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Economic Calendar by FXMAG.COM – 04/03/2022 This week wasn’t easy for anybody and we might say markets and governors “have taken that into consideration” and let us slow down in the end of this week. We don’t have many events to follow on Friday. Australia The biggest challenge would be staying awake at 0:30 a.m. to check out the Australian Retail Sales (MoM) (prev. -4.4%). United Kingdom Nine hours later, at 9:30 a.m. UK Construction PMI is presented. The previous value of this indicator was 56.3 North America According to Investing.com, In the USA, at 1:30 p.m., the Bureau of Labor Statistics presents Nonfarm Payrolls (467K) and Unemployment Rate (4.0%). An hour and a half later Canada releases Ivey PMI (50.7)

Is a bear market on the way? My research suggests the downward sloping trend line (LIGHT ORANGE in the Daily/Weekly SPY chart below) may continue to act as solid resistance – possibly prompting a further breakdown in the markets for US major indexes.As we've seen recently, news and other unexpected events prompt very large price volatility events in the US major indexes. For example, the VIX recently rose above 30 again, which shows volatility levels are currently 3x higher than normal levels.Increased Volatility & The Start Of An Excess Phase Peak Should Be A Clear WarningThis increased volatility in the markets, coupled with the increased fear of the US Fed and the global unknowns (Ukraine, China, Debt Levels, and others), may be just enough pressure to crush any upside price trends over the next few months. Technically, my research suggests the $445 to $450 level is critical resistance. The SPY must climb above these levels to have any chance of moving higher.Sign up for my free trading newsletter so you don’t miss the next opportunity! Unless the US markets find some new support and attempt to rally back towards recent highs, an “Excess Phase Peak” pattern will likely continue to unfold throughout 2022. This unique price pattern appears to have already reached a Phase 2 or Phase 3 setup. Please take a look at this Weekly GE example of an Excess Phase Peak pattern and how it transitions through Phase 1 through Phase 4 before entering an extended Bearish price trend.Read this research article about Excess Phase Peaks: HOW TO SPOT THEN END OF AN EXCESS PHASE - PART 2SPY May Already Be In A Phase 4 Excess Peak PhaseThis Daily SPY chart highlights my analysis, showing the major downward sloping trend line, the Middle Resistance Zone, and the lower Support Zone. Combined, these are acting as a “Wedge” for price over the past few weeks – tightening into an Apex near $435~440.If the US major indexes attempt to break this downward price trend, then the price must attempt to move solidly above this downward sloping price channel and try to rally back into the Resistance Zone (near $445~$450). Unless that happens, the price will likely transition into a deeper downward price move, attempting to break below recent lows, near $410, and possibly quickly moving down to the $360 level.SPY Weekly Chart Shows Consolidation Near $435 – Possibly Starting A Phase 4 Excess PeakTraders should stay keenly aware of the risks associated with the broad US and global market decline as the Ukraine war, and other unknowns continue to elevate fear and concerns related to the global economy. In my opinion, with the current excess global debt levels, extended speculative market bubbles, and the continued commodity price rally, we may be starting to transition away from an extended growth phase and into a deeper depreciation cycle phase.My research suggests we entered a new Depreciation cycle phase in late 2019 and are already more than 25 months into a potential 9.5-year global Depreciation cycle. What comes next should not surprise anyone.Read this article about Depreciation Cycle Phases: HOW TO INTERPRET & PROFIT FROM THE RISKS OF A DEPRECIATION CYCLE Traders should stay keenly focused on market risks and weaknesses. I expected the conflict in Ukraine to have been priced into the US markets over the past 7+ days. However, I believe the markets were unprepared for this scale or invasion and will attempt to settle fair stock price valuation levels as the conflict continues. This is not the same US/Global market Bullish trend we've become used to trading over the past 5+ years. Looking Forward - preparing for a possible Bear marketMarket dynamics and trends are changing from what we have experienced over the past 40 years for stocks and bonds. The 60/40 portfolio is costing you money now. Traders need an edge to stay ahead of these markets trends and to protect and profit from big trends.The only way to navigate the financial markets safely, no matter the direction, is through technical analysis. By following assets and money flows, we identify trend changes and move our capital into whatever index, sector, industry, bond, commodity, country, and even currency ETF. By following the money, you become part of new emerging trends and can profit during weak stock or bond conditions.Want Trading Strategies that Will Help You To Navigate Current Market Trends?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 

USDJPY tests supply areaThe Japanese yen stalled after an increase in January’s unemployment rate.The pair’s rally above the supply zone around 115.80 has put the US dollar back on track. The general direction remains up despite its choppiness. 114.40 has proved to be solid support and kept the bulls in the game.A close above 115.80 would extend the rally to the double top (116.30), a major resistance on the daily chart. Meanwhile, an overbought RSI caused a limited pullback, with 115.10 as fresh support.NZDUSD breaks resistanceThe New Zealand dollar recovers amid commodity price rallies.After the pair found support near last September’s lows (0.6530), a bullish MA cross on the daily chart suggests that sentiment could be turning around. A bullish breakout above the recent high (0.6810) would further boost buyers’ confidence and lift offers to January’s high at 0.6890.On the downside, 0.6730 is the first support if buyers struggle to gather more interest. 0.6675 would be a second layer to keep the current rebound intact.UK 100 lacks supportThe FTSE 100 slipped after the second round of talks between Russia and Ukraine ended without much result.The index met stiff selling pressure at 7560 then fell below the critical floor at 7170. Increasingly bearish sentiment triggered a new round of sell-off to the psychological level of 7000 from last November.A deeper correction would lead to a retest of 6850, dampening the market mood in the medium-term. On the upside, the bulls must clear 7300 and 7450 to reclaim control of the direction.

S&P 500 consolidation isn‘t turning out well for the bulls as 4,300 can be easily broken again if I look at credit markets‘ posture. Treasuries just aren‘t sliding no matter the Fed‘s ambiguity on inflation, let alone markets sniffing out rate hike ideas getting revisited. Still, tech gave up opening gains, and closed on a weak note while commodities and precious metals maintained high ground, and the dollar continued rising.The odds are stacked against paper market bulls, and as I had been telling you weeks ago already, this is the time of real assets outperformance. In this sense, miners‘ leadership is a great confirmation of more strength to come, of inflation to continue… Everyone‘s free to make their own opinion after the State of the Union address.On the bright side, the flood of recently closed series of trades spanning stocks, precious metals, oil and copper, has resulted in sharp equity curve gains – and more good calls are in the making, naturally:Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 is facing a setback, which could turn a lot worse if the sentiment turn continues. Odds are it would, and we would see some selling going into the weekend.Credit MarketsHYG refused to extend opening gains, and the message is clear, and also a reaction to the Fed‘s pronouncements. Treasuries though are more careful in the tightening prospects assessment – risk-off in bonds and the dollar continues.Gold, Silver and MinersPrecious metals are doing great, and are likely to continue rising no matter what the dollar does. There is no good reason for a selloff if you look around objectively. Miners are confirming, the upleg is underway.Crude OilCrude oil upswing isn‘t yet done, it would be premature to say so. It seems though that the time of volatile chop and new base building can continue – oil stocks are the barometer.CopperCopper outperformance leaves me a bit cautious – the advance is likely to slow down and get challenged next. It was a good run, and the red metal isn‘t at all done in the medium-term.Bitcoin and EthereumCrypto downswing is reaching a bit farther than I would have been comfortable with. The buyers are welcome to step in on good volume, but I‘m not expecting miracles today or through the weekend.SummaryS&P 500 bulls are losing the initiative, and neither credit markets nor the dollar favor a turnaround today. Treasuries rising in spite of the Fed‘s messaging are also casting a clear verdict, and the yield curve compression continues. The risk-off sentiment that is getting an intermezzo here and there, is likely to rule unless the Fed makes a profound turn before the Mar FOMC. And given the inflation dynamics with all the consequences beyond economics, that‘s unlikely to happen. Markets are thus likely to continue fearing the confluence of events till...Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

This month, the Fed is expected to hike interest rates. Contrary to popular belief, the tightening doesn't have to be adverse for gold. What does history show?March 2022 – the Fed is supposed to end its quantitative easing and hike the federal funds rate for the first time during recovery from a pandemic crisis . After the liftoff, the Fed will probably also start reducing the size of its mammoth balance sheet and raise interest rates a few more times. Thus, the tightening of monetary policy is slowly becoming a reality. The golden question is: how will the yellow metal behave under these conditions?Let’s look into the past. The last tightening cycle of 2015-2019 was rather positive for gold prices. The yellow metal rallied in this period from $1,068 to $1,320 (I refer here to monthly averages), gaining about 24%, as the chart below shows.What’s really important is that gold bottomed out in December 2015, the month of the liftoff. Hence, if we see a replay of this episode, gold should detach from $1,800 and go north, into the heavenly land of bulls. However, in December 2015, real interest rates peaked, while in January 2016, the US dollar found its local top. These factors helped to catapult gold prices a few years ago, but they don’t have to reappear this time.Let’s dig a bit deeper. The earlier tightening cycle occurred between 2004 and 2006, and it was also a great time for gold, despite the fact that the Fed raised interest rates by more than 400 basis points, something unthinkable today. As the chart below shows, the price of the yellow metal (monthly average) soared from $392 to $634, or more than 60%. Just as today, inflation was rising back then, but it was also a time of great weakness in the greenback, a factor that is currently absent.Let’s move even further back into the past. The Fed also raised the federal funds rate in the 1994-1995 and 1999-2000 periods. The chart below shows that these cases were rather neutral for gold prices. In the former, gold was traded sideways, while in the latter, it plunged, rallied, and returned to a decline. Importantly, just as in 2015, the yellow metal bottomed out soon after the liftoff in early 1999.In the 1980s, there were two major tightening cycles – both clearly negative for the yellow metal. In 1983-1984, the price of gold plunged 29% from $491 to $348, despite rising inflation, while in 1988-1989, it dropped another 12%, as you can see in the chart below.Finally, we have traveled back in time to the Great Stagflation period! In the 1970s, the Fed’s tightening cycles were generally positive for gold, as the chart below shows. In the period from 1972 to 1974, the average monthly price of the yellow metal soared from $48 to $172, or 257%. The tightening of 1977-1980 was an even better episode for gold. Its price skyrocketed from $132 to $675, or 411%. However, monetary tightening in 1980-1981 proved not very favorable , with the yellow metal plunging then to $409.What are the implications of our historical analysis for the gold market in 2022? First, the Fed’s tightening cycle doesn’t have to be bad for gold. In this report, I’ve examined nine tightening cycles – of which four were bullish, two were neutral, and three were bearish for the gold market. Second, all the negative cases occurred in the 1980s, while the two most recent cycles from the 21st century were positive for gold prices. It bodes well for the 2022 tightening cycle.Third, the key is, as always, the broader macroeconomic context – namely, what is happening with the US dollar, inflation, and real interest rates. For example, in the 1970s, the Fed was hiking rates amid soaring inflation. However, in March 1980, the CPI annul rate peaked, and a long era of disinflation started. This is why tightening cycles were generally positive in the 1970s, and negative in the 1980s.Hence, it seems on the surface that the current tightening should be bullish for gold, as it is accompanied by high inflation. However, inflation is expected to peak this year. If this happens, real interest rates could increase even further, creating downward pressure on gold prices. Please remember that the real federal funds rate is at a record low level. If inflation peaks, gold bulls’ only hope will be either a bearish trend in the US dollar (amid global recovery and ECB’s monetary policy tightening) or a dovish shift in market expectations about the path of the interest rates, given that the Fed’s tightening cycle has historically been followed by an economic slowdown or recession.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

Monday seems to be a calm beginning of the week (despite the Russia-Ukraine conflict) as there’s no any major event planned. The rest of the week 7/03-11/03 will surely arouse more interest. What to follow? Have a look at Economic Calendar by FXMAG.COM Tuesday – Japan and Poland The first important indicator of the week is the Japanese GDP (QoQ) (Q4) which is released very lately on Tuesday at 11:40 p.m. The previous value – 1.3% As tensions rise, the country which lies closely to Ukraine has its currency (PLN) weakened, so the Interest Rate Decision of National Bank released on Tuesday as well is worth a look as well. Wednesday - USA On Wednesday we focus on USA, where JOLTs Job Openings (3 p.m.) and US Crude Oil Inventories (3:30 p.m.) are released. Thursday – European Union and USA Thursday is full of Europe-targeted events. According to Investing.com, at 10 a.m., EU Leaders meet at the Summit and shortly after midday ECB releases its Marginal Lending Facility its Interest Rate Decision. At 1.30 p.m. there is a Press Conference planned. The same time ECB speaks to media, US Bureau Of Labor Statistics releases Core CPI (MoM) of February which previously hit 0.6% Friday – UK, EU And Canada Who’s going to wake up early on Friday? The answer is UK Office of National Statistics which releases GDP (MoM) and Manufacturing Production (MoM) at 7 a.m. EU Leaders will rest a little longer as they meet at the another Summit at 10 a.m. According to Investing.com the latest “triple-star” event of 11/03 is the release of Employment Change indicator in Canada, which hit -200.1K in the month before. Data: Investing.com Time: GMT

With a sharp decline over the weekend, Bitcoin wiped out the initial gains, gave away the positions to bears after the third straight week of gains. On Saturday and Sunday, there were drawdowns to $34K on the low-liquid market. So the rate of the first cryptocurrency fell to $38K with a 3.8% loss. However, over the past 24 hours, BTC has reached $39,000 while Ethereum has lost 4.5%. Other leading altcoins from the top ten decline from 2% (XRP) to 6.8% (LUNA). According to CoinMarketCap, the total capitalization of the crypto market decreased by 3.8%, to $1.71 trillion. The bitcoin dominance index sank from 42.9% on Friday to 42.3% due to the sale of bitcoin over the weekend. The cryptocurrency fear and greed index is at 23 now, remaining in a state of "extreme fear". Looking back, in the middle of the week, the index had a moment in the neutral position. The FxPro Analyst team mentioned that the sales were triggered by reports that the BTC.com pool banned the registration of Russian users. Cryptocurrencies do not remain aloof from politics, and they are weakly confirming the role of an alternative to the banking system now, supporting EU and US sanctions against Russia, and showing their own initiative. The news appeared that Switzerland would freeze the crypto assets of the Russians who fall under the sanctions. In the second half of the week, bitcoin lost almost all the growth against the backdrop of a decline in stock indices. Although, last week started on a positive wave: BTC added almost $8,000 (21%) since previous Monday, but couldn't overcome the strong resistance of mid-February highs at around $45,000 and the 100-day moving average. Speaking about the prospects, pressure on all risky assets will continue to be exerted by the situation around Ukraine, where hostilities have been taking place for two weeks. Worth mentioning that the world-famous investor and writer Robert Kiyosaki said that the US is “destroying the dollar” and called for investing in gold and bitcoin. At the same time, the founder of the investment company SkyBridge Capital (Anthony Scaramucci) is confident that bitcoin will reach $100,000 by 2024. At the moment, he has invested about $1 billion in BTC. Plis, a group of American senators is developing a bill that opens access to the crypto market for institutional investors. And one more news to consider: the city of Lugano in Switzerland has recognized bitcoin and the leading stablecoin Tether (USDT) as legal tender.

USDCHF struggles for support USDCHF The US dollar softens as the Fed may settle for a less aggressive rate hike agenda. The recent sideways action is a sign of the market’s indecision. Sellers’ previous attempts to push below 0.9150 have met some buying interest in this demand zone. A definitive breakout may send the pair to January’s lows around 0.9100. Then the path of least resistance could be down, ending a three-month-long consolidation. 0.9230 is the immediate resistance and 0.9290 is a major hurdle before the greenback could bounce back. XAUUSD breaks higher XAUUSD Gold rallies as investors’ flight to safety continues. The bulls have tempered their aggressiveness after the initial surge. The latest pullback has been an opportunity to accumulate against a bullish backdrop. Price action continues to climb along the rising trendline which suggests that the direction is still up. A break above the psychological level of 2000 would bring in more momentum traders. In fact, that would send the price to August 2020’s high at 2075. Between the trendline and 1930 there is a key demand zone. GER 40 drops to a fresh low GER 40 The Dax 40 plunges for fears of stagflation in the eurozone. The index has ventured further into the bearish territory after it broke below March 2021’s lows around 14000. The liquidation is yet to end as sentiment remains downbeat. A break below the psychological level of 13000 would trigger a new round of sell-off to 12000. The RSI’s oversold situation from both daily and hourly charts may cause a limited bounce if short-term traders take profit. 13500 is the first resistance ahead and could attract more trend followers.  

