise rates one or two more times than the ECB. Perhaps the market is not yet ready to resume selling the pair, and it may require one or even two more correction cycles, but we don't even consider the scenario of a new upward trend at the moment. We expect the dollar to rise to 1.0200. Read more: https://www.instaforex.eu/forex_analysis/358692

On a slippery floor By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   While the US economy has been surprisingly resilient this year to the Federal Reserve's (Fed) aggressive monetary tightening, we cannot say that we have a similar soothing picture in Europe. The energy crisis, that followed the pandemic, has been hard on Germany. The country needs money when money becomes rare and expensive. Germany decided to suspend the debt limit for the 4th consecutive year – signaling that borrowing in Europe will continue to increase, and the new debt that the Europeans will take on their shoulders will cost significantly higher than a few years ago.   German bonds fell yesterday on news of yet another suspension of the debt limit. The 10-year German yield advanced to 2.60%, Italy's 10-year yield jumped to 4.40%, the Italian – German yield spread rebounded this week from the lowest levels since September, and the widening yield spread between core and periphery could become a limiting factor for euro appetite at a time traders should decide whether the EURUSD should appreciate above the 1.10 psychological mark.   As per the European Central Bank (ECB) expectations, the European officials do their best to tame the rate cut expectations in the Eurozone. Belgian central bank governor Pierre Wunsch said yesterday that the ECB won't cut the rates as long as wages growth remains elevated, while the German central bank head Joachim Nagel said that cutting rates too early would be a mistake. A mistake? Maybe. Yet, economic data comes as further evidence that the European economies are not going toward sunny days. Released yesterday, the European PMI figures came in slightly better than expected, but the reading was below 50 for the 6th consecutive month, meaning that activity in the Eurozone contracted for the 6th consecutive month. The Eurozone GDP fell below 0 at the latest reading, while in comparison, the US GDP grew nearly 5%. This is to say that, based on the current data, the Fed has a greater margin for keeping rates steady than their European counterparts. It at least has better credibility. And the Fed's bigger hawkish margin compared to the ECB should keep the euro appetite limited against the US dollar following the rally since the beginning of October.   In the US, despite warnings that the falling US long-term yields will, at some point, trigger a hawkish reaction from the Fed and eventually reverse, the Fed doves remain in charge of the market. The US dollar index struggles to gain traction above the 200-DMA.   The USDJPY remains offered near the 50-DMA after the Japanese inflation advanced to a 3-month high in October (rose to 3.3% level from 3% printed a month earlier). Normally, it would've boosted bets of Bank of Japan (BoJ) normalization, but the BoJ should first awaken from its coma.  In energy, US crude trades near $75/76 region. Downside risks prevail due to speculation that the delayed OPEC meeting could result in Saudi Arabia not doubling its solo production cuts. There is even a slim possibility that they eventually reverse them.   I am wondering if this week's drama is not staged amid poor buying following the news that Saudi would doble its cuts, to cast shadow in Saudi's intention to defend oil prices, to bring attention to OPEC and to Saudi which finally would go ahead and double its production cuts hoping that the market reaction would be stronger than if they had announced the same outcome this weekend. In all cases, deteriorating growth prospects will likely limit the upside potential in oil prices in the medium run. The short run will certainly see more volatility.    

Asia Morning Bites China profits data for October to dominate Asian macro releases on an otherwise quiet day.   Global macro and markets Global markets: US Treasuries ended the week with yields rising again. The yield on the 2Y Treasury rose 4.9bp, while the 10Y yield went up 6.2bp to 4.466%, taking it close to the 4.50% line again. The USD was softer again on Friday. EURUSD rose to 1.0943. The AUD has tested the 0.6590 level before settling down to around 0.6584. Sterling has broached 1.26 for the first time since September. But the JPY is still hovering below 1.50 and hasn’t gained as much as its other G-10 peers. Other Asian FX was mostly softer on Friday and will likely catch up with the G-10 moves this morning. The weaker currencies, KRW, THB, and TWD will probably outperform the others. The CNY is little changed at 7.1490. US equities did very little on a low trading volume day as many market participants dragged the Thanksgiving holiday over to the weekend. US equity futures are looking a bit negative today. Chinese markets were down on Friday, possibly reflecting unease after a criminal probe was launched into the financial conglomerate, Zhongzhi, though most of the weakness in the CSI 300 came from the info-tech part of the index, along with consumer discretionary stocks and industrials. Financials were down 0.44% on the day. G-7 macro: Friday’s very meagre offerings on the macro front don’t offer much new insight. The S&P PMI indices for the US rose fractionally for manufacturing but remained just in contraction territory at 49.9. The service sector PMI was stronger at 50.3, but down from the October 50.8 reading, and takes the composite PMI down to just 50.4. There isn’t enough history for this series to draw any meaningful conclusions from this. Today, we just get US new home sales for October. The US housing market has been doing surprisingly well, but the market is looking for a small 4.7% MoM decline this month – mainly a statistical pullback from the very robust September figure. China: Industrial profits data for October come out today. This is expected to show the contraction in earnings abating slightly, in line with some of the slightly stronger PMI and activity figures. The September figure was a -9.0%YoY ytd decline. Figures around the -6.7% mark have been cited as the consensus forecast. What to look out for: China Industrial Profits and US new home sales China industrial profits (27 November) Thailand trade (27 November) US new home sales (27 November) Australia retail sales (28 November) Taiwan GDP (28 November) US Conference board consumer confidence (28 November) South Korea business survey (29 November) US GDP, personal consumption, wholesale inventories (29 November) US Fed Beige book (30 November) South Korea industrial production and BoK meeting (30 November) Japan retail sales and industrial production (30 November) China PMI manufacturing and non-manufacturing (30 November) US initial jobless claims and personal spending (30 November) US pending home sales (30 November) Japan jobless rate and job-applicant ratio (1 December) South Korea trade balance (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US ISM manufacturing (1 December)