As we wrote on Friday, this week is not full of major events, but still there are some which definitely worth a follow. The most interesting ones are coming later this week, but tomorrow… Economic Calendar by FXMAG.COM - 08/03/2022 Europe: The day begins with the release of German Industrial Production (MoM), which previously amounted to -0.3% GDP of Euro zone (YoY and QoQ) are released at 10 a.m. Previous values were accordingly 4.6% and 0.3% USA: At 1:30 p.m. Bureau of Economic Analysis releases Exports (prev. 228.10B), Imports (308.90B) And Trade Balance of January (-80.70B) After a few hours “break” EIA Short-Term Energy Outlook indicator is released what seems to be crucial. Crude Oil situation in recent days is very, very dynamic as sanctions affect supplies. Japan: The latter major event tomorrow is the release of Japanese GDP (YoY) (5.4%) which takes place at the eleventh hour - 11:50 p.m.  Data: Investing.com Time: GMT

The Swing Overview - Week 9 The war in Ukraine continues, and although we all want this tragic event to be ended immediately, but unfortunately, according to last statements of Russian officials, it looks like the war will drag on for a longer period of time. Investors have reacted to this development by selling risk assets, including the Czech koruna. Stock indices are losing ground and the DAX in particular has been under heavy pressure. On the other hand, commodities such as oil, gold, and coal are strengthening strongly. Somewhat surprising is the development in the Australian dollar, which usually weakens in the events of geopolitical uncertainties. However, there is a reason for its current rise. More on this in our article. Conflict in Ukraine   Vladimir Putin probably did not expect to encounter such a brave resistance from Ukraine and that  almost the whole world would send Russia into isolation through significant sanctions. The list of companies and actions that have cut ties with Russia is growing day by the day and Western companies are leaving Russia. Thus, for Russians, foreign goods (food, clothing, furniture, electronics, cars) will gradually become very rare. Probably the strongest sanction that Russia has felt so far, was the freeze of the Russian Central Bank's foreign exchange reserves. In response, the Russian ruble began to depreciate significantly on February 28, 2022, and has already lost more than 30% of its pre-invasion value. In response, the Russian Central Bank intervened by raising the interest rate to 20%, which temporarily halted the ruble's fall.    Figure 1: The Russian ruble paired with the USD and the euro Meanwhile, Western countries have not exhausted all options to stop Russia in this war through economic sanctions in case of further escalation of the conflict yet. The fact that European countries might stop taking Russian gas is also at stake. This would, of course, have a very significant impact on the entire European economy. However, these are still just some economic losses, which can not be   compared at all with the losses of lives experienced by the unprecedentedly attacked Ukraine. In any case, this crisis seems to have the potential to surpass in its consequences the crisis that occurred in Russia in 1998, which led to inflation exceeding 80% and central bank interest rates reaching 150%.   Data from the US economy The ISM manufacturing sentiment indicator for February came in at 58.6 which is better than expected and points to an optimistic development of the US economy. In the labour market sector, the ADP (non-farm job change) indicator was reported, which showed that 475 thousand jobs were created in America in February (compared to 509 thousand in January). The number of unemployment claims reached 215 thousand last week, which was less than expected 226 thousand. Thus, the data show that the US economy is doing well so far and the US Fed is going to raise interest rates at its next meeting on March 16, 2022. Jerome Powell said that he would support a 0.25% rate hike. Powell also said that the war in Ukraine means significant uncertainty for monetary policy.   The US dollar and bond yields The US dollar continues to strengthen, as the USD index shows. In addition to the expected US interest rate hike, the US dollar bullishness is explained by demand for US government bonds in times of uncertainty. Demand for these bonds then pushes down their yields, which continue to fall. Figure 2: 10-year government bond yield on the 4H chart and USD index on the daily chart Index SP500 The US SP 500 index moved in a consolidation range last week. This shows that investors have so far viewed the conflict in Ukraine as an event that is more or less a regional event and therefore saw cheap stocks as a buying opportunity.  However, the sanctions adopted by Western countries will of course also have an impact on the global economy, especially if the conflict deepens further. This concern was then reflected at the end of the week when the index started to weaken. Figure 3: The SP 500 on H4 and D1 chart   Resistance according to the H4 chart is in the region of around 4,410 - 4,420. The nearest support according to the H4 chart is at 4255 - 4284. Significant support is at 4,100 - 4,113. German DAX index In contrast to the SP 500 index, there was a big sell-off in the DAX, showing that investors are worried, among other things, that a further escalation of the conflict could lead to a disruption in the supply of Russian gas, on which Germany is heavily dependent.  According to the daily chart, it looks like the DAX index is now in free fall and is breaking through support barriers as if they did not exist. It looks like the market is starting to show signs of panic selling by inexperienced investors.  If you are speculating in the short term, then bear in mind that short term speculation against such a strong downtrend is very disadvantageous and risky.   Figure 4: DAX on H4 and daily chart     Current resistance is in the area of 13,655 - 13,756. The price is now at support at 13,400, which is already slightly broken, but the closing of the whole session will be crucial. The next support is then at 13 000 - 13 100.   The Czech koruna is losing significantly The Czech koruna has long benefited from the interest rate differential, which has been very favourable for the koruna against the euro and has been the reason why the koruna has appreciated strongly since November 2021. But the Czech koruna, along with other Central European currencies, is a currency that is losing ground heavily in the current conflict.   Figure 5: The EURCZK on the daily chart   Firstly, there is the concern that the Czech Republic is geographically quite close to Ukraine, even though the Czech Republic does not have very significant exports directly with Ukraine nor Russia (in total, around 3% of total Czech exports). At the same time, there is concern about the Czech Republic's dependence on Russian gas. If the taps are closed, then the koruna could shoot above  CZK 27 per euro. Currently, the EURCZK pair is trading at the resistance level of 25. 80 - 25.90.   The Australian dollar The Australian dollar is a currency that tends to weaken during major global crises. In particular, the AUDJPY pair is correlated with the SP 500 index in the short term. Currently, however, the Australian dollar is strengthening.  This is because the Australian economy is export-oriented and exports commodities such as gold, iron ore, coal and gas.  All these commodities are now in high demand. Europe, for example, is realising that dependence on Russian gas is not paying off and is looking for alternatives. A temporary solution will be to rebuild coal-fired power stations. Germany and Italy have already started to buy coal stocks, which are therefore appreciating strongly. As a result, the price of coal has sky-rocketed, with one tonne reaching a record price of the USD 400. Figure 6: The coal price   The gold, traditionally seen as a safe haven in times of uncertainty, is also strengthening. The gold has also been helped by a fall in US bond yields.   Figure 7: The gold on H4 and D1 charts   In terms of technical analysis, the gold stopped at the resistance of $1,973 per ounce. The nearest support according to the daily chart is  $1,870 - 1,878 per ounce. The rise in commodity prices then resulted in the strengthening of the Australian dollar.     Figure 8: The AUDJPY currency pair on D1 chart   The AUDJPY broke the resistance in the range of 0.8400 - 0.8420, which became the new support. The next resistance is then at the level of 85.90 - 86.20.  

Now is the time for traders to adapt to higher volatility and rapidly changing market conditions. One of the best ways to do this is to monitor different asset classes and track which investments are gaining and losing money flow. Knowing what the Best Asset Now is (BAN) is critical for consistent growth no matter the market condition.With that said, buyers (countries, investors, and traders) are panicking as the commodity Wheat, for example, gained more than 40% last week.‘Panic Commodity Buying’ in Wheat – Weekly ChartAccording to the US Dept. of Agriculture, China will hold 69% of the world’s corn reserves, 60% of rice and 51% of wheat by mid-2022.Commodity markets surged to their largest gains in years as Ukrainian ports were closed and sanctions against Russia sent buyers scrambling for replacement supplies. Global commodities, commodity funds, and commodity ETFs are attracting huge capital inflows as investors seek to cash in on the rally in oil, metals, and grains.How does the Russia – Ukraine war affect global food supplies?The conflict between major commodity producers Russia and Ukraine is causing countries that rely heavily on commodity imports to feed their citizens to enter into panic buying. The breadbaskets of Ukraine and Russia account for more than 25% of the global wheat trade and nearly 20% of the global corn trade.Last week, it was reported that many countries have dangerously low grain supplies. Nader Saad, an Egypt Cabinet spokesman, has raised the alarm that currently, Egypt has only nine months’ worth of wheat in silos. The supply includes five months of strategic reserves and four months of domestic production to cover the bread needs of 102 million Egyptians. Additionally, Avigdor Lieberman, Israel’s economic minister, said on Thursday (3/3/22) that his country should keep “a low profile” regarding the conflict in eastern Europe, given that Israel imports 50 percent of its wheat from Russia and 30 percent from Ukraine.Sign up for my free trading newsletter so you don’t miss the next opportunity!The longer-term potential for much higher grain prices exists, but it’s worth noting that Friday’s close of nearly $12.00 a bushel for wheat is not that far away from the all-time record high of $13.30, recorded 14-years ago. According to Trading Economics, wheat has gone up 75.08% year-to-date while other commodity markets like Oats are up a whopping 85.13%, Coffee 74.68%, and Corn 34.07%.How are other markets reacting to these global events?Year-to-date comparison returns as of 3/4/2022:-9.18% S&P 500 (index), -7.49% DJI (index), -15.21% Nasdaq (index), +37.44% Exxon Mobile (oil), +20.08% Freeport McMoran (copper & gold), -20.68% Tesla (alternative energy), -24.49% Microstrategy (bitcoin play), -40.51% Meta-Facebook (social media)As stock holdings and 401k’s are shrinking it may be time to re-evaluate your portfolio. There are ETFs available that can give you exposure to commodities, energy, and metals.Here is an example of a few of these ETFs:+53.81% WEAT Teucrium Wheat Fund+41.79% GSG iShares S&P TSCI Commodity -Indexed Trust+104.40 UCO ProShares Ultra Bloomberg Crude Oil+59.32% PALL Aberdeen Standard Physical Palladium SharesHow is the global investor reacting to rocketing commodity prices and increasing market volatility?We can track global money flow by monitoring the following 1-month currency graph (www.finviz.com). The Australian Dollar is up +4.25%, the New Zealand Dollar +3.72%, and the Canadian Dollar +0.30% vs. the US Dollar due to the rising commodity prices like metals and energy. These country currencies are known as commodity currencies.The Switzerland Franc +0.96%, the Japanese Yen +0.35%, and the US Dollar +0.00% are all benefiting from global capital seeking a safe haven. As volatility continues to spike, these country currencies will experience more inflows as capital comes out of depreciating assets and seeks stability.We also notice that capital outflow is occurring from the European Union-Eurodollar -4.55% and the British Pound -2.22% due to their close proximity (risk) to the Russia - Ukraine war.www.finviz.comGlobal central banks will need to begin raising their interest rates to combat high inflation!Due to the rapid acceleration of inflation, the US Federal Reserve may have been looking to raise interest rates by 50 basis points at its policy meeting two weeks from now. However, given Russia’s invasion of Ukraine, the FED may become more cautious and consider raising interest rates by only 25 basis points on March 15-16.What strategies can help you navigate current market trends?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals are starting to act as a proper hedge as caution and concern start to drive traders/investors into Metals and other safe-havens.Now is the time to keep your eye on the ball!I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

USDCAD breaks higher The US dollar bounces back as traders pile into safer currencies at the expense of commodity assets. The previous rally above the supply zone at 1.2800 has prompted sellers to cover. Then a follow-up pullback saw support over 1.2600, a sign of accumulation and traders’ strong interest in keeping the greenback afloat. A breakout above 1.2810 could pave the way for an extended rise to last December’s high at 1.2950, even though the RSI’s situation may briefly hold the bulls back. 1.2680 is a fresh support in case of a pullback. EURGBP bounces back The euro recoups losses as shorts cover ahead of the ECB meeting. The pair’s fall below the major floor (0.8280) on the daily chart further weighs on sentiment. The lack of support suggests that traders’ are wary of catching a falling knife. The RSI’s double-dip into the oversold area has led to profit-taking, driving the price up. However, the rally could turn out to be a dead cat bounce if the bears fade the rebound in the supply zone around 0.8360. 0.8200 is a fresh support when momentum comes back again. SPX 500 struggles to rebound The S&P 500 extended losses as investors are wary of a global economic downturn. On the daily chart, a brief rebound has met stiff selling pressure on the 30-day moving average (4410). In fact, this indicates that the bearish mood still dominates after the index fell through 4250. Buyers have failed to hold above 4230, leaving the market vulnerable to another round of sell-off. 4110 is the next stop and a bearish breakout could lead to the psychological level of 4000. 4320 is now the closest resistance ahead.

It’s been almost two weeks since Russia invaded Ukraine. Even if the first day weren’t affected by huge rises, recent days show a major lift across markets. Source: TradingView.com Nickel There are some sensational rises beginning with Nickel price which increased by over 150% what can significantly affect many branches as Nickel is used, among others, in automotive and medical industries. Gold Gold raised by ‘only’ 4%, but it trades over magic $2000 level which nears ATH of Ca. $2100 (2020). XAU is believed to be a safe-haven as tensions rise and other assets’ fluctuations scare off investors. Crude Oil – BRENT and WTI Crude Oil prices have been rising since the first sights of invasion, but hitting Ca. $130 per barrel (to put it mildly) confused both investors and drivers around the world. Generally speaking, Crude Oil price has increased by Ca. 30% since the beginning of the war. Bitcoin BTC hasn’t fluctuated much and sticks to the levels near $40k, increasing by Ca. 5% since the invasion. Russian Rouble Currency of the invader has weakened significantly – by ca. 40% as RUBUSD chart shows. It will be really hard to get the Russian currency back to the game after such decrease. MOEX Some say Russian Index (RTSI – RU50) ‘surrendered’ shortly after the invasion has started as it remains closed since 1/03. At that time RTSI had been ca. 26% higher than on the first day of the warfare. DAX (GER 40) One of the greatest European index has lost almost 10%, what shows how broad is the influence of Russia-Ukraine War. Wheat Last but (definitely) not least… Wheat price increased by over 40% as conflicted countries – Russia and Ukraine are the major suppliers of such commodities. Don’t forget to follow us on Twitter! Data: TradingView.com

Brent oil is trading near $125 - in the 2011 and 2012 highs area. The market continues to receive pretty bullish comments from politicians and officials. However, traders seemed set to pause to digest current price levels after a frightening rally to $129 at one point on Monday, reacting to reports that the US and allies are weighing a ban on Russian oil and gas imports. In Russia, Novak (a former energy minister and co-founder of OPEC+ deals) points out that the oil embargo will push prices into the $300 a barrel area. Probably, this forecast is based on a comparison of the current situation with the OPEC embargo in late 1972, when the price soared 3-4 times within a few weeks. The International Energy Agency's executive director said the Oil can still move higher from current levels. Officially, Russia is not refusing to export Oil and Gas, but local companies have recently failed to sell Oil because of a buyers' boycott or fears of being hit by US and EU sanctions. Shell's just-announced refusal to buy all Russian Oil is doing little to bring down the commodity price. With this news backdrop, Oil is getting support on the downside in the $115 area, where last week's highs were located. It will take a lot more political will to reverse the trend in Oil. Also, the chances of Oil from Iran to make up for the drop-offs are somewhat thawed, as the president has said that Tehran will not give up its red lines. Iran would logically be expected to use the situation to bargain for better terms on a deal with the West. The same applies to Venezuela, where US representatives have headed to secure a rise in global production. Will the countries previously most disadvantaged by US sanctions use the momentum to ramp up production? That question is not yet answered. Likely, we should expect price rises to accelerate in the coming days before the situation reverses into a constructive direction and prices head for a correction.

While the world discusses the prospect of an embargo on Russian oil and gas, the absolute madness is in metals. In many of them, Russia has a pretty significant share, and investors fear a ban on exports could be Russia’s response to sanctions, on a par with restricting supplies of agricultural products. Palladium set a new all-time high at $3439 on Monday, gaining 14.8% on the day at one point. Nickel reached $100,000/tonne, gaining more than 200% over the two days, but soon retreated to $82,000 (+71% since the start of the day). Aluminum reached $4000 per tonne on Monday, compared with stabilization at $2600 from November to mid-December. Copper exceeded $10800/tonne yesterday, rewriting its historic high. Still, if we apply ‘peacetime’ patterns, we can see short-squeezes and a final capitulation by the bears in one metal after another. A reversal usually follows this. Copper and palladium have been sliding hard after making new all-time highs, and we’re now seeing a distinct tug-of-war between the buyers and the sellers, at an impressive distance from yesterday’s extremes. Nickel is retracing a sharp bounce today. The troy ounce reached $2020 earlier on Tuesday, having hit new highs since August 2020. The momentum in gold gained new strength after restrictions from cryptocurrency exchanges for Russian residents. But here, too, it is worth betting with great caution on the upside, as there will be a big seller entering the market. The Bank of Russia, for the most part, has no other means but to sell off the gold from its reserves in Russia. These steps could be taken tomorrow, as Monday and Tuesday were national holidays. Those actions will keep the price of gold on the way to the all-time highs near $2075, where it could be as early as this week. However, the chances are higher that more sellers will enter into gold, which will cool the current rally, temporarily correcting the price into the $1960-2000 area before the end of March.