FX Daily: Central bank meetings and US GDP in focus FX markets start the week in quiet fashion. The highlight this week will be central bank meetings in many parts of the world, including Japan and the eurozone. No major changes are expected in developed market monetary policy, but decent fourth quarter US GDP data could see US interest rates back up a little further, keeping the dollar supported.   USD: Dollar can stay supported The dollar looks to be trading in a supported fashion. This year's backup in short-term rates has reined in some of the pro-risk sentiment that dominated markets late last year. This backup in rates has largely been driven by central bankers saying they are in no rush to cut rates. After the informal commentary seen over recent weeks, this week will start to see the formal communication as central banks meet in Japan (Tuesday), Canada (Wednesday), and the eurozone and Norway (Thursday). Like many, we think the earthquake in Japan makes it too early for the Bank of Japan (BoJ) to unwind its Yield Curve Control this week. In fact, there have been surprisingly few source stories ahead of this particular meeting, even though we will see a crucial set of new forecasts for prices and activity. Assuming the BoJ springs no surprise, USD/JPY should continue to hover around 148. For the dollar this week, our macro team forecasts above-consensus fourth quarter GDP on Thursday. This could see the market further pare back Federal Reserve easing expectations this year. The market currently attaches a 43% chance of a cut in March and an easing cycle this year now worth 115bp. An interesting aside. Some US banks are proponents of the March Fed cut because the Fed will probably not be renewing its Bank Term Funding Programme in early March. Currently, it seems that some US banks are using the facility to borrow cheaply (4.87% p.a.) and park money at the Fed (5.30%). The thinking goes that a rate cut in March could smooth funding conditions for the regional banks. We do not subscribe to this view and maintain a call for the first rate cut in May. Beyond the US GDP data this week, Friday sees December personal consumption data, where the deflator is again seen at 0.2% month-on-month. This could deliver a benign end to the week. In all, we would say it looks like a range-bound week for the dollar where DXY could trade out something like a 103-104 range. That will continue to see the market interested in carry, and we note that the Turkish lira and the Indian rupee have still managed to deliver year-to-date total positive returns against the dollar – in a broadly bid dollar environment.

Today's core PCE the next key signpost ahead of next weeks Fed meeting By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets managed to eke out a small gain yesterday after the ECB kept rates unchanged but left the door ajar to the prospect of a rate cut before the summer. ECB President Christine Lagarde did push back strongly on speculation that policymakers had discussed anything like that insisting that such talk was premature, echoing her comments made earlier this month. It was noteworthy however that the possibility of a cut before June wasn't ruled out completely, and it was that markets reacted to yesterday as yields declined sharply, which does keep the prospect of an earlier move on the table given how poor this week's economic data has been.   US markets also managed to finish the day higher with the S&P500 and Nasdaq 100 putting in new record closes, after US Q4 GDP came in well above expectations at 3.3%. The core PCE price index also remained steady at 2% for the second quarter in succession, and in line with the Federal Reserve's inflation target, thus keeping faint hopes of a US rate cut in March alive. It also places much greater importance on today's December core PCE deflator inflation numbers which aren't expected to vary much from what we saw in the November numbers. At the moment markets seem convinced that the Fed might spring a surprise in March and slip in an early rate cut if inflation shows further signs of slowing. That might make sense if the US economy was struggling but this week's economic numbers clearly suggest it isn't, and if anything is still growing at a decent clip. There is a danger that in cutting rates in March they drive market expectations of further cuts into overdrive, something they have been keen to push back on with recent commentary.   In any case with the Federal Reserve due to meet next week markets are continuing to try and finesses the timing of when the first rate cut is likely to occur, after Powell's surprisingly dovish shift when the central bank last met just before Christmas. That means today PCE numbers are likely to be a key waypoint for markets and the central bank, after the PCE core deflator slowed to 3.2% in November, slipping from 3.4% in October, and the lowest level since April 2021. A further slowdown to 3% or even lower, which appears to be the consensus could see markets continue to build on the prospect of a rate cut in March, which took hold back in December. The bigger concern for some Fed officials is that headline CPI appears to be ticking higher again, which may make the last yards to 2% much trickier. This will be the Fed's key concern over an early cut as it could reignite the inflationary pressures that have taken so long to get under control. This caution would suggest that March is too early for a US rate cut, and that the market is getting ahead of itself, with policymakers also likely to pay attention to consumer demand. This means personal spending is also likely to be a key indicator for the FOMC and here we are expecting to see a pickup to 0.5% from 0.2%. With the US consumer still looking resilient the Fed is likely to be extra cautious if inflation starts ticking higher again as it already has with headline CPI.   It was also interesting to note that while yields fell sharply yesterday, the US dollar didn't, it actually finished the day higher and well off the lows of the week.       EUR/USD – slipped back towards the 200-day SMA at 1.0820/30 yesterday, with a break below 1.0800 targeting a potential move towards 1.0720. Resistance at the highs this week at 1.0930 and behind that at 1.1000.  GBP/USD – while the pound has struggled to push higher this week, we've managed to consistently hold above the support at the 50-day SMA as well as the 1.2590 area. We need to get above 1.2800 to maintain upside momentum. EUR/GBP – finally slipped to support at the 0.8520 area, which needs to hold to prevent a move towards the August lows at 0.8490. Resistance at the 0.8620/25 area and the highs last week. USD/JPY – currently finding resistance at the 148.80 area which has held over the last week or so which could see a move back towards the 146.25 area. A fall through 146.00 could delay a move towards 150 and argue for a move towards 144.00. FTSE100 is expected to open 30 points higher at 7,559 DAX is expected to open 50 points lower at 16,857 CAC40 is expected to open 28 points higher at 7,492.

A dream comes true. By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank The EURUSD traded south yesterday, as the European Central Bank (ECB) Chief Christine Lagarde reckoned that growth and inflation are slowing, while insisting that the rate cut decision will be data dependent. The pair cleared the 200-DMA support, fell to 1.0820, it's a little higher this morning, but we are now below the 200-DMA and the ECB rate cut bets on falling inflation and slowing European economies remain the major driver of the euro weakness, with many investors now thinking that June could be a good time to start cutting the rates. Three more rates could follow this year. Across the Atlantic, the US released its latest GDP update and the data was as good as it could possibly get. The US economy grew 3.3% in Q4 versus 2% expected by analysts. It grew 2.5% for all of last year –quite FAR from a recession. The consumer spending growth slowed to 2.8%, but remained strong on healthy jobs market and wages growth, business investment and housing were supportive and... the cherry on top: the GDP price index, a gauge of inflation fell to 1.5%. Plus, data from rent.com showed that the median rent rate declined in December, and that's good news when considering that rents have been one of the major drivers of inflation lately, and they look like they are cooling down. In summary, yesterday's US GDP data was the definition of goldilocks in numbers: good growth, slowing inflation. A dream comes true. As reaction, the US 2-year yield fell below 4.30% and the 10-year yield fell below 4.10%. The strong numbers didn't necessarily hammer the Federal Reserve (Fed) cut expectations given that inflation slowed! Investors are not sure that March would bring the first rate cut from the Fed – as the probability of a March cut is around 50%, but a May cut is almost fully priced in. Today, all eyes are on the Fed's favorite gauge of inflation: core PCE – expected to have retreated to 3% in December. A number in line with expectations, or ideally softer than expected could further boost risk appetite.

The Japanese yen has edged lower on Thursday. In the North American session, USD/JPY is trading at 147.62, up 0.08%. US GDP roars with 3.3% gain The US economy continues to surprise with stronger-than-expected data. On Wednesday, the services and manufacturing PMIs both accelerated and beat the estimates, followed by first-estimate GDP for the fourth quarter earlier today. The economy sparkled with an expansion of 3.3% q/q, blowing past the consensus estimate of 2.0%. This follows the blowout gain of 4.9% in the third quarter. Consumer spending remained strong at 2.8%, compared to 3.1% in the third quarter. The US economy expanded in 2023 at 2.5% y/y, up from 1.9% in 2022. The US dollar’s reaction to the positive GDP report has been muted. There were concerns earlier this year that the economy might tip into a recession, as the Fed continued to raise interest rates to beat down inflation. However, solid consumer spending and a resilient labour market have boosted economic growth and the Fed is well on its way to achieving the tricky task of a soft landing for the economy. On the inflation front, the core personal expenditure price index was unchanged at 2% in the fourth quarter, while the headline index rose 1.7%, down sharply from 2.6 in Q3. The week wraps up with the personal consumption expenditures (PCE) price index on Friday, considered the Fed’s preferred inflation gauge. The PCE price index and core PCE price index are expected to edge slightly lower in January, which would be an encouraging sign that the inflation is moving lower.   Japan releases Tokyo Core CPI, a key inflation indicator, on Friday. The consensus estimate for January stands at 1.9% y/y for January, after a 2.1% gain in December. If the estimate proves correct, it would mark the first time in almost two years that it has fallen below the BoJ’s target of 2%. . USD/JPY Technical USD/JPY is testing resistance at 147.54, followed by resistance at 148.44 There is support at 146.63 and 145.73