  Gold has hit $2,000 but is still struggling to maintain that historical level. It has already tried 8 times - will the ninth attempt succeed? Many indications make this doubtful. Gold is attempting to break above the $2,000 milestone, and miners are trying to break above their declining resistance line. Will they manage to do so, and if so, how long will the rally last? Yesterday, gold didn’t manage to close above the $2,000 level and it’s making another attempt to rally above it in today’s pre-market trading. However, will it be successful? Given the RSI above 70 and the strength of the current resistance, it’s doubtful. In fact, nothing has changed with regard to this likelihood since yesterday, so what I wrote about it in the previous Gold & Silver Trading Alert remains up-to-date: Gold touched $2,000 in today’s pre-market trading, which is barely above its 2021 high and below its 2020 high. Crude oil is way above both analogous levels. In other words, gold underperforms crude oil to a significant extent, just like in 2003. Interestingly, back in 2003, gold topped when crude oil rallied about 40% from its short-term lows (the late-2002 low). What happened next in 2003? Gold declined, and the moment when crude oil started to visibly outperform gold was also the beginning of a big decline in gold stocks. That makes perfect sense on the fundamental level too. Gold miners’ share prices depend on their profits (just like it’s the case with any other company). Crude oil at higher levels means higher costs for the miners (the machinery has to be fueled, the equipment has to be transported, etc.). When costs (crude oil could be viewed as a proxy for them) are rising faster than revenues (gold could be viewed as a proxy for them), miners’ profits appear to be in danger; and investors don’t like this kind of danger, so they sell shares. Of course, there are many more factors that need to be taken into account, but I just wanted to emphasize one way in which the above-mentioned technical phenomenon is justified. Back in 2003, gold stocks wiped out their entire war-concern-based rally, and the biggest part of the decline took just a bit more than a month. Let’s remember that back then, gold stocks were in a very strong medium- and long-term uptrend. Right now, mining stocks remain in a medium-term downtrend, so their decline could be bigger – they could give away their war-concern-based gains and then decline much more. Mining stocks are not declining profoundly yet, but let’s keep in mind that history rhymes – it doesn’t repeat to the letter. As I emphasized previously today, back in 2003 and 2002, the tensions were building for a longer time, and it was relatively clear in advance that the U.S. attack was going to happen. This time, Russia claimed that it wouldn’t attack until the very last minute before the invasion. Consequently, the “we have to act now” is still likely to be present, and the dust hasn’t settled yet – everything appears to be unclear, and thus the markets are not returning to their previous trends. Yet. However, as history shows, that is likely to happen. Either immediately, or shortly, as crude oil is already outperforming gold. The above chart features the GDXJ ETF. As you can see, the junior miners moved to their very strong resistance provided by the declining resistance line. This resistance is further strengthened by the 38.2% Fibonacci retracement, and the previous (late-2021) high. This means that it’s particularly strong, and any breakout here would likely be invalidated shortly. Given the clear sell signal from the RSI indicator, a turnaround here is even more likely. I marked the previous such signals to emphasize their efficiency. When the RSI was above 70, a top was in 6 out of 7 of the recent cases, and the remaining case was shortly before the final top, anyway. This resistance seems to be analogous to the $2,000 level in gold. By the way, please note that gold tried to break above $2,000 several times: twice in August 2020; twice in September 2020 (once moving above it, once moving just near this level); once in November 2020 (moving near this level); once in January 2021 (moving near this level); once in February 2022 (moving near this level). These attempts failed in each of the 7 cases mentioned above. This is the eight attempt. Will this very strong resistance break this time? Given how much crude oil has already soared, and how both markets used to react to war tensions in the case of oil-producing countries, it seems that the days of the rally are numbered. Moving back to the GDXJ ETF, please note that while gold is moving close to its all-time highs, the junior miners are not doing anything like that. In fact, they barely moved slightly above their late-2021 high. They are not even close to their 2021 high, let alone their 2020 high. Instead, junior mining stocks are just a bit above their early-2020 high, from which their prices were more than cut in half in less than a month. In other words, junior miners strongly underperform gold, which is a bearish sign. When gold finally declines – and it’s likely to, as geopolitical events tend to have only a temporary effect on prices, even if they’re substantial – junior miners will probably slide much more than gold. One of the reasons is the likely decline in the general stock market. I recently received a question about the impact the general stock market has on mining stocks, as the latter moved higher despite stocks’ decline in recent weeks. So, let’s take a look at a chart that will feature junior mining stocks, the GLD ETF, and the S&P 500 Index. Before the Ukraine crisis, the link between junior miners and the stock market was clear. Now, it's not as clear, but it’s still present. Juniors only moved to their late-2021 highs, while gold is over $100 above those highs. Juniors underperform significantly, in tune with the stock market's weakness. The gold price is still the primary driver of mining stock prices – including junior mining stocks. After all, that’s what’s either being sold by the company (that produces gold) or in the properties that the company owns and explores (junior miners). As gold prices exploded in the last couple of weeks, junior miners practically had to follow. However, this doesn’t mean that the stock market’s influence is not present nor that it’s going to be unimportant going forward. Conversely, the weak performance of the general stock market likely contributed to junior miners’ weakness relative to gold – the former didn’t rally as much as the latter. Since the weakness in the general stock market is likely to continue, and gold’s rally is likely to be reversed (again, what happened in the case of other military conflicts is in tune with history, not against it), junior miners are likely to decline much more profoundly than gold. Speaking of the general stock market, it just closed at the lowest level since mid-2021. The key thing about the above chart is that what we’ve seen this year is the biggest decline since 2020, and the size of the recent slide is comparable to what we saw as the initial wave down in 2020 – along with the subsequent correction. If these moves are analogous, the recent rebound was perfectly normal – there was one in early 2020 too. This also means that a much bigger decline is likely in the cards in the coming weeks, and that it’s already underway. This would be likely to have a very negative impact on the precious metals market, in particular on junior mining stocks (initially) and silver (a bit later). All in all, it seems that due to the technical resistance in gold and mining stocks, the sizable – but likely temporary (like other geopolitical-event-based-ones) – rally is likely to be reversed shortly. Then, as the situation in the general stock market deteriorates, junior miners would be likely to plunge in a spectacular manner. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Boeing stock falls as Russian raw material supplies are likely to be in short supply. Boeing earlier said it was suspending buying Russian titanium. BA stocks fell over 6% on Monday as main indices fell over 3%. Boeing (BA) stock slipped on Monday, even disproportionally versus the main market. While the S&P 500 and the Nasdaq fell in the region of 3% to 4%, Boeing underperformed as it fell just under 6.5%. Boeing Stock News Monday's move took Boeing stock to new 52-week lows as the stock remains pressured in the current risk-off environment. The Wall Street Journal reported on Monday that Boeing had suspended purchases of titanium from Russia as the company felt it had enough supply from other sources. “Our inventory and diversity of titanium sources provide sufficient supply for airplane production, and we will continue to take the right steps to ensure long-term continuity,” a Boeing spokeswoman told WSJ. Also on Monday Cowen & Co. lowered their price target for Boeing from $265 to $230. Cowen maintained their outperform rating on Boeing. Breaking Defense had last week reported that Air Force One's replacement was running up to 17 months late, according to two sources. Boeing is the supplier of Air Force One. Boeing will also likely feel headwinds from the current surge in oil prices. While not directly affected, higher oil prices will flow through to higher airfares and a likely reduction in passenger demand. This would see a knock-on but delayed demand for additional planes affecting Boeing and its main competitor, Airbus. However, Boeing does have a large military division. At the end of 2021 the Boeing Defence, Space & Security division accounted for over 33% of total Boeing revenues. The US Department of Defense is the top customer of this division. Boeing Stock Forecast Breaking the 52-week low is significant, and from the weekly chart below we can see how Boeing failed to regain its pre-pandemic levels. This should have been setting off alarm bells as stocks and indices reached all-time highs. The aerospace sector was a special case, but technically this was a bearish signal. BA stock chart, weekly The daily chart outlines the series of bearish lower lows and highs. Any rally to $185 can be used to instigate fresh bearish positions. BA stock chart, daily

Bitcoin price action sees bulls storming out of the gate, with BTC bouncing off a $38,073 historical pivot. BTC price set to tick $39,780 intraday in a range-trading profile. Expect to see more upside, should BTC continue its rally from positive signals out of Ukraine, and punch through the 55-day SMA. Bitcoin price action is back on the front foot today as global markets surf positive news of a ceasefire and fresh round of talks between Russia and Ukraine. The lift in positive sentiment spilled over into cryptocurrencies and saw positive prints across the board. Bitcoin was no different, with the price up 2.30% for the day at the time of writing and a possible tick of over 4% profit going into the U.S. session this evening. Bitcoin sees bulls taking over in ceasefire setback for bears Bitcoin price action is whipsawing between $45,000 to the upside and $34,000 to the downside, in a bandwidth that has been drawn since January. With global markets remaining stressed and on edge, today is set to give a sigh of relief and blow off some steam out of the pressure cooker that is Ukraine. Expect to see further decompression going into the U.S. session as this positive news gets picked up and translated into another round of bullish uplift for the cryptocurrency. BTC price is set to tick $39,780 and will try to break the high of last weekend. But bulls will immediately face another level of resistance, with the 55-day Simple Moving Average (SMA) around $40,250, and the $40,000 level in the way. Add to that the monthly pivot at $41,000 – so within a $1,000 – and there are three bearish elements capable of cutting short any attempts for further upside if no additional relief catalysts are added to the current headlines. BTC/USD daily chart Over the weekend, a ceasefire was already tried but failed after just a few minutes. Should that be the case again, expect this to break the fragile trust that has been in place now since recent talks yesterday. Expect BTC price action to be pushed back to $38,073 a drop of around 4%.

USDJPY breaks higherThe Japanese yen softened after weaker-than-expected GDP in Q4. Despite choppiness in recent price action, confidence in the greenback remains high.A failed attempt at the supply zone (115.80) suggests a lack of momentum, but a swift bounce off 114.65 reveals strong enough buying interest.A bullish breakout would lead to the double top at 116.35. Its breach could end the two-month-long consolidation and trigger an extended rally towards January 2017’s highs around 118.00. 115.40 is fresh support.AUDUSD seeks supportThe Australian dollar stalls as commodity prices consolidate. The rally above 0.7310, a major supply area, has weakened selling pressure and put the pair on a bullish reversal course.The Aussie’s parabolic ascent and an overbought RSI prompted short-term buyers to take profit. As the RSI swings back into the oversold zone, the bulls may see the current fallback as an opportunity to stake in.0.7380 is a fresh resistance and 0.7250 is the immediate support. Further below 0.7170 is a critical level to keep the rebound valid.UK 100 sees limited bounceThe FTSE 100 struggles as the UK plans to ban Russian energy imports.On the daily chart, a break below the demand zone (6850) wiped out 11-months worth of gains and signaled a strong bearish bias. The RSI’s oversold situation may cause a temporary rebound, but a bearish MA cross could attract more selling interest.The liquidation is yet to end as medium-term buyers scramble for the exit. 7200 is a fresh resistance and 7450 is a major supply zone. A drop below 6800 may lead to 6500.

A barrel of Oil on the spot market briefly topped $130 for Brent and $125 for WTI, having retreated to $127 and $121, respectively, by the start of European trading. Oil received its latest boost on expectations that the US will announce an embargo on Russian energy imports. Traders took short-term profits on Biden's speech, which kept Oil from rising further. On the sellers' side was also news that the UK was unable to repeat the US move and is instead set to halt energy imports from Russia before the end of the year. Biden also noted that many European countries would not be able to stop buying Russian Oil and Gas any time soon because of their heavy reliance on them.The latest comments have somewhat dampened pressure on the Oil price, as have earlier International Energy Agency calculations on ways to reduce Europe's energy consumption from Russia by up to 80% as early as this year. Such plans often over-idealise the possibility of a coordinated effort, but their mere appearance has a stabilising effect on the market. For its part, Russia has also worked to prove its role as a reliable energy supplier, loading Crude Oil at ports in line with the schedule.Nevertheless, markets continue to face an increased risk premium, and Russian Oil struggles to find new buyers. The UAE and Saudi Arabia try to use the situation to their advantage, refusing to cooperate with the US to increase oil supplies. Iran is haggling for more favourable terms on the nuclear deal. Russia, the architect of the deal, has suddenly become an obstacle to it, demanding legal guarantees from the US that sanctions will not affect Russian-Iranian trade, thereby trying to thwart the US attempts to increase oil supply in countries where US sanctions limit production.We would venture to guess that all existing conditions are already built into the Oil quotes, and its price is now near a ceiling for the coming weeks and months. From here, we could see the establishment of a fairly broad corridor of $95-130 per barrel for Brent for the foreseeable future. This is a vast range, reflecting the outlook's persistence of extreme volatility and extreme uncertainty.

S&P 500 once again gave up intraday gains, and credit markets confirmed the decline. Value down significantly more than tech, risk-off anywhere you look. For days without end, but the reprieve can come on seemingly little to no positive news, just when the sellers exhaust themselves and need to regroup temporarily. We‘re already seeing signs of such a respite in precious metals and commodities – be it the copper downswing, oil unable to break $130, or miners not following gold much higher yesterday. Corn and wheat also consolidated – right or wrong, the market seeks to anticipate some relief from Eastern Europe.The big picture though hasn‘t changed:(…) credit markets … posture is very risk-off, and the rush to commodities goes on. With a little check yesterday on the high opening prices in crude oil and copper, but still. My favorite agrifoods picks of late, wheat and corn, are doing great, and the pressure within select base metals, is building up – such as (for understandable reasons) in nickel and aluminum. Look for more to come, especially there where supply is getting messed with (this doesn‘t concern copper to such a degree, explaining its tepid price gains).And I‘m not talking even the brightest spot, where I at the onset of 2022 announced that precious metals would be the great bullish surprise this year. Those who listened, are rocking and rolling – we‘re nowhere near the end of the profitable run! Crude oil is likely to consolidate prior steep gains, and could definitely continue spiking higher. Should it stay comfortably above $125 for months, that would lead to quite some demand destruction. Given that black gold acts as a „shadow Fed funds rate“, ......its downswing would contribute to providing the Fed with an excuse not to hike in Mar by 50bp. After the prior run up in the price of black gold that however renders such an excuse a verbal exercise only, the Fed remains between a rock and hard place, and the inflationary fires keep raging on.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 is reaching for the Feb 24 lows, and may find respite at this level. The upper knot though would need a solid close today (above 4,250) to be of short-term significance. Remember, the market remains very much headline sensitive.Credit MarketsHYG clearly remains on the defensive, but the sellers may need a pause here, if volume is any guide. Bonds are getting beaten, and the outlook remains negative to neutral for the weeks ahead. Gold, Silver and MinersPrecious metals keep doing great, but a pause is knocking on the door. Not a reversal, a pause. Gold and silver are indeed the go-to assets in the current situation, and miners agree wholeheartedly.Crude OilCrude oil is having trouble extending gains, and the consolidation I mentioned yesterday, approaches. I do not think however that this is the end of the run higher.CopperCopper is pausing already, and this underperformer looks very well bid above $4.60. Let the red metal build a base, and continue rising next, alongside the rest of the crowd.Bitcoin and EthereumCryptos upswing equals more risk appetite? It could be so, looking at the dollar‘s chart (I‘m talking that in the summary of today‘s analysis).SummaryEvery dog has its day, and the S&P 500‘s one might be coming today or tomorrow. It‘s that the safe havens of late (precious metals, commodities and the dollar) are having trouble extending prior steep gains further. These look to be in for a brief respite that would be amplified on any possible news of deescalation. In such an environment, risk taking would flourish at expense of gold, silver and oil especially. I don‘t think so we have seen the tops – precious metals are likely to do great on the continued inflation turning into stagflation (GDP growth figures being downgraded), and commodities are set to further benefit from geopolitics (among much else).Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

As we wrote in the weekly calendar on previous Friday, the 10th March will be dominated with European Union’s events. However, it’s good to follow news from the USA, as Core CPI And Initial Job Claims are released as well. Events’ data is courtesy of Investing.com European Union So, EU Leaders meet at 10 a.m., what’s the first major event of the day. The Summit is followed by releases of Deposit Facility Rate, ECB Marginal Lending Facility, Interest Rate Decision And Monetary Policy Statement. All of these releases take place at 12:45 p.m. Then, after a short break, ECB will speak to media (1:30 a.m.) USA US Core CPI (prev. 0.6%) And Initial Jobless Claims Are Released (215K) are presented at the same time – 1:30 a.m. Japan Half an hour before midnight investors might focus on Japanese indicators. At 11.30 p.m. Household Spending (MoM And YoY) are released. What’s more? BSI Large Manufacturing Conditions is presented twenty minutes later. This one amounted to 7.9 previously. Brazil For those interested in LATAM markets – you’re welcomed to follow news from Brazil as at the midday Retail Sales (YoY and MoM) are released. Source: Investing.com Time: GMT

To minimize trading risk and grow capital during a global crisis is somewhat hinged on the answers to speculative questions. How long will the Russia – Ukraine war last? How high is the price of oil and gas going to go? How quickly will central banks raise interest rates to counter high inflation? What assets should I put my money into? Knowing what the Best Asset Now (BAN) is, is critical for risk management and consistent growth no matter the market condition!‘BUY THE DIP’ or ‘SELL THE RALLY’? - DJI Weekly ChartAs of 3/8/22, YTD returns are: DJIA -10.20%, S&P 500 -12.49%, Nasdaq 100 -18.70%The Dow Jones Industrial Average traded as high as 36952.65 on January 5, 2022The DJIA put in a Covid 2020 Low of 18213.65 on March 23, 2020. When you double the price of this significant low, you get a price of 36427.30, which the DJIA reached on November 4, 2021. This was precisely 591 calendar days from the 2020 low. The 200% level seems to have capped the bull rally. If, in fact, this is the top and the start of a bear market, we should experience high volatility both up and down. However, the highs and lows should be lower as the market begins to trend lower. The volatility will also continue to increase as the market deflates and continues to lose capital.Sign up for my free trading newsletter so you don’t miss the next opportunity! It appears this scenario may very well coincide with the fundamental current events of high inflation, central banks unable to add stimulus, having to raise their interest rates, and current/future geopolitical events.What-To-Do Before the Storm Hits“Have A Plan and Stick-To-Your-Plan”There are some basic strategies or practices that professional traders utilize to minimize trading risk and grow capital. Here are a few ideas:Bull/Bear Markets – In an upmarket, you should buy the dips. In a down market, you should do the opposite and sell the rallies. Rallies in a down 'bear' market tend to be very fast and short-lived.Diversification – Don't have your eggs in too many baskets. It is better to navigate thru a storm by focusing your resources specifically rather than generally.Leverage – Reduce leverage, position size, or know how you will respond to different percentage losses or gains. Understand what your investment objective is as well as your tolerance for risk. If you're having trouble sleeping at night, you should reduce your holdings to the place where you are comfortable.Leverage is a mathematical equation, and it does not have to be 1x, 2x, etc. It can also be 0.75x, 0.50x, etc. You get to decide what's best for you and your family. Leverage is also a double-edged sword! Be careful, especially when the markets are on edge and volatile.Where is the Institutional Money Going?The global currency market, otherwise known as Forex or FX, is the largest market in the world. According to the BIS Triennial Central Bank Survey, published on December 8, 2019, by the Bank for International Settlements, it has an average daily transactional volume of $6.6 trillion.By tracking global money flow, we can get a pretty good idea of where the smart money is going. For now, let’s see what has happened during the last 6-months.According to www.finviz.com, we notice that the US Dollar, despite its Covid stimulus spending spree, was the preferred currency. However, the Eurodollar has seen substantial outflows decreasing by -7.60%, which is entirely understandable with the Russia – Ukraine War at their doorstep.Global central banks ponder how quickly to raise interest rates in order to curb high inflation!According to TradingEconomics, the current global interest rates by major country are: United States 0.25%, Japan -0.10%, Switzerland -0.75%, Euro Region 0.00%, United Kingdom 0.50%, Canada 0.50%, and Australia 0.10%.The US Federal Reserve may have been looking to raise interest rates by as much as 50 basis points at its next policy meeting. However, given Russia’s invasion of Ukraine, the FED may become more cautious and consider raising interest rates by only 25 basis points on March 15-16. We need to pay close attention to this high-impact market event.What strategies can help you minimize trading risk and grow capital?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Minimizing risk in order to grow your capital must remain a primary focus for all investors and traders. Now is the time to keep your eye on the ball!I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Russia's denial of wanting to overthrow Ukraine's government has boosted the market mood. Ongoing bombing, accusations of using biological weapons may come to haunt markets. The safe-haven dollar and gold have room to recover after the recent slide. All markets are saying, is give peace a chance – paraphrasing John Lennon's song, that is what is going on, with stocks and risk currencies rising while safe-haven assets are tumbling down. However, it may become worse before it becomes better. The latest bout of optimism stems from Russia's statement that it does not seek to overthrow Ukraine's government and its preference to resolve differences via discussions. The Kremlin added that it has never threatened and does not threaten NATO. These olive branches join Tuesday's news that Ukrainian President Volodymyr Zelenskyy signaled he is willing to give up NATO membership and the upcoming meeting of the two countries foreign ministers planned for Thursday in Turkey. On the ground, a humanitarian ceasefire is in effect in several Ukrainian cities on Wednesday, and civilians are begin evacuated, so far safely. Markets have reacted positively to these developments, with S&P futures jumping by 2%, EUR/USD jumping by some 80 pips, and safe havens such as gold and the dollar suffering significant falls. Is the war nearing its end? Not so fast. Reasons to worry First, Russia continues bombing Kyiv and is likely using this day of relative calm to regroup and resupply its troops, which have suffered massive logistical failures. Several of the previous ceasefires were not respected and this may happen again. Secondly, Russia's statements are also one that the US has declared economic war on it. Such comments contradict the better vibes that have previously boosted the market mood. Russia also accuses its enemy of developing biological weapons, in what seems like an excuse to intensify attacks. Third, Ukrainian President Zelensky called on Russian troops to "surrender while you still can" and that "we will answer in full for all our killed people" – militant statements are not exclusive to one side. The war will eventually end, hopefully, sooner rather than later. However, it seems overoptimistic to circle Wednesday as the beginning of the end, and that everything improves from here. Another escalation may come shortly, souring the market mood and boosting the safe-haven gold and dollar. Moreover, with every day that passes, the damage to the global economy increases. While shortages of energy have yet to be seen – prices are rising without any stop in the flow of oil or gas – food issues may become a burden for the global economy. Russia and Ukraine produce a vast amount of wheat and barley, which are now blocked. That is already raising food prices. And while the war continues, so do new Western sanctions. The EU has approved a new list of restrictions on Russian leaders and oligarchs, and also disconnect several Belarusian banks from the SWIFT payments system. All in all, it will likely get worse before it becomes better and that means another rush to the dollar and gold.

EURUSD bounces back The euro rallies on news that the EU may issue a joint bond to fund energy and defense. The pair found bids near May 2020’s lows (1.0810). An oversold RSI on the daily chart prompted sellers to take profit, easing the downward pressure. A rally above the immediate resistance at 1.0940 and a bullish MA cross may improve sentiment in the short term. However, buyers will need to clear the support-turned-resistance at 1.1160 before they could hope for a meaningful rebound. 1.0910 is the support in case of a pullback. GBPUSD inches higher The sterling claws back losses as risk appetite makes a timid return across the board. Following a three-month-long rebound on the daily chart, a lack of support at 1.3200 and a bearish MA cross shows strong selling pressure. A bounce-back above 1.3200 may only offer temporary relief as sellers potentially look to fade the rebound. 1.3350 is a key hurdle that sits along the 20-day moving average. 1.3080 is fresh support and its breach could trigger a new round of sell-off below the next daily support at 1.2880. USOIL breaks support WTI crude tumbled after the UAE said consider boosting production. The parabolic climb came to a halt at 129.00 and pushed the RSI into an extremely overbought condition on the daily chart. A bearish RSI divergence suggested a loss of momentum and foreshadowed a correction as traders would be wary of chasing the rally. A fall below 115.00 led buyers to bail out, triggering a wave of liquidation. 105.00 is the next support and a breakout could bring the price back to 95.00 near the 30-day moving average.

S&P 500 tech driven upswing makes the advance a bit suspect, and prone to consolidation. I would have expected value to kick in to a much greater degree given the risk-on posture in the credit markets. The steep downswing in commodities and precious metals doesn‘t pass the smell test for me – just as there were little cracks in the dam warning of short-term vulnerability at the onset of yesterday, the same way there are signs of the resulting downswing being overdone now.And that has consequences for the multitude of open positions – the PMs and commodities super bull runs are on, and the geopolitics still support the notion of the next spike.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 turned around, and the volume isn‘t raising too many eyebrows. However, the bulls should have tempered price appreciation expectations, to put it politely...Credit MarketsHYG turned around, but isn‘t entirely convincing yet. We saw an encouraging first step towards risk-on turn that requires that the moves continue, which is unlikely today – CPI is here, and unlikely to disappoint the inflationistas.Gold, Silver and MinersPrecious metals downswing looks clearly overdone, and I continue calling for a shallow, $1,980 - $2,000 range consolidation next. This gives you an idea not to expect steep silver discounts either. Miner are clear, and holding up nicely.Crude OilCrude oil downswing came, arguably way too steep one. Even oil stocks turned down in spite of the S&P 500 upswing, which is odd. I‘m looking for gradual reversal of yesterday‘s weakness in both.CopperCopper has made one of its odd moves on par with the late Jan long red candle one – I‘m looking for the weakness to be reversed, and not only in the red metal but within commodities as such.Bitcoin and EthereumCryptos are giving up yesterday‘s upswing – they are dialing back the risk-on turn and rush out of the safe havens of late.SummaryThe S&P 500 dog indeed just had its day, but the price appreciation prospects are not looking too bright for today. With attention turning to CPI, and yesterday‘s „hail mary decline aka I don‘t need you anymore“ in the safe havens of late (precious metals, crude oil, wheat, and the dollar to name just a few) getting proper scrutiny, I‘m looking for gradual return to strength in all things real (real assets) – it‘s my reasonable assumption that the markets won‘t get surprised by an overwhelmingly positive headline from Eastern Europe at this point. Focusing on the underlying fundamentals and charts, I don‘t think so we have seen the real asset tops – precious metals are likely to do great on the continued inflation turning into stagflation (GDP growth figures being downgraded), and commodities are set to further benefit from geopolitics (among much else).Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

NZDUSD consolidates gains The New Zealand dollar inched higher supported by roaring commodity prices. A break above the daily resistance at 0.6890 has put the kiwi back on track in the medium term. A bullish MA cross on the daily chart suggests an acceleration to the upside. As sentiment improves, the bulls may see the current consolidation as an opportunity to accumulate. A close above 0.6920 would extend the rally to 0.7050. 0.6800 is the first support and 0.6730 over the 30-day moving average a key demand zone. XAGUSD seeks support Silver consolidates amid ongoing geopolitical instability. A bearish RSI divergence suggests a deceleration in the rally. A tentative break below 25.40 has prompted some buyers to take profit. While sentiment remains optimistic, a correction might be necessary for the bulls to take a breather. The psychological level of 25.00 is a major demand zone. Its breach could send the precious metal to 24.30 which sits on the 30-day moving average. A rally above 26.90 could propel the price to last May’s highs around 28.50. US 30 struggles for buyers The Dow Jones 30 turned south after talks between Russia and Ukraine stalled again. A rebound above 34000 has provided some relief. Nonetheless, enthusiasm could be short-lived after the index gave up all recent gains. The prospect of a bear market looms if this turns out to be a dead cat bounce. A fall below 32300 could trigger another round of liquidation and push the Dow to a 12-month low at 30800. On the upside, 33500 is the first resistance. The bulls will need to lift offers around 34100 before they could attract more followers.

  With each day of the Russian invasion, gold confirms its status as the safe-haven asset. Its long-term outlook has become more bullish than before the war. Two weeks have passed since the Russian attack on Ukraine. Two weeks of the first full-scale war in Europe in the 21th century, something I still can’t believe is happening. Two weeks of completely senseless conflict between close Slavic nations, unleashed without any reasonable justification and only for the sake of Putin’s imperial dreams and his vision of Soviet Reunion. Two weeks of destruction, terror, and death that captured the souls of thousands of soldiers and hundreds of civilians, including dozens of children. Just yesterday, Russian forces bombed a maternity hospital in southern Ukraine. I used to be a fan of Russian literature and classic music (who doesn’t like Tolstoy or Tchaikovsky?), but the systematic bombing of civilian areas (and the use of thermobaric missiles) makes me doubt whether the Russians really belong to the family of civilized nations. Now, for the warzone report. The country’s capital and largest cities remain in the hands of the Ukrainians. Russian forces are drawing reserves, deploying conscript troops to Ukraine to replace great losses. They are still trying to encircle Kyiv. They are also strengthening their presence around the city of Mykolaiv in southern Ukraine. However, the Ukrainian army heroically holds back enemy attacks in all directions. The defense is so effective that the large Russian column north-west of Kyiv has made little progress in over a week, while Russian air activity has significantly decreased in recent days.   Implications for Gold How has the war, that has been going on for already two weeks, affected the gold market so far? Well, as the chart below shows, the military conflict was generally positive for the yellow metal, boosting its price from $1,905 to $1989, or about 4.4%. Please note that initially the price of gold jumped, only to decline after a while, and only then rallied, reaching almost $2,040 on Tuesday (March 8, 2022). However, the price has retreated since then, below the key level of $2,000. This is partially a normal correction after an impressive upward move. It’s also possible that the markets are starting to smell the end of the war. You see, Russian forces can’t break through the Ukrainian defense. They can continue besieging cities, but the continuation of the invasion entails significant costs, and Russia’s economy is already sinking. Hence, they can either escalate the conflict in a desperate attempt to conquer Kyiv – according to the White House, Russia could conduct a chemical or biological weapon attack in Ukraine – or try to negotiate the ceasefire. In recent days, the President of Ukraine, Volodymyr Zelensky, said he was open to a compromise with Russia. Today, the Russian and Ukrainian foreign ministers met in Turkey for the first time since the horror started (unfortunately, without any agreement). However, although gold prices may consolidate for a while or even fall if the prospects of the de-escalation increase, the long-term fundamentals have turned more bullish. As you can see in the chart below, the real interest rates decreased amid the prospects of higher inflation and slower economic growth. Russia and Ukraine are key exporters of many commodities, including oil, which would increase the production costs and bring us closer to stagflation. What’s next, risk aversion increased significantly, which is supportive of safe-haven assets such as gold. After all, Putin’s decision to invade Ukraine is a turning point in modern history, which ends a period of civilized relations with Russia and relative safety in the world. Although Russia’s army discredited itself in Ukraine, the country still has nuclear weapons able to destroy the globe. As you can see in the chart below, both the credit spreads (represented here by the ICE BofA US High Yield Index Option-Adjusted Spread) and the CBOE volatility index (also called “the fear index”) rose considerably in the last two weeks. Hence, the long-term outlook for gold is more bullish than before the invasion. The short-term future is more uncertain, as there might be periods of consolidation and even corrections if the conflict de-escalates or ends. However, given the lack of any decisions during today’s talks between Ukrainian and Russian foreign ministers and the continuation of the military actions, gold may rally further. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Ethereum price faces a decisive moment as it coils up inside a symmetrical triangle. Investors can expect a 34% move in either direction, considering the ambiguous nature of the setup. A move to the upside seems unlikely due to the presence of multiple resistance barriers. Ethereum price action shows an interesting setup that forecasts the possibility of a massive move in both directions. However, considering the technical aspects, the probability of a down move appears more plausible for ETH. Ethereum price is stuck consolidating Ethereum price sets up three lower highs and two higher lows since January 24. Connecting these swing points using trend lines results in a symmetrical triangle formation. This technical formation forecasts a 34% move in either direction obtained by measuring the distance between the first swing high and low. A bullish breakout at roughly $2,882 puts the target at $3,874, but a bearish move below $2,405 reveals the target at $1,578. However, an upside move is less likely due to the presence of the weekly supply zone extending from $2,927 to $3,413. Moreover, the 50-day Simple Moving Average (SMA) has kept the price capped for the last three months. Additionally, the 100-day SMA present inside the weekly supply zone makes this confluence a stiff hurdle to overcome. Therefore, a six-hour candlestick close below $2,405 would indicate a breakout and forecasts a 34% crash to $1,578. ETH bulls might prevent such a steep correction due to the weekly support level at $1,730. ETH/USDT 6-hour chart On the other hand, if Ethereum price witnesses a massive surge in buying pressure that kick-starts a bullish breakout, investors can expect the upside to be capped around the 200-day SMA at $3,543 or $3,600. Any move beyond this level will require a massive inflow of stablecoins or a pileup of bid orders, which is unlikely considering the consolidative nature of BTC and ETH’s correlation to it.

Price has been in this range since 23rd February till date within $0.0168 & $0.0217. Price has tested this price level serving as support and resistance twice. Price is approaching the support at $0.0168 to test it the 3rd time. The question on our mind is “will price break this support or rise to the resistance zone at $0.0217?” There’s no answer to that yet. We need confirmation to know what price is going to do. Therefore, this is the possible direction to which it can follow. What do you think? Share your opinion in the comment section You can also demand for analysis of your preferred coin Happy Trading https://www.tradingview.com/chart/SLPUSDT/HD1GITO6-SLP-CONSOLIDATION-WITHIN-0-0168-0-0217-STILL-ACTIVE/ Join my FREE Telegram Channel for daily updates and signals https://t.me/Petrock_Signals

S&P 500 gave up the opening gains, but managed to close on a good note, in spite of credit markets not confirming. Given though the high volume characterizing HYG downswing and retreating crude oil, we may be in for a stock market led rebound today. It‘s that finally, value did much better yesterday than tech.CPI came red hot, but didn‘t beat expectations, yield curve remains flat as a pancake, and the commodity index didn‘t sell off too hard. It remains to be seen whether the miners‘ strength was for real or not – anyway, the yesterday discussed shallow $1,980 - $2,000 range consolidation still remains the most likely scenario. I just don‘t see PMs and commodities giving up a lion‘s share of the post Feb 24 gains next.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 can still turn around, and the odds of doing so successfully (till the closing bell today), have increased yesterday. The diminished volume points to no more sellers at this point while buyers are waiting on the sidelines.Credit MarketsHYG has only marginally closed below Tuesday‘s lows – corporate junk bonds can reverse higher without overcoming Wednesday‘s highs fast, which would still be constructive for a modest S&P 500 upswing.Gold, Silver and MinersPrecious metals are indeed refusing to swing lower too much – the sector remains excellently positioned for further gains. For now though, we‘re in a soft patch where the speculative fever is slowly coming out, including out of other commodities. Enter oil.Crude OilCrude oil still remains vulnerable, but would catch a bid quite fast here. Ideally, black gold wouldn‘t break down into the $105 - $100 zone next. I‘m looking for resilience kicking in soon.CopperCopper fake weakness is being reversed, and the red metal is well positioned not to break below Wednesday‘s lows. I‘m not looking for selloff continuation in the CRB Index either.Bitcoin and EthereumCryptos remain undecided, and erring on the side of caution – this highlights that the risk appetite‘s return is far from universal.SummaryS&P 500 missed a good opportunity yesterday, but the short-term bullish case isn‘t lost. Stocks actually outperformed credit markets, and given the commodities respite and value doing well, bonds may very well join in the upswing, with a notable hesitation though. That wouldn‘t be a short-term obstacle, take it as the bulls temporarily overpowering the bears – I still think that the selling isn‘t over, and that the downswing would return in the latter half of Mar if (and that‘s a big if) the Fed‘s response to inflation doesn‘t underwhelm the market expectations that have been dialed back considerably over the last two weeks. Token 25bp rate hike, anyone? That wouldn‘t sink stocks dramatically...Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

From time to time, we may want to consider volatility as an ally. After all, why would highly volatile markets necessarily mean more losing trades?The first target was hit – BOOM! Today – just before the weekend – it is time to bank some profits from my recent trade projections (provided on March 2). Since then, the trade plan has provided our dear subscribers with multiple bounces to trade the NYMEX Natural Gas Futures (April contract) in various ways, always depending on each one’s personal risk profile.The first possibility is the swing trading with trailing stop method explained in my famous risk management article.Trade entry triggered on Tuesday, March 8 (firm rebound on yellow band), stop lifted once price extends beyond mid-point (median) price between first target and entry, thus ending at $4.607 (black dotted line), given the market closed at its daily high of $4.704 (purple dotted line) that same day and assuming you entered that long trade at $4.550 (top of the yellow band). That was a quick one that lasted only a couple hours for the day traders who closed their trades at the regular market close (two candles later, see below chart). For the swing traders, the win-stop was triggered the next day (Wednesday) on the following pull-back. Henry Hub Natural Gas (NGJ22) Futures (April contract, hourly chart)The second option is to scale the rebounds with fixed targets (active or experienced traders).This method consists of “riding the tails” (or the shadows). To get a better grasp of this concept, let’s zoom out on a 4H-chart so you can see the multiple rebounds of the price characterized by the shadows (or tails) of candlesticks, where a crowd of bulls are placing buy orders around that yellow support zone, therefore squeezing bears by pushing prices towards the upside (like some sort of rope pulling game). This trading style often requires stops to be tighter with some profit-to-risk ratio greater than 1.5 (with usually fixed targets). Henry Hub Natural Gas (NGJ22) Futures (April contract, 4H chart)Third possibility: position trading. This is probably the most passive trading style, as it would suit everyone’s busy timetable (and be the most rewarding). This is usually the one we privilege at Sunshine Profits since it allows us to provide trade projections some time in advance for our patient sniper traders to lock in their trading targets and take sufficient time to assess the associated risk with each projection as part of a full trade plan (or flying map).Let’s zoom out again to spot our first target getting hit today on a daily chart so we can have an overall view of the next target to be locked in while lifting our stop to breakeven (entry), previous swing low ($4.450) or using an Average True Range (ATR) ratio as some of you may like to use:Henry Hub Natural Gas (NGJ22) Futures (April contract, daily chart)That’s all folks for today. Have a great weekend!Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Sebastien BischeriOil & Gas Trading Strategist* * * * *The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

We live in uncertain times, but one thing is (almost) certain: the Fed’s tightening cycle will be followed by an economic slowdown – if not worse.There are many regularities in nature. After winter comes spring. After night comes day. After the Fed’s tightening cycle comes a recession. This month, the Fed will probably end quantitative easing and lift the federal funds rate. Will it trigger the next economic crisis?It’s, of course, more nuanced, but the basic mechanism remains quite simple. Cuts in interest rates, maintaining them at very low levels for a prolonged time, and asset purchases – in other words, easy monetary policy and cheap money – lead to excessive risk-taking, investors’ complacency, periods of booms, and price bubbles. On the contrary, interest rate hikes and withdrawal of liquidity from the markets – i.e., tightening of monetary policy – tend to trigger economic busts, bursts of asset bubbles, and recessions. This happens because the amount of risk, debt, and bad investments becomes simply too high.Historians lie, but history – never does. The chart below clearly confirms the relationship between the Fed’s tightening cycle and the state of the US economy. As one can see, generally, all recessions were preceded by interest rate hikes. For instance, in 1999-2000, the Fed lifted the interest rates by 175 basis points, causing the burst of the dot-com bubble. Another example: in the period between 2004 and 2006, the US central bank raised rates by 425 basis points, which led to the burst of the housing bubble and the Great Recession.One could argue that the 2020 economic plunge was caused not by US monetary policy but by the pandemic. However, the yield curve inverted in 2019 and the repo crisis forced the Fed to cut interest rates. Thus, the recession would probably have occurred anyway, although without the Great Lockdown, it wouldn’t be so deep.However, not all tightening cycles lead to recessions. For example, interest rate hikes in the first half of the 1960s, 1983-1984, or 1994-1995 didn’t cause economic slumps. Hence, a soft landing is theoretically possible, although it has previously proved hard to achieve. The last three cases of monetary policy tightening did lead to economic havoc.It goes without saying that high inflation won’t help the Fed engineer a soft landing. The key problem here is that the US central bank is between an inflationary rock and a hard landing. The Fed has to fight inflation, but it would require aggressive hikes that could slow down the economy or even trigger a recession. Another issue is that high inflation wreaks havoc on its own. Thus, even if untamed, it would lead to a recession anyway, putting the economy into stagflation. Please take a look at the chart below, which shows the history of US inflation.As one can see, each time the CPI annul rate peaked above 5%, it was either accompanied by or followed by a recession. The last such case was in 2008 during the global financial crisis, but the same happened in 1990, 1980, 1974, and 1970. It doesn’t bode well for the upcoming years.Some analysts argue that we are not experiencing a normal business cycle right now. In this view, the recovery from a pandemic crisis is rather similar to the postwar demobilization, so high inflation doesn’t necessarily imply overheating of the economy and could subsidy without an immediate recession. Of course, supply shortages and pent-up demand contributed to the current inflationary episode, but we shouldn’t forget about the role of the money supply. Given its surge, the Fed has to tighten monetary policy to curb inflation. However, this is exactly what can trigger a recession, given the high indebtedness and Wall Street’s addiction to cheap liquidity.What does it mean for the gold market? Well, the possibility that the Fed’s tightening cycle will lead to a recession is good news for the yellow metal, which shines the most during economic crises. Actually, recent gold’s resilience to rising bond yields may be explained by demand for gold as a hedge against the Fed’s mistake or failure to engineer a soft landing.Another bullish implication is that the Fed will have to ease its stance at some point in time when the hikes in interest rates bring an economic slowdown or stock market turbulence. If history teaches us anything, it is that the Fed always chickens out and ends up less hawkish than it promised. In other words, the US central bank cares much more about Wall Street than it’s ready to admit and probably much more than it cares about inflation.Having said that, the recession won’t start the next day after the rate liftoff. Economic indicators don’t signal an economic slump. The yield curve has been flattening, but it’s comfortably above negative territory. I know that the pandemic has condensed the last recession and economic rebound, but I don’t expect it anytime soon (at least rather not in 2022). It implies that gold will have to live this year without the support of the recession or strong expectations of it.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

USDCAD struggles for supportThe Canadian dollar surged after a sharp drop in February’s unemployment rate. A break above the recent peak at 1.2875 has consolidated the US dollar’s lead.The RSI’s repeatedly overbought condition has led to some profit-taking. As the indicator swung into the oversold area, a pullback attracted bargain hunters in the demand zone between 61.8% (1.2700) Fibonacci retracement level and 1.2680.A rally above 1.2840 may resume the rally and send the pair to December’s high at 1.2960.EURJPY attempts reversalThe euro continues upward after the ECB left the door open to an interest rate hike. A pop above 128.60 has prompted sellers to reconsider their bets.However, traders can expect strong bearish pressure in the supply zone around 129.20. This level overlays with the 20-day moving average, making it a congestion area.An overbought RSI has tempered the initial comeback and the bulls need to consolidate their positions before they could push further. 126.50 is key support and 124.40 a second line of defense to keep the pair afloat.UK 100 bounces backThe FTSE 100 recoups losses as Britain’s GDP beat expectations in January. The rebound has gained traction after it broke above 7200.After a brief pause, the index met buying interest over 7050 and a bullish MA cross indicates an acceleration to the upside. Sentiment remains cautious from the daily chart perspective though and the bears could be waiting to sell into strength.7450 at the origin of the latest sell-off is a major hurdle as its breach could turn the mood around. Otherwise, there could be a revision of 6800 soon.

It’s a quite good day for German most popular index. Charts - courtesy of TradingView.com There are three brands which should be definitely satisfied as shortly before markets closes… Deutsche Bank (DBK) has gone ca. 7.4% up: Porsche (PAH3) has added ca. 6%: Volkswagen has increased by ca. 5.2% Source: TradingView.com  

Bitcoin price loses momentum as it slides back into consolidation along the $36,398 to $38,895 demand zone. Ethereum price slides below a symmetrical triangle, hinting at a move below $2,000. Ripple price remains bullish as bulls eye a retest of $1 psychological level. Bitcoin price continues to tag the immediate demand area, weakening it. Despite the sudden bursts in buying pressure, BTC seems to be in consolidation mode. Ethereum price has triggered a bearish outlook while Ripple price shows signs of heading higher. Also read: Gold Price Forecast: Lower lows hinting at a steeper decline Bitcoin price moves with no sense of direction Bitcoin price dips into the $36,398 to $38,895 demand zone for the fourth time without producing any higher highs. This price action is indicative of a consolidation and is likely to breach lower. A daily candlestick close below $36,398 will invalidate the demand zone and knock BTC to retest the weekly support level at $34,752, which is the last line of defense. A breakdown of this barrier will open the path for bears to crash Bitcoin price to $30,000 or lower. Here, market makers will push BTC below $29,100 to collect liquidity resting below the equal lows formed in mid-2021. BTC/USD 1-day chart While things look inauspicious for Bitcoin price, a strong bounce off the said demand zone that retests the weekly supply zone, ranging from $45,550 to $51,860, will provide some relief for bulls. Ethereum price favors bears Ethereum price action from January 22 to March 4 created three lower highs and higher lows, which, when connected via trend lines, resulted in a symmetrical triangle formation. This technical formation forecasts a 26% move obtained by measuring the distance between the first swing high and swing low to the breakout point. On March 6, ETH breached below, signaling a bearish breakout, which puts the theoretical target at $1,962. A breakdown of the weekly support level at $2,541 is vital; a breakdown of this barrier will expedite the move lower. ETH/USD 1-day chart Regardless of the recent onslaught of bearishness, Ethereum price needs to produce a daily candlestick close above $3,413 to invalidate the bullish thesis. Such a development will also open the possibility of kick-starting a potential uptrend. https://youtu.be/-U0QTf_NwnI Ripple price maintains its bullish momentum Ripple price traverses a bull flag continuation pattern, a breakout from which hints at a continuation of the uptrend. This technical formation contains an impulsive move higher followed by a consolidation in the form of a pennant. The 55% rally between February 3 and 8 formed a bullish flag pole continuation pattern, and the consolidation that ensued in the form of lower highs and higher lows created the pennant. Together, the bullish setup forecasts a 31% ascent for XRP price, obtained by adding the flag pole’s height to the breakout point from the pennant. On March 11, Ripple price broke out from the pennant, signaling the start of the 31% uptrend to $1. So far, the retest seems to be holding up well, so investors can expect the remittance token to continue its journey higher to the $1 psychological level. XRP/USD 1-day chart A daily candlestick close below the immediate demand zone, ranging from $0.689 to $0.705, will create a lower low and invalidate the bullish thesis for Ripple price. In such a case, XRP has the twelve-hour demand zone, extending from $0.546 to $0.633 to support any residual selling pressure. https://youtu.be/rCFQmMHWJZ4

Soaring real estate, rising volatility, surging commodities and slumping stocks - Sound Familiar?This past week marked the 13th anniversary of the bottom of the Global Financial Crisis (GFC) of 2007-2009. The March 6, 2009 stock market low for the S&P 500 marked a staggering overall value loss of 51.9%.The GFC of 2007-09 resulted from excessive risk-taking by global financial institutions, which resulted in the bursting of the housing market bubble. This, in turn, led to a vast collapse of mortgage-back securities resulting in a dramatic worldwide financial reset.Sign up for my free trading newsletter so you don’t miss the next opportunity! IS HISTORY REPEATING ITSELF?The following graph shows us that precious metals and energy outperform the stock market as the ‘Bull’ cycle reaches its maturity. The stock market is always the first to lead, the second being the economy, and the third, being the commodity markets. But history has shown that commodity markets can move up substantially as the stock market ‘Bull’ runs out of steam.The current commodities rally in Gold began August 2021, Crude Oil April 2020, and Wheat in January 2022. Interestingly we started seeing capital outflows in the SPY-SPDR S&P 500 Trust ETF in early January 2022, and the DRN-Direxion Daily Real Estate Bull 3x Shares ETF starting back in late December 2021.LET’S SEE WHAT HAPPENED TO THE STOCK AND COMMODITY MARKETS IN 2007-2008SPY - SPDR S&P 500 TRUST ETFFrom August 17, 2007 to July 3, 2008: SPDR S&P 500 ETF Trust depreciated -20.12%The State Street Corporation designed SPY for investors who want a cost-effective and convenient way to invest in the price and yield performance of the S&P 500 Stock Index. According to State Street’s website www.ssga.com, the Benchmark, the S&P 500 Index, comprises selected stocks from five hundred (500) issuers, all of which are listed on national stock exchanges and span over approximately 24 separate industry groups.DBC – INVESCO DB COMMODITY INDEX TRACING FUND ETFFrom August 17 2007 to July 3, 2008: Invesco DB Commodity Index Tracking Fund appreciated +96.81%Invesco designed DBC for investors who want a cost-effective and convenient way to invest in commodity futures. According to Invesco’s website www.invesco.com, the Index is a rules-based index composed of futures contracts on 14 of the most heavily traded and important physical commodities in the world.BE ALERT: THE US FEDERAL RESERVE POLICY MEETING IS THIS WEEK!In February, the inflation rate rose to 7.9% as food and energy costs pushed prices to their highest level in more than 40 years. If we exclude food and energy, core inflation still rose 6.4%, which was the highest since August 1982. Gasoline, groceries, and housing were the most significant contributors to the CPI gain. The consumer price index is the price of a weighted average market basket of consumer goods and services purchased by households.The FED was expected to raise interest rates by as much as 50 basis points at its policy meeting this week, March 15-16. However, given the recent world events of the Russia – Ukraine war in Europe, the FED may decide to be more cautious and raise rates by only 25 basis points.HOW WILL RISING INTEREST RATES AFFECT THE STOCK MARKET?As interest rates rise, the cost of borrowing becomes more expensive. Rising interest rates tend to affect the market immediately, while it may take about 9-12 months for the rest of the economy to see any widespread impact. Higher interest rates are generally negative for stocks, with the exception of the financial sector.WILL RISING INTEREST RATES BURST OUR HOUSING BUBBLE?It is too soon to tell exactly what the impact of rising interest rates will be regarding housing. It is worth noting that in a thriving economy, consumers continue buying. However, in our current economy, where the consumers' monthly payment is not keeping up with the price of gasoline and food, it is more likely to experience a leveling off of residential prices or even the risk of a 2007-2009 repeat of price depreciation.THE POTENTIAL FOR OUTSIZED GAINS IN A BEAR MARKET ARE 7X GREATER THAN A BULL MARKET!The average bull market lasts 2.7 years. From the March low of 2009, the current bull market has established a new record as the longest-running bull market at 12 years and nine months. The average bear market lasts just under ten months, while a few have lasted for several years. It is worth noting that bear markets tend to fall 7x faster than bull markets go up. Bear markets also reflect elevated levels of volatility and investor emotions which contribute significantly to the velocity of the market drop.WHAT STRATEGIES CAN HELP YOU NAVIGATE CURRENT MARKET TRENDS?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24 months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe we are seeing the markets beginning to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into metals, commodities, and other safe havens.IT'S TIME TO GET PREPARED FOR THE COMING STORM; UNDERSTAND HOW TO NAVIGATE THESE TYPES OF MARKETS!I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

This is the continuation of my previous analysis on fantom here Price is approaching the lower trendline which is a potential support zone to push price ahead to the upper trendline. For investors, you can buy and pick a long position from $1.02 - $1.10 and take profit at $1.60 & $1.74. What do you think? Share your opinion in the comment section You can also demand for analysis of your preferred coin Happy Trading https://www.tradingview.com/chart/FTMUSDT/VAMApInG-FANTOM-TO-RISE-BY-65-TO-1-74/ Join my FREE Telegram Channel for daily updates and signals https://t.me/Petrock_Signals

Crude oil prices are slipping from their recent highest levels. Where could we see the next support located?Oil prices fell sharply on Monday – extending last week’s decline – driven by potential progress in Ukraine-Russia talks.India is considering taking advantage of Russia's discounted crude oil and other commodities offers by settling transactions through the rupee/ruble payment system. Meanwhile, on the eastern side, there is a rush to replace the Russian barrels in the west, but immediate availability is limited.In addition, some fears that OPEC+ countries might not be able to easily increase supply remain, even though the UAE said last week that OPEC+ could double the output to the market (about 800,000 bpd) very quickly. However, this sounds very challenging since OPEC+ countries have already struggled to bring in 400,000 bbd.On the Asian side, a slowdown in demand could have been seen as 17 million residents in Shenzhen, the technological centre of southern China, were locked down on Sunday after reports of epidemic outbreaks linked to the neighbouring territory of Hong Kong, where the Omicron strain seems to have spread. There are growing fears that other cities could follow suit to comply with the country's strict zero-COVID policy, adopted by the government of the People's Republic of China.WTI Crude Oil (CLJ22) Futures (April contract, daily chart)Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Sebastien BischeriOil & Gas Trading Strategist* * * * *The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

EURUSD struggles to rebound The US dollar bounces across the board as the Fed may possibly raise interest rates on Wednesday. The pair found support near May 2020’s lows around 1.0800. The RSI’s oversold condition on the daily chart prompted the bears to take some chips off the table, alleviating the pressure. 1.1110 is a fresh resistance and its breach could lift offers to 1.1270. In fact, this could turn sentiment around in the short term. Failing that, a break below 1.0830 could trigger a new round of sell-off towards March 2020’s lows near 1.0650. AUDUSD lacks support The Australian dollar slipped after dovish RBA minutes. The pair continues to pull back from its recent top at 0.7430. A drop below the demand zone at 0.7250 further puts the bulls on the defensive. The former support has turned into a resistance level. 0.7170 at the origin of a previous breakout is key support. An oversold RSI may raise buyers’ interest in this congestion area. A deeper correction could invalidate the recent rebound and send the Aussie to the daily support at 0.7090. GER 40 attempts to rebound The Dax 40 edges higher as Russia and Ukraine hold a fourth round of talks. The index bounced off the demand zone (12500) from the daily chart, a sign that price action could be stabilizing. The supply zone around the psychological level of 14000 sits next to the 20-day moving average, making it an important hurdle. A tentative breakout may have prompted sellers to cover. 14900 would be the target if the rebound gains momentum. On the downside, 13300 is fresh support, and 12720 is the second line of defense.

Bitcoin slightly strengthened over the past day to 38,800 (+0.5%). Ethereum lost 0.8%, while other leading altcoins from the top ten range showed an amplitude from -2.4% (Avalanche) to +3.7% (Terra). According to CoinMarketCap, the total capitalization of the crypto market grew by 0.4% in 24 hours, to $1.73 trillion. The Bitcoin Dominance Index rose 0.3 points to 42.7%. The fear and greed index is at 21 (-2 points) now and is remaining in a state of "extreme fear". The FxPro Analyst Team emphasized that Bitcoin updated its weekly lows around $37,500 today. Subsequently, the first cryptocurrency bounced up, briefly rising above $39,300 in the middle of the day on the news from Elon Musk. The CEO of Tesla said he had no plans to sell his cryptocurrencies. Musk tweeted that he owns not only Bitcoin but also ETH and DOGE. However, BTC did not show a strong reaction to this statement: during the American session, it levelled a slight increase against the backdrop of a fall in US stock indices. Dogecoin reacted to Musk's comment much more violently, jumping more than 7% at the time. According to CoinShares, institutional investors withdrew about $110 million from crypto funds last week, despite seeing the largest capital inflow in three months the week earlier. The European Union abandoned plans to introduce a virtual ban on mining based on the Proof-of-Work (PoW) mechanism. At the same time, Russian State Duma deputy Alexander Yakubovsky said that Russia has a real opportunity to create its own crypto exchanges.

The UK economy continues to show strength in the January-February economic reports. A fresh batch of data noted a fall in the number of people receiving unemployment benefits of 48.1k last month. The January statistics have improved and now show a fall in those receiving benefits from -31.9k to -67.3k. Wage growth continues to gain momentum to 4.8% against 4.6%. This data reinforces the view of the UK finance minister. Rishi Sunak expressed confidence that the labour market is in good shape and that the economy will cope with the challenges ahead. The confidence of UK officials should also be taken as a signal that the Bank of England might decide to accelerate its tightening. Market participants, on average, expect the third hike of 25 points on the coming Thursday. However, in light of the strong labour market and wage growth figures, combined with actual and expected price rises, the Bank of England could decide on a move of 50 points at once. The central bank had previously warned that it might take such a step. If the Bank of England hikes the rate from 0.5% to 1.0%, it could support the Pound markedly. Its appreciation would further reduce inflationary pressures from import prices and stabilise the economy as quickly as possible.

16/03/22 is the date to remember as finally Fed will release its Interest Rate Decision. According to recent Jerome Powell's rhetoric the raise of rate is almost sure. Tomorrow, EIA releases Crude Oil Inventories as well - a lot to watch on Wednesday! Data: courtesy of Investing.com USA The day begins quiet lately at 12:30 p.m. as Core Retail Sales (MoM) is relased. This one previosuly amounted to 3.3%. At the same time appropriate department publishes Retail Sales (MoM) (prev. 3.8%). 2:30 p.m. - the first Big One actually - Crude Oil Inventories release. Previously this indicator amounted to -1.863M and we can predict the next value will hit higher levels. At 6 p.m. FOMC Economic Projections, FOMC Statement and, most importantly, new interest rate go public and many suppose the current interest rate (which is 0.25%) will be raised. After all the releases, at 6:30 p.m. FOMC speak to media. Canada There's "only" one major release on 15/03/22 in Canada - the Core CPI which previously hit 0.8%. New Zealand At the evening (9:45 p.m.) New Zealand's GDP (QoQ) is published - the indicator equaled to -3.7% previously.   Source: Investing.com Economic Calendar Time: GMT

  The S&P 500 index extended its Friday’s decline yesterday, but it remained within a week-long volatile consolidation. Is this a medium-term bottoming pattern? The broad stock market index lost 0.74% on Monday, Mar. 14, after its Friday’s decline of 1.3%. The market bounced from the short-term resistance level of 4,300 and it extended a volatile consolidation following the early March sell-off from the 4,400 level. Last week on Tuesday it reached the local low of 4,157.87 and then we’ve seen a rebound to the 4,300 level. Yesterday the S&P 500 came back below the 4,200 level again. The market is closer to the Feb. 24 local low of 4,114.65. It was 704 points or 14.6% below the January 4 record high of 4,818.62 then. There’s still a lot of uncertainty concerning the ongoing Ukraine conflict. This morning the S&P 500 index is expected to open 0.5% higher following lower than expected Producer Price Index release. The market will be waiting for the important tomorrow’s FOMC Statement release, and we may see some further consolidation. The nearest important resistance level is now at around 4,200. On the other hand, the support level is at 4,100-4,150. The S&P 500 index continues to trade slightly above the recently broken downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com): Futures Contract Trades Along the Previous Lows Let’s take a look at the hourly chart of the S&P 500 futures contract. Today it is bouncing from the 4,140 level. It’s a support level marked by the previous local low. The support level is also at 4,100. We are still maintaining our long position, as we are expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com): Conclusion The S&P 500 index will likely bounce this morning following better-than-expected producers’ inflation data release. The market may extend its volatile consolidation and we may see more uncertainty, as investors will be waiting for the Wednesday’s FOMC Statement release. Here’s the breakdown: The S&P 500 index will likely bounce this morning, but we may see some more short-term uncertainty. We are maintaining our long position (opened on Feb. 22). We are still expecting an upward correction from the current levels. Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Paul Rejczak,Stock Trading StrategistSunshine Profits: Effective Investments through Diligence and Care * * * * * The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

GameStop stock is back on the top trending list but still struggling. GME stock is down 43% year to date. GameStop releases earnings on Thursday after the close. GameStop (GME) is back on the top trending lists, though it has not been seen for a while. Some other stocks have taken the limelight, recently some micro-cap oil stocks, but these have gone back to sleep now as the crowd moves on. GameStop was the original though, and it releases earnings after the close on Thursday. This is generating some attention on the usual social media sites and helping the GME stock price too. At the time of writing, GME stock is up 1.4% at $79.05. GameStop Stock News GameStop earnings are out after the close with a conference call afterward. GME is expected to report earnings per share (EPS) of $0.84 and revenue of $2.22 billion. This would be a marked improvement on Q3 earnings, which it reported on December 8. Back then EPS was forecast at $-0.52 but came in way behind at $-1.39. Revenue came in ahead of forecasts back then too. GME lost 10% the day after its Q3 earnings. We remain bearish on GME stock though and cannot argue against the current trend. The stock has lost 65% over the last nine months and has been on a one-way spiral. The current environment is punishing high growth stocks, and the recent spike in yields will only add to that. It needs blockbuster earnings on Thursday from GME to change that sentiment. GME still trades on a very high multiple compared to other consumer stocks, and rising inflation will hurt. GameStop is also a high street store. It pays wages, electricity, etc., all of which are rising and will continue to do so. GameStop Stock Forecast GME stock closed below our key support at $86 on Monday. This will likely lead to more selling pressure. That will bring GME quickly down to $70, and we may then see a stabilization period as volume is quite strong around the $70 level. GameStop (GME) stock chart, daily    

  It seems that the stalemate in Ukraine has slowed down gold's bold movements. Will the Fed's decision on interest rates revive them again?  The tragedy continues. As United Nations Secretary-General António Guterres said yesterday, “Ukraine is on fire and being decimated before the eyes of the world.” There have already been 1,663 civilian casualties since the Russian invasion began. What is comforting in this situation is that Russian troops have made almost no advance in recent days (although there has been some progress in southern Ukraine). They are attempting to envelop Ukrainian forces in the east of the country as they advance from the direction of Kharkiv in the north and Mariupol in the south, but the Ukrainian Armed Forces continue to offer staunch resistance across the country. So, it seems that there is a kind of stalemate. The Russians don’t have enough forces to break decisively through the Ukrainian defense, while Ukraine’s army doesn’t have enough troops to launch an effective counteroffensive and get rid of the occupiers. Now, the key question is: in whose favor is time working? On the one hand, Russia is mobilizing fighters from its large country, but also from Syria and Nagorno-Karabakh. The invaders continue indiscriminate shelling and air attacks that cause widespread destruction among civilian population as well. On the other hand, each day Russian army suffers heavy losses, while Ukraine is getting new weapons from the West.   Implications for Gold How is gold performing during the war? As the chart below shows, the recent stabilization of the military situation in Ukraine has been negative for the yellow metal. The price of gold slid from its early March peak of $2,039 to $1,954 one week later (and today, the price is further declining). However, please note that gold makes higher highs and higher lows, so the outlook remains rather positive, although corrections are possible. On the other hand, gold’s slide despite the ongoing war and a surge in inflation could be a little disturbing. However, the reason for the decline is simple. It seems that the uncertainty reached its peak last week and has eased since then. As the chart below shows, the CBOE volatility index, also called a fear index, has retreated from its recent peak. The Russian troops have made almost no progress, the most severe response of the West is probably behind us, and the world hasn’t sunk into nuclear war. Meanwhile, the negotiations between Russia and Ukraine are taking place, offering some hope for a relatively quick end to the war. As I wrote last week, “there might be periods of consolidation and even corrections if the conflict de-escalates or ends.” The anticipation of tomorrow’s FOMC meeting could also contribute to the slide in gold prices. However, the chart above also shows that credit spreads, another measure of risk perception, have continued to widen in recent days. Other fundamental factors also remain supportive of gold prices. Let’s take, for instance, inflation. As the chart below shows, the annual CPI rate has soared from 7.5% in January to 7.9% in February, the largest move since January 1982. Meanwhile, the core CPI, which excludes food and energy prices, surged from 6.0% to 6.4% last month, also the highest reading in forty years. The war in Ukraine can only add to the inflationary pressure. Prices of oil and other commodities have already soared. The supply chains got another blow. The US Congress is expanding its spending again to help Ukraine. Thus, the inflation peak would likely occur later than previously thought. High inflation may become more embedded, which increases the odds of stagflation. All these factors seem to be fundamentally positive for gold prices. There is one “but”. The continuous surge in inflation could prompt monetary hawks to take more decisive actions. Tomorrow, the FOMC will announce its decision on interest rates, and it will probably hike the federal funds rate by 25 basis points. The hawkish Fed could be bearish for gold prices. Having said that, historically, the Fed’s tightening cycle has been beneficial to the yellow metal when accompanied by high inflation. Last time, the price of gold bottomed out around the liftoff. Another issue is that, because of the war in Ukraine, the Fed could adopt a more dovish stance and lift interest rates in a more gradual way, which could be supportive of gold prices. The military situation in Ukraine and tomorrow’s FOMC meeting could be crucial for gold’s path in the near future. The hike in interest rates is already priced in, but the fresh dot-plot and Powell’s press conference could bring us some unexpected changes in US monetary policy. Stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

S&P 500 decline was led by tech, and made possible by credit markets‘ plunge. The 4,160s held on a closing basis, and unless the bulls clear this area pretty fast today, this key support would come under pressure once again over the nearest days. Interestingly, the dollar barely moved, but looking at the daily sea of red across commodities, the greenback would follow these to the downside. Not that real assets including precious metals would be reversing on a lasting basis here – the markets are content that especially black gold keeps flowing at whatever price, to whatever buyer(s) willing to clinch the deal. Sure, it‘s exerting downward pressure on the commodity, but I‘m looking for the extraordinary weakness to be reversed, regardless of: (…) not even the virtual certainty of only 25bp hike in Mar is providing much relief to the credit markets. Given that the real economy is considerably slowing down and that recession looks arriving before Q2 ends, the markets continue forcing higher rates (reflecting inflation). The rising tide of fundamentals constellation favoring higher real asset prices, would continue kicking in, especially when the markets sense a more profound Fed turn than we saw lately with the 50bp into 25bp for Mar FOMC. Make no mistake, the inflation horse has left the barn well over a year ago, and doesn‘t intend to come back or be tamed. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bears won the day, and are likely to regroup next – yes, that doesn‘t rule out a modest upswing that would then fizzle out. Credit Markets HYG woes continue, and credit markets keep raising rates for the Fed. The bears continue having the upper hand. Gold, Silver and Miners Precious metals haven‘t found the short-term bottom, but it pays to remember that they are often trading subdued before the Fed days. This is no exception, and I‘m fully looking for gold and silver to regain initiative following the cautious Fed tone. Crude Oil Crude oil didn‘t keep above $105, but would revert there in spite of the stagflationary environment (already devouring Europe). With more clarity in the various oil benchmarks, black gold would continue rising over the coming weeks. Copper Copper weakness is another short-term oddity, which I am looking for to be reversed in the FOMC‘s wake. Volume had encouragingly risen yesterday, so I‘m looking for a solid close to the week. Bitcoin and Ethereum Cryptos are very modestly turning higher, but I‘m not expecting too much of a run next. As stated yesterday, I wouldn‘t call it as risk-on constellation throughout the markets. Summary S&P 500 got into that precarious position (4,160s) yesterday, but managed to hold above. Given the usual Fed days trading pattern, stocks are likely to bounce a little before the pronouncements are made – only to continue drifting lower in their wake. That‘s valid for the central bank not making the U-turn towards easing again, which is what I‘m expecting to happen in the latter half of this year. Inflation would continue biting, and that means stocks are mired in a giant trading range a la the 1970s. Commodities and precious metals would continue building a base here, only to launch higher in response to (surprise, surprise) stubborn inflation. After all, where else to hide in during stagflations? Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

Shiba Inu price action sees price pressure against the technical triangle base at $0.00002140. SHIB price action set to test the low of its existence. As global markets threaten to drop into a recession, investors will flee cryptocurrencies in the coming days. Shiba Inu (SHIB) price action is on the cusp of breaking out of a bearish triangle that has dictated price action over the past two months. With a break to the downside, room opens up for an almost 70% drop towards the lowest levels in its existence as investors flee cryptocurrencies overall, following more and more reports that global markets are going into recession. With this dire projection in mind, expect to see further bleeding of SHIB price action as it falls back to $0.00000655. Shiba Inu price action bleeds as investors flee from recession fears Shiba Inu price action is seeing a massive squeeze building from bears trying to break out of the bearish triangle as more and more headwinds combine each day. The situation in Ukraine and new lockdowns in China are spelling supply chain issues again, and banks are starting to use the word recession more often in their reports about the future. This weighs on investor sentiment as cryptocurrencies are put on the backfoot and witness a daily outflow of cash from investors pulling the plug on their positions. SHIB price looks to break below $0.00002140 any moment now, with considerable momentum behind it from the death cross with the 55-day Simple Moving Average (SMA) below the 200-day SMA. Next to that, the Relative Strength Index is nowhere near being oversold, opening the door for short sellers to pick up some more gains in the downtrend. Expect to see a sharp drop in the coming days towards $0.00001000, breaking the monthly S1 and S2 support levels along the way, only to find a floor near $0.00000607, which is near the lowest level in SHIB’s. SHIB/USD daily chart Although red flags are popping up all over financial markets, investors could still be working on a turnaround in an attempt to look beyond the current crisis at hand. If central banks can steer economies out of this dire situation, expect investors to start buying into cryptocurrencies to take advantage of lucrative discounts. This could spill into a turnaround and see price action first pop back above $0.00002500, breaking the bearish 55-day SMA and hitting $0.00002787, above the 28.6% Fibonacci level.

USDCHF breaks major resistance The US dollar continues upward as the Fed is set to increase its interest rates by 25bp. The rally sped up after it cleared the daily resistance at 0.9360. The bullish breakout may have ended a 9-month long consolidation from the daily chart perspective. The rising trendline confirms the optimism and acts as an immediate support. Solid momentum could propel the greenback to April 2021’s high at 0.9470. Buyers may see a pullback as an opportunity to jump in. 0.9330 is the closest support should this happen. EURGBP tests key resistance The sterling found support after a drop in Britain’s unemployment rate in January. A break above the daily resistance at 0.8400 has prompted sellers to cover, easing the downward pressure. Sentiment remains downbeat unless buyers push the single currency past 0.8475. In turn, this could pave the way for a reversal in the weeks to come. Otherwise, the bears might double down and drive the euro back into its downtrend. A fall below 0.8360 would force early bulls to liquidate and trigger a sell-off to 0.8280. USOIL drops towards key support WTI crude falls back over a new round of ceasefire talks between Russia and Ukraine. Previously, a bearish RSI divergence indicated a loss of momentum as the price went parabolic. Then a steep fall below 107.00 was a sign of liquidation. Buyers continue to unwind their positions as the price slides back to its pre-war level. The psychological level of 90.00 is an important support on the daily chart. An oversold RSI may attract buying interest in this demand zone. 105.00 is the first resistance before buyers could regain control.

BTC added 1.4% over the past day to $39.3K. Attempts to develop an offensive ran into a selling wall. The most important line of defense in the first cryptocurrency at the 38.0K area is still more confident withstanding all bear attacks. Ethereum added 3.1% to $2.6K in 24 hours. Other leading altcoins range from a 6% decline (Terra) to a 4.5% rise (Polkadot). According to CoinMarketCap, the total capitalization of the crypto market grew by 1.4%, to $1.75 trillion. The Bitcoin Dominance Index lost 0.1 percentage points to 42.6%. Cryptocurrency fear and greed index added 3 points to 24, although it remains in the territory of "extreme fear". The FxPro Analyst Team mentioned that during the Asian session, there was a sharp jump in the rate from $39.2K to $41.7K, followed by an almost equally rapid pullback to the area below $39.0K. Stop orders were triggered in the morning low-liquid market, but it is clear that the selling pressure remains huge. In fact, since February 10, the rises in the Bitcoin rate have become less and less long and end at ever lower levels. The reason for the jump in prices in early trading in Asia was the statements of official Beijing on support for the markets, which caused a rally in the shares of the region. However, Bitcoin frankly ignored the drawdown of Asian stocks in recent days, so it quickly returned to its place, because other factors have become its key drivers in recent days. Meanwhile, Glassnode believes that bitcoin investors may face a final capitulation. This is indicated by the high proportion of "unprofitable" coins among short-term holders. At the same time, the uncertainty associated with geopolitics and the Fed rate weakened the accumulation of BTC by hodlers and caused an increase in sales on their part.

S&P 500 is turning around, and odds are that would be so till the FOMC later today. The pressure on Powell to be really dovish, is on. I‘m looking for a lot of uncerrtainty and flexibility introduction, and much less concrete rate hikes talk that wasn‘t sufficient to crush inflation when the going was relatively good, by the way.As stated yesterday:(…) The rising tide of fundamentals constellation favoring higher real asset prices, would continue kicking in, especially when the markets sense a more profound Fed turn than we saw lately with the 50bp into 25bp for Mar FOMC. Make no mistake, the inflation horse has left the barn well over a year ago, and doesn‘t intend to come back or be tamed.Not that real assets including precious metals would be reversing on a lasting basis here – the markets are content that especially black gold keeps flowing at whatever price, to whatever buyer(s) willing to clinch the deal. Sure, it‘s exerting downward pressure on the commodity, but I‘m looking for the extraordinary weakness to be reversed.We‘re seeing such a reversal in commodities already, and precious metals have a „habit“ of joining around the press conference. Yesterday‘s performance of miners and copper, provides good enough a hint.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 upswing looks like it can go on for a while. Interestingly, it was accompanied by oil stocks declining – have we seen THE risk-on turn? This looks to be a temporary reprieve unless the Fed really overdelivers in dovishness.Credit MarketsHYG is catching some bid, and credit markets are somewhat supporting the risk-on turn. Yields though don‘t look to have put in a top just yet, which means the stock market bears would return over the coming days.Gold, Silver and MinersPrecious metals are looking very attractive, and the short-term bottom appears at hand – this is the way they often trade before the Fed. I‘m fully looking for gold and silver to regain initiative following the cautious and dovish Fed tone.Crude OilCrude oil didn‘t test the 50-day moving average, and I would expect the bulls to step in here – after all, the Fed can‘t print oil, and when they go dovish, the economy just doesn‘t crash immediately...CopperCopper is refusing to decline, and the odd short-term weakness would be reversed – and the same goes for broader commodities, which have been the subject of my recent tweet.Bitcoin and EthereumCryptos aren‘t fully risk-on, but cautiously giving the bulls benefit of the doubt. Not without a pinch of salt, though.SummaryS&P 500 bulls are on the (short-term) run, and definitely need more fuel from the Fed. Significant dovish turn – they would get some, but it wouldn‘t be probably enough to carry risk-on trades through the weekend. The upswing is likely to stall before that, and commodities with precious metals would catch a fresh bid already today. This would be coupled with the dollar not making any kind of upside progress to speak of. The true Fed turn towards easing is though far away still (more than a few months away) – the real asset trades are about patience and tide working in the buyers favor. The yield curve remains flat as a pancake, and more stagflation talk isn‘t too far...Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

XAUUSD stabilizes Gold struggles as the Fed maps out aggressive tightening. The precious metal has given up all its gains from the previous parabolic rise, which suggests a lack of commitment to support the rally. The price is testing the origin of the bullish breakout at 1907 which coincides with the 30-day moving average. An oversold RSI attracted some buying interest. 1961 is the hurdle ahead before a rebound could materialize. Further down, 1880 is key support on the daily chart and its breach could reverse the course in the weeks to come. NZDUSD attempts rebound The New Zealand dollar found support from a rebound in commodity prices. The pair saw solid bids in the demand zone around 0.6725 and right over the 30-day moving average. A bullish RSI divergence showed a deceleration in the pullback, which would have caught buyers’ attention in this congestion area. A close above 0.6800 has prompted short-term sellers to cover and leave the door open for a rebound. 0.6870 is the last major resistance and a bullish breakout could propel the kiwi past the recent peak at 0.6920. CADJPY breaks key resistance The Canadian dollar shot higher after February’s CPI beat expectations. A break above last October’s high at 93.00 could be an ongoing signal to end a 5-month long consolidation. The RSI’s double top in the overbought area may temporarily hold the bulls back. As sentiment turns overwhelmingly upbeat, buyers may be eager to jump in at a discounted price. The supply-turned-demand zone near 91.60 is an important level to safeguard the breakout. The psychological level of 94.00 could see resistance.

After hawkish rhetoric Fed raises interest rate by 25bps it amounts to 0.5%. Not only did this decision affect major FX pairs, but also exotic USDPLN. Let's see how have EURUSD, USDJPY, S&P 500 and Bitcoin reacted. Some might say markets were prepared for the raise of 25bps and their reaction are not that noticeable. Charts: Courtesy of TradingView.com [LAST UPDATE: 17/03/22 7:36 GMT] FX EURUSD - Slight fluctuation GBPUSD - Quite strong Pound USDJPY - chart shows a small uptrend after the release USDPLN - exotic, but interesting pair as in Poland interest rates were raised exactly a week ago S&P 500 Gold (XAUUSD) Bitcoin (BTC) Source: TradingView.com

AMC stock gains on Tuesday as equities and growth stocks rally. More gains are likely on Wednesday for AMC shares as peace hopes rise for Ukraine. AMC Entertainment also saw increased attention from its investment in Hycroft Mining. AMC shares are up 8% to $15.65 as better prospects for peace in Ukraine seem to be lifting up the entire market. The Nasdaq has risen an optimistic 2.7% about one hour into Wednesday's session. Further positivity is in motion with the start of the Federal Reserve's Federal Open Market Committee two-day meeting that is expected to usher in a 25 basis point rise in the fed funds rate. The rise in interest rates should slow this year's hike in inflation. This price action is certainly exciting for AMC apes, who have witnessed AMC stock drop to the low $13s earlier this week. AMC Entertainment did benefit in Tuesday's afternoon session from its acquisition of Hycroft Mining, but it seems the stock is gaining more interest on Wednesday for this buy. Now its acquisition target, HYMC, has seen its shares go in the opposite direction on Wednesday. HYMC stock is trading down 9% at $1.37 at the time of writing. AMC stock closed higher on Tuesday as investors took comfort from the continued collapse in oil prices and hoped for some form of peace in Ukraine. It was oil that was the big driver for equity markets, and growth stock, in particular, bounced hard as this sector had seen the bigger losses since the year began. It is hard to see guess whether this movie can be sustained long term though as yields have once again moved up. This should stall growth stocks. A peace deal would see further gains for all sectors, but then these may be capped if yields keep rising. The Fed decision later on Wednesday will give us more clarity on this. AMC Stock News The big news yesterday though for AMC apes was the investment in Hycroft Mining by AMC. This was right out of left field and remains a puzzling one to say the least. Hycroft Mining is a gold and silver miner with one mine in Nevada. The company has not turned a profit since 2013 and last November said it may need to raise capital to meet future financial obligations. The company also laid off over half of its workforce at the mine last November. This is a pretty high-risk investment and perhaps AMC and AMC apes are used to that. It was only a small outlet as CEO adam Aron alluded to. Nevertheless, the Hycroft Mining (HYMC) stock price soared as retail investors piled into the name. By the opening of the regular session on Tuesday, HYMC stock was trading nearly 100% higher, but it closed only 9% higher at $1.52 having traded up to $2.97. The reason for the dramatic turnaround was probably a bit of reality set into investors once they had a look at Hycroft Mining and its financial condition. The main reason was a Bloomberg report saying that Hycroft Mining could do a $500 million share sale by as early as next Tuesday. We understand the sale is ongoing and being led by B.Riley Securities. AMC Stock Forecast We were quite negative on this deal on Tuesday and remain so. At least it is not a big investment for AMC, but it still reads poorly. This will not endear AMC stock to further credibility in our view. CNBC carried out a report yesterday about the surge in price and volume trading in HYMC stock before the AMC announcement: "Small mining firm with troubled history saw big spikes in stock price, trading volume ahead of AMC deal." Tuesday's move took AMC back up to our resistance level at $14.54, which was a key breakdown level. Below this and AMC remains bearish. Above $14.54 is neutral. We remain bearish on AMC with a target price of $8.95. AMC stock chart, daily Prior Update: AMC stock opened higher on Wednesday as the stock market remains on edge over the potential for some form of a peace deal in Ukraine. Oil prices falling sharply has also helped investor sentiment. AMC is currently trading at $14.77 for a gain of exactly 2% after 5 minutes of the regular session on Tuesday. Hycroft Mining (HYMC) stock is trading 4% lower at the same stage on Wednesday. Later we get the Fed interest rate decision which may hamper more progress from growth stocks but for now, it is full steam ahead. AMC is back among the top trending stocks on social media sites and interest seems high. $14.54 remains a key level for AMC to hold above if it wants to have put a bottom formation in place. Otherwise, it will return to the bearish trend and look to target $8.95 in our view.

There are still fewer leased and built offices than two years ago, but there is an upward trend in the office sector. Last year, some regional markets saw a sizable increase in demand, even compared to 2019 In 2021, 325 thousand sq m of office space was delivered on the Warsaw market. Such a high result was last seen in 2016. Several spectacular buildings, the implementation of which began before the pandemic, have been commissioned. Skyliner, Warsaw Unit, Generation Park Y and Fabryka Norblina have been completed in the vicinity of DaszyÅ„skiego roundabout. The construction of X20 building and Moje Miejsce II in the district of Mokotów have been completed. Warsaw office resources, which already exceed 6.15 million sq m. have also gained two office buildings in Centrum Praskie Koneser complex, as well as the EQ2 building and Baletowa Business Park. Warsaw with a negligible amount of new projects On the other hand, there is over a half less offices under construction in Warsaw than in recent years, when about 700-800 thousand sq m. of space was commissioned annually. According to Walter Herz, almost 330 thousand sq m. of offices is currently under construction. The last time there has been so little of them built in the city was a decade ago. Most of the projects will be completed this and next year. The office buildings under construction include, among others, Varso Tower, SkySawa, The Bridge, P180 and Bohema. The high level of new supply in 2021 and lower demand caused the vacancy rate to increase in the Warsaw market by 2.8 pp. to 12.7 per cent and become the highest in six years. - The activity of tenants in the office market is still lower than before the pandemic, but its gradual increase is noticeable. The total volume of lease in the office sector in Poland in 2021 was several percent higher than in the previous year. In Warsaw, the volume of lease transactions increased by over 7% year on year. Over 646 thousand sq m. of space has been leased. This result is significantly lower than in 2015-2019, when tenants leased an average of about 830 thousand sq m. of offices - says BartÅ‚omiej Zagrodnik, Managing Partner/CEO of Walter Herz. - However, offices still remain an important element of companies' business activities and interesting assets for investors. So far, rental rates are at the same level as before, but a significant increase in construction costs is putting pressure to increase them – adds BartÅ‚omiej Zagrodnik. The Tri-City with the largest number of new offices In the regions, the highest increase in resources was recorded in the Tri-City. The offer of the Tri-City office market, which is the fourth in the country, will soon reach 1 million sq m. of space, due to the completion of construction of 73 thousand sq m. of offices in 3T Office Park, Palio, LPP Fashion Lab and Gato projects. Cracow, the second largest office market in Poland, increased its offer last year to over 1.6 million sq m. of space. The supply increased by over 60 thousand sq m. of space, due to the completion of Equal Business Park D, Ocean Office Park A, Tertium Business Park B and Aleja Pokoju 81. Over 37 thousand sq m. of offices has been delivered to the office market in Poznan in Nowy Rynek D building. As a result, the resources exceeded 620 thousand sq m. of space. In Wroclaw, Krakowska 35 and Nowa Strzegomska projects were commissioned, offering a total of 22 thousand sq m. of space. As a result, the offer increased to 1.25 million sq m. In Katowice (600 thousand sq m.), over 13 thousand sq m. of space entered the market last year, and in Lodz (583 thousand sq m.) - 3.6 thousand sq m. Katowice market with the largest development Katowice clearly stands out in the regions with the number of offices under construction. There are as many as 200 thousand sq m. of space under construction on the Katowice market, which accounts for nearly a third of the city's current resources. Most of the projects are to be completed this year. The Cracow market is also growing, with 165 thousand sq m. of office space under construction. - If the macroeconomic conditions and the economic situation are favorable, this value may increase in the upcoming quarters with projects that are being prepared for implementation in Cracow - says Mateusz Strzelecki, Head of Tenant Representation/Partner at Walter Herz. - Another office market that is also expanding is Wroclaw with 150 thousand sq m. of space under construction, among others in the Brama OÅ‚awska project, Quorum Office Park and another building in the Centrum PoÅ‚udnie and Tri-City complex with 120 thousand sq m. of offices that are implemented mainly in Gdansk - informs Mateusz Strzelecki. Nearly 80 thousand sq m. of office space is under construction in Poznan and almost 90 thousand sq m. of offices in Lodz. The largest investment on the Poznan market is Andersia Silver, which upon completion will deliver the tallest building in the city. In the near future, Lodz will offer modern space in Manufaktura Widzewska, Fuzja and React projects. Demand in the regions is at a fair level According to Walter Herz, the lease level in regional markets was over a dozen per cent lower last year than in 2019. - While the office sector has seen a significant recovery in the second half of 2021, the annual transaction value is still below the pre-pandemic average. However, the high demand for offices registered last year in Wroclaw, the Tri-City and Poznan, where more space was contracted than in 2019 is noteworthy - says Mateusz Strzelecki. Last year, we could observe the greatest demand for offices in Cracow, where approximately 156 thousand sq m. of space was leased and in Wroclaw, which showed absorption at the level of 153 thousand sq m. While the demand on the Cracow market was slightly lower than in the previous years, in Wroclaw the result was several per cent higher, both in comparison to 2020 and 2019. The Tri-City and Poznan markets also showed an increase in demand last year. The rental volume in the Tri-City amounted to 108 thousand sq m. of office space and was 23 per cent higher than the year before, and nearly 7 per cent higher than in 2019. Poznan, on the other hand, where lease agreements for 73 thousand sq m of offices were signed, recorded over 80 per cent increase in demand for offices, compared to 2019. The demand on the Katowice market dropped to 53 thousand sq m. of space, that’s 16 per cent lower than a year earlier. In Lodz, 51 thousand sq m. of offices were contracted, which is also less than in previous years. Over the last year, the vacancy rate in regional markets increased slightly. Only in Poznan, due to the jump in demand, it slightly decreased. It is currently at the level of 10.5 per cent in Katowice to 16.7 per cent in Wroclaw. Experts point out that the model of arranging office space is changing. More rooms for meetings and videoconferences are now being designed. A larger number of desks also function as workstations, which, depending on the needs, can be used by various people in the hybrid system. About Walter Herz Walter Herz company is a leading Polish entity which has been operating in the commercial real estate sector across the country. For ten years, the company has been providing comprehensive and strategic investment consulting services for tenants, investors and real estate owners across the country. Walter Herz experts assist investors, property owners and tenants. They provide full service, to companies from the private as well as public sectors. Walter Herz advisors support clients in finding and leasing space, and provide consulting in the implementation of investment projects in the warehouse, office, retail and hotel sectors. The company is based in Warsaw and runs regional branches in Cracow and Łódź. Walter Herz has created the Tenant Academy, the first project in Poland, which supports and educates commercial tenants from all over Poland by organizing specialized training meetings. In order to ensure the highest ethical level of services provided, the agency introduced the Code of Good Practice.

  The Fed will want to keep inflation under control, and that could have miserable consequences for gold and miners. Will we see a repeat from 2008?  The question one of my subscribers asked me was about the rise in mining stocks and gold and how it was connected to what was happening in bond yields. Precisely, while short-term and medium-term yields moved higher, very long-term yields (the 30-year yields) dropped, implying that the Fed will need to lower the rates again, indicating a stagflationary environment in the future. First of all, I agree that stagflation is likely in the cards, and I think that gold will perform similarly to how it did during the previous prolonged stagflation – in the 1970s. In other words, I think that gold will move much higher in the long run. However, the market might have moved ahead of itself by rallying yesterday. After all, the Fed will still want to keep inflation under control (reminder: it has become very political!), and it will want commodity prices to slide in response to the foregoing. This means that the Fed will still likely make gold, silver, and mining stocks move lower in the near term. In particular, silver and mining stocks are likely to decline along with commodities and stocks, just like what happened in 2008. Speaking of commodities, let’s take a look at what’s happening in copper. Copper invalidated another attempt to move above its 2011 high. This is a very strong technical sign that copper (one of the most popular commodities) is heading lower in the medium term. Yes, it might be difficult to visualize this kind of move given the recent powerful upswing, but please note that it’s in perfect tune with the previous patterns. The interest rates are going up, just like they did before the 2008 slide. What did copper do before the 2008 slide? It failed to break above the previous (2006) high, and it was the failure of the second attempt to break higher that triggered the powerful decline. What happened then? Gold declined, but silver and mining stocks truly plunged. The GDXJ was not trading at the time, so we’ll have to use a different proxy to see what this part of the mining stock sector did. The Toronto Stock Exchange Venture Index includes multiple junior mining stocks. It also includes other companies, but juniors are a large part of it, and they truly plunged in 2008. In fact, they plunged in a major way after breaking below their medium-term support lines and after an initial corrective upswing. Guess what – this index is after a major medium-term breakdown and a short-term corrective upswing. It’s likely ready to fall – and to fall hard. So, what’s likely to happen? We’re about to see a huge slide, even if we don’t see it within the next few days. In fact, the outlook for the next few days is rather unclear, as different groups of investors can interpret yesterday’s developments differently. However, once the dust settles, the precious metals sector is likely to go down significantly. Gold is up in today’s pre-market trading, but please note that back in 2020, after the initial post-top slide, gold corrected even more significantly, and it wasn’t really bullish. This time gold doesn’t have to rally to about $2,000 before declining once again, as this time the rally was based on war, and when we consider previous war-based rallies (U.S. invasion of Afghanistan, U.S. invasion of Iraq, Russia’s invasion of Crimea), we know that when the fear-and-uncertainty-based top was in, then the decline proceeded without bigger corrections. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

GBPUSD attempts to rebound The British pound stalled after the BOE failed to secure a unanimous vote for higher rates. A bullish RSI divergence suggests exhaustion in the sell-off, and combined with the indicator’s oversold condition on the daily chart, may attract buying interest. A tentative break above 1.3190 led some sellers to take profit. The bulls will need to push above the 1.3250 next to the 20-day moving average to get a foothold. On the downside, the psychological level of 1.3000 is a critical floor to keep the current rebound valid. USDJPY takes a breather The Japanese yen struggles as the BOJ pledges to stick with stimulus. Sentiment turned extremely bullish after the pair rallied above December 2016’s high at 118.60. The RSI went overbought on both hourly and daily charts, and the overextension could refrain buyers from chasing bids. Trend followers may be waiting to buy at pullbacks. 117.70 is the first level to gauge buying interest and 116.80 is the second line of support. A rebound above 119.00 would extend gains beyond the psychological level of 120.00. SPX 500 tests resistance The S&P 500 bounced higher after Russia averted a bond default. Price action has stabilized above last June’s lows around 4140 where a triple bottom indicates a strong interest in keeping the index afloat. A previous attempt above 4350 forced sellers to cover but hit resistance at 4420. A bullish close above this key level on the daily chart could trigger a runaway rally. 4590 would be the next target when sentiment turns around. Otherwise, a lack of conviction from the buy-side would send the index to test 4250.

The Indian Central Bank came out this morning with firm rejection against adopting cryptocurrencies in the country. Dogecoin price action undergoes firm rejection against a double technical barrier. DOGE set to tank by 8% as bears see opportunity fit to pair back gains from Wednesday yet again. Dogecoin (DOGE) price action saw bulls being hit by ice-cold water this morning as two headlines made the sky drop on their heads. These were the Kremlin coming out saying that talks are nowhere near as positive as markets are frontrunning, and the Indian Central Bank (RBI) giving a firm rejection to the adoption of cryptocurrencies. The RBI branded cryptocurrencies as a tool that will wreck the currency system, monetary authority and government's ability to control the economy. This is a significant blow and setback for cryptocurrencies that saw bulls coming up yesterday for a catch of fresh air but are now again submerged underwater with negative prints today. Dogecoin price gains short-lived Dogecoin price action is not currently in a sweet spot as in just 5 minutes, two separate comments unrelated to each other trashed bulls’ game plan to target $0.1357 next week. Instead, DOGE price action fell back to its opening price and took a step back as bulls reassessed the situation – due to some unforeseen tail risks that caused headwinds overpowering the tailwinds that emerged the day before. Expect to possibly see DOGE price action tumble again to the downside, in a similar scenario to last week. DOGE price action got a firm rejection from negative headlines at $0.1197 with the green ascending trend line and that intermediary top-line proving too big for bulls to take on. Instead, price action collapsed back to the entry-level and looked heavy and dangling, as if poised to drop at any moment to the downside. A possible downside target is set at $0.1137 and $0.1100 with the last one making a triple bottom – although there is also the risk of a break even further to the downside if more tail-risk materialises. DOGE/USD daily chart Once the US session takes over, it could well be that investors look beyond these very short-term headlines, considering them as partial hiccups before moving on. That would mean a pickup in buying interest which could lead to a punch through $0.1197 to the upside. This would open the door towards $0.1242 intraday and possibly again on track for $0.1357.

  The FOMC finally raised interest rates and signaled six more hikes this year. Despite the very hawkish dot plot, gold went up in initial reaction. There has been no breakthrough in Ukraine. Russian invasion has largely stalled on almost all fronts, so the troops are focusing on attacking civilian infrastructure. However, according to some reports, there is a slow but gradual advance in the south. Hence, although Russia is not likely to conquer Kyiv, not saying anything about Western Ukraine, it may take some southern territory under control, connecting Crimea with Donbas. The negotiations are ongoing, but it will be a long time before any agreement is reached. Let’s move to yesterday’s FOMC meeting. As widely expected, the Fed raised the federal funds rate. Finally! Although one Committee member (James Bullard) opted for a bolder move, the US central bank lifted the target range for its key policy rate only by 25 basis points, from 0-0.25% to 0.25-0.50%. It was the first hike since the end of 2018. The move also marks the start of the Fed’s tightening cycle after two years of ultra-easy monetary policy implemented in a response to the pandemic-related recession. In support of these goals, the Committee decided to raise the target range for the federal funds rate from 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. It was, of course, the most important part of the FOMC statement. However, the central bankers also announced the beginning of quantitative tightening, i.e., the reduction of the enormous Fed’s balance sheet, at the next monetary policy meeting in May. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting. It’s also worth mentioning that the Fed deleted all references to the pandemic from the statement. Instead, it added a paragraph related to the war in Ukraine, pointing out that its exact implications for the U.S. economy are not yet known, except for the general upward pressure on inflation and downward pressure on GDP growth: The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. These changes in the statement were widely expected, so their impact on the gold market should be limited.   Dot Plot and Gold The statement was accompanied by the latest economic projections conducted by the FOMC members. So, how do they look at the economy right now? As the table below shows, the central bankers expect the same unemployment rate and much slower economic growth this year compared to last December. This is a bit strange, as slower GDP growth should be accompanied by higher unemployment, but it’s a positive change for the gold market. What’s more, the FOMC participants see inflation now as even more persistent because they expect 4.3% PCE inflation at the end of 2022 instead of 2.6%. Inflation is forecasted to decline in the following years, but only to 2.7% in 2023 and 2.3% in 2024, instead of the 2.3% and 2.1% seen in December. Slower economic growth accompanied by more stubborn inflation makes the economy look more like stagflation, which should be positive for gold prices. Last but not least, a more aggressive tightening cycle is coming. Brace yourselves! According to the fresh dot plot, the FOMC members see seven hikes in interest rates this year as appropriate. That’s a huge hawkish turn compared to December, when they perceived only three interest rate hikes as desired. The central bankers expect another four hikes in 2024 instead of just the three painted in the previous dot plot. Hence, the whole forecasted path of the federal fund rate has become steeper as it’s expected to reach 1.9% this year and 2.8% next year, compared to the 0.9% and 1.6% seen earlier. Wow, that’s a huge change that is very bearish for gold prices! The Fed signaled the fastest tightening since 2004-2006, which indicates that it has become really worried about inflation. It’s also possible that the war in Ukraine helped the US central bank adopt a more hawkish stance, as if monetary tightening leads to recession, there is an easy scapegoat to blame.   Implications for Gold What does the recent FOMC meeting mean for the gold market? Well, the Fed hiked interest rates and announced quantitative tightening. These hawkish actions are theoretically negative for the yellow metal, but they were probably already priced in. The new dot plot is certainly more surprising. It shows higher inflation and slower economic growth this year, which should be bullish for gold. However, the newest economic projections also forecast a much steeper path of interest rates, which should, theoretically, prove to be negative for the price of gold. How did gold perform? Well, it has been sliding recently in anticipation of the FOMC meeting. As the chart below shows, the price of the yellow metal plunged from $2,039 last week to $1,913 yesterday. However, the immediate reaction of gold to the FOMC meeting was positive. As the chart below shows, the price of the yellow metal rebounded, jumping above $1,940. Of course, we shouldn’t draw too many conclusions from the short-term moves, but gold’s resilience in the face of the ultra-hawkish FOMC statement is a bullish sign. Although it remains to be seen whether the upward move will prove to be sustainable, I wouldn’t be surprised if it will. This is what history actually suggests: when the Fed started its previous tightening cycle in December 2015, the price of gold bottomed out. Of course, history never repeats itself to the letter, but there is another important factor. The newest FOMC statement was very hawkish – probably too hawkish. I don’t believe that the Fed will hike interest rates to 1.9% this year. And you? It means that we have probably reached the peak of the Fed’s hawkishness and that it will rather soften its stance from then on. If I’m right, a lot of the downward pressure that constrained gold should be gone now. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The global equity market also continues to thaw after a pronounced decline since the start of the year. Initial reports of progress on the peace talks were later supported by indications that the US and China are looking to reduce friction between them and avoid new threats against each other. In addition, reassurances from the world’s major central banks over the past week sounded very encouraging. As a result, the Fear and Greed Index has moved out of the extreme fear territory, having bottomed out last week at levels last seen in March 2020. A return to territory above 20 for the index would typically mean a reversal to growth. One should note the increasing divergence between the S&P500 price and the Relative Strength Index, where since late January, S&P500’s lower lows has been marked by RSI’s higher low. The S&P500 has bounced back from its lows by almost 6% and is now testing the 50-day moving average. A consolidation above 4400 would signal the start of a broader, more powerful rally. Now it looks like the bravest already bought when there was “blood on the streets”; now, it is time for a broader range of buyers to step in. Gold and oil prices remain indicators of the military stand-off between Russia and Ukraine. Signs that progress in talks has stalled have put prices of these assets back on an upward trajectory. Brent crude oil was trading more than 11% above levels at the end of trading on March 16 at the start of the day on Friday. A glance at the chart suggests that technically quotations remain within the uptrend that began back in December. This is in line with the supposed progress in de-escalation between Russia and Ukraine. In our view, it is already worth noting that fears over energy supplies are no longer panic-driven but more constructive, lengthening the forecast horizon.

S&P 500 extended gains, and the risk appetite in bonds carried over into value rising faster than tech. Given the TLT downswing though, it‘s all but rainbows and unicorns ahead today. Not only that quad witching would bring high volume and chop, VIX itself doesn‘t look to slide smoothly below 25 today. Friday‘s ride would be thus rocky, and affected by momentum stalling in both tech and value. Real assets though can and will enjoy the deserved return into the spotlight. With much of the preceding downswing being based on deescalation hopes (that aren‘t materializing, still), the unfolding upswing in copper, oil and precious metals (no, they aren‘t to be spooked by the tough Fed tightening talk) would happen at a more measured pace than had been the case recently. Pay attention to the biting inflation, surrounding blame games hinting at no genuine respite – read through the rich captions of today‘s chart analyses, and think about reliable stores of real value. And of course, enjoy the open profits. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 looks likely to consolidate as the 4,400 – 4,450 zone would be tough to overcome, and such a position relative to both the moving averages shown, has historically stopped quite a few steep recoveries off very negative sentiment readings. Credit Markets HYG is likely to slow down here, as in really stall and face headwinds. The run had been respectable, and much of the easy gains happened already yesterday. Gold, Silver and Miners Precious metals upswing did indeed return – and the miners performance doesn‘t hint at a swift return of the bears, to put it mildly. The path to $1950s is open. Crude Oil Crude oil bottom was indeed in, and the price can keep recovering towards $110s and beyond. No, the economy isn‘t crashing yet, monetary policy isn‘t forcing that outcome, and the drawing of petroleum reserves is a telltale sign of upside price pressures mounting. It‘ll be an interesting April, mark my words. Copper Copper is duly rebounding, and not at all overheated. The move is also in line with other base metals. My yesterday‘s target of $4.70 has already been reached – I‘m looking for a measured pace of gains to continue. Bitcoin and Ethereum Cryptos are taking a small break, highlighting the perils of today. The boat won‘t be rocked too much. Summary S&P 500 bulls made the easy gains already yesterday, and today‘s session is going to be volatile, even treacherous in establishing a clear and lasting direction (i.e. choppy), and the headwinds would be out there in the plain open. These would come from bonds not continuing in the risk-on turn convincingly rather than commodities and metals surging head over heels. Both tech and value would feel the heat as VIX would show signs of waking up (to some degree). Today‘s session won‘t change the big picture dynamics of late, and I invite you to read more in-depth commentary within the individual market sections of today‘s full analysis. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

The Mexican dollar has added more than 4% over the last nine days against the US dollar. The upward momentum in this rally is followed by a brief correction but without any noticeable pullback. At first glance, this rally does not seem logical, as oil is cheap for most of this time, hurting oil-exporting Mexico. Nevertheless, in the short term, the MXN has been steadily gaining the following signs of a recovery in demand for risky assets in global markets. Mexico, like the US, finds itself far away from the military conflict in eastern Europe, so the impact on its economy will be much more indirect. Moreover, in the medium term, Mexico will also benefit from the US' rejection of oil from Russia. The states need heavier oil than their own WTI. The cocktail needed for refineries used to be made from Venezuelan oil, which was then replaced by Russian crude. Now the replacements will be Canadian and Mexican, which should benefit production levels and support MXN's strength through higher export revenues. In the coming days, the USDMXN will head for another test of 20.0. Below this level, the pair could not sustainably consolidate in 2021. If this situation proves sustainable, the Bank of Mexico will have more room to fight inflation through policy tightening without fear of strangling the economy too much. If so, the USDMXN may only be in the middle of its strengthening against the dollar, which could last for several quarters.

  St. Patrick’s Day is historically considered among the best trading days. Apparently, judging by the results, it may have brought some luck to natural gas. If you are interested in looking at the stats, an article by Market Watch summed them up. The second target hit – BOOM! Yesterday, on St. Patrick's Day, the opportunity to bank the extra profits from my recent Nat-Gas trade projections (provided on March 2) finally arrived. That trade plan has provided traders with multiple bounces to trade the NYMEX Natural Gas Futures (April contract) in various ways, always depending on each one’s personal risk profile. To get some more explanatory details on understanding the different trading ways this fly map (trading plan) could offer, I invite you to read my previous article (from March 11). To quickly sum it up, the various trade opportunities that could be played were as follows (with the following captures taken on March 11): The first possibility is swing trading, with the trailing stop method explained in my famous risk management article. Henry Hub Natural Gas (NGJ22) Futures (April contract, hourly chart) The second option consisted of scalping the rebounds with fixed targets (active or experienced traders). I named this method “riding the tails” (or the shadows). Henry Hub Natural Gas (NGJ22) Futures (April contract, 4H chart) The third way is position trading – a more passive trading style (and usually more rewarding). Henry Hub Natural Gas (NGJ22) Futures (April contract, daily chart) The chart below shows a good overall view of NYMEX Natural Gas hitting our final target, $4.860: Henry Hub Natural Gas (NGJ22) Futures (April contract, daily chart) Henry Hub Natural Gas (NGJ22) Futures (April contract, 4H chart) As you can see, the market has provided us with multiple entries into the same support zone (highlighted by the yellow band) – even after hitting the first target, you may have noticed that I maintained the entry conditions in place – after the suggestion to drag the stop up just below the new swing low ($4.450). The market, still in a bull run, got very close to that point on March 15 by making a new swing low at $4.459 (just about 10 ticks above it). Before that, it firmly rebounded once more (allowing a new/additional entry) and then extended its gains further away while consecutively hitting target 1 ($4.745) again. After that, it finally hit target 2 ($4.860)! That’s all folks for today. It is time to succesfully close this trade. Have a great weekend! Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Sebastien BischeriOil & Gas Trading Strategist * * * * * The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Starting at a low of US$1,780 on January 28th, gold went up rapidly US$290 within less than six weeks, reaching a short-term top at US$2,070. Since that high on March 8th, however, gold prices fell back even faster. In total, gold plunged a whooping US$175 to a low of US$1,895 in the aftermath of last week’s FOMC meeting. A quick bounce took prices back to around US$1,950, but the weekly close at around US$1,920 came in lower.This volatile roller coaster ride is truly not for the faint of heart. Nevertheless, gold has done well this year, and, despite a looming multi-months correction, it might now be in a setup from which another attack towards US$2,000 could start in the short-term.Gold in US-Dollar, weekly chart as of March 19th, 2022.Gold in US-Dollar, weekly chart as of March 19th, 2022.On the weekly chart, gold prices have been rushing higher with great momentum. For five consecutive weeks, the bulls were able to bend the upper Bollinger band (US$1,963) upwards. However, the final green candle closed far outside the Bollinger bands and looks like a weekly reversal. Consequently, if gold has now dipped into a multi-month correction, a retracement back to the neckline of the broken triangle respectively the inverse head & shoulder pattern in the range of US$1,820 to US$1,850 would be quite typical and to be expected. In this range, the classic 61.8% retracement of the entire wave up (from the low at US$1,678 on August 9th, 2021, to the most recent blow off top at US$2,070) sits at US$1,827.79. The weekly stochastic oscillator has not yet rolled over, but weekly momentum is overbought and vulnerable.In total, the weekly chart shows a big reversal and therefore no longer supports the bullish case. However, it could still take some more time before a potential correction gains momentum.  Gold in US-Dollar, daily chart as of March 19th, 2022.Gold in US-Dollar, daily chart as of March 19th, 2022.While the weekly chart may just be at the beginning of a multi-month correction, the overbought setup on the daily chart has already been largely cleared up by the recent steep pullback. Despite Friday’s rather weak closing, the odds are not bad that gold might very soon be turning up again. However, gold bulls need to take out the pivot resistance around US$1,960 to unlock higher price targets in the context of a recovery. The potential Fibonacci retracements are waiting at US$1,962, US$2,003 and US$2,028. Hence, gold could bounce back to approx. US$2,000, which is a round number and therefore a psychological resistance.On the other hand, if gold fails to move back above Thursday’s high at US$1,950, weakness will increase immediately and significantly. In that case, bulls can only hope that the quickly rising lower Bollinger Band (US$1,861) would catch and limit a deeper sell-off. But since the stochastic oscillator has reached its oversold zone, bears might have a hard time pushing gold significantly below US$1,900.Overall, the daily chart is slightly oversold, and gold might start a bounce soon. Conclusion: Potential recovery to approx. US$2,000After a strong rally and a steep pullback, the gold market is likely in the process of reordering. While the weekly timeframe points to a correction, the oversold daily chart points to an immediate bounce. Given these contradictory signals, investors and especially traders are well advised to exercise patience and caution in the coming days, weeks, and months. If gold has entered a corrective cycle, it could easily take until the early to mid-summer before a sustainable new up-trend might emerge.Alternative super bullish scenarioAlternatively, and this of course is still a possible scenario, the breakout from the large “cup and handle” pattern is just getting started. In this very bullish case, gold is in the process of breaking out above US$2,100 to finally complete the very large “cup and handle” pattern, which has been developing for 11 years! Obviously, the sky would then be the limit.To summarize, gold is getting really bullish back above US$2,030. On the other hand, below $US1,895 the bears would be in control. In between those two numbers, the odds favor a bounce towards US$1,960 and maybe USD$2,000.Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter.Disclosure: Midas Touch Consulting and members of our team are invested in Reyna Gold Corp. These statements are intended to disclose any conflict of interest. They should not be misconstrued as a recommendation to purchase any share. This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.By Florian Grummes|March 19th, 2022|Tags: Gold, Gold Analysis, Gold bearish, Gold bullish, gold chartbook, Gold consolidation, gold fundamentals, Gold sideways, precious metals, Reyna Gold|0 Commentshttps://www.midastouch-consulting.com/gold-chartbook-19032022-potential-recovery-to-approx-us2000About the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks. Besides all that, Florian is a music producer and composer. Since more than 25 years he has been professionally creating, writing & producing more than 300 songs. He is also running his own record label Cryon Music & Art Productions. His artist name is Florzinho.

Bitcoin gained 6.3% over the past week, finishing near $41.3K. The price retreated slightly to $41.0K on Monday morning, losing 2.1% over the last 24 hours. Ethereum has corrected by 2% over the same period but still added 11.6% to the price seven days ago. Other leading altcoins in the top 10 have gained between 7.3% (Polkadot) and 24.8% (Avalanche) over the past week. Total cryptocurrency market capitalisation, according to CoinMarketCap, rose 7.5% for the week to $1.86 trillion. The Bitcoin Dominance Index fell 0.6 points to 41.9% due to outperforming altcoins. The Cryptocurrency Fear and Greed Index rose 7 points for the week to 30 and moved into "fear" from "extreme fear". Last week turned out to be a good one for the crypto market, with bitcoin rising the most in six weeks. Last Wednesday, the US Federal Reserve meeting weakened the dollar and boosted stocks, which benefited all risky assets, including cryptocurrencies. Meanwhile, bitcoin has continued to trade in a sideways range of $38-45K for the second month, with a closer look marked by a sequence of declining local highs with bullish momentum fading near 42 in the last two weeks. The positive sentiment is supported by the 50-day moving average reversing upwards. BTCUSD broke it in a relatively strong move on March 16th, and it has been acting as local support ever since. The external environment in the financial markets remains mixed. Traders have tighter financial conditions due to higher rates and waning economic growth on one side of the scale. On the other side is the demand for purchasing power insurance for capital due to the highest inflation in two generations. Weighing these factors, Galaxy Digital head Mike Novogratz said bitcoin would continue to trade in a sideways range this year. He said BTC will resume growth and reach $500K by 2025 as inflation curbing measures are too weak. Piyush Gupta, chief executive of Singapore's largest bank, DBS, said cryptocurrencies could be an alternative to gold but would not be able to fit into the traditional financial system due to excessive volatility.

Gold has remained in a one-and-a-half per cent range since last Thursday. The correction from a peak of $2070 to values below $1900 caused a brief aftershock, but it was not sustained. Gold has now stabilised above the peaks of May and June last year and is currently searching for further meaningful momentum. For short-term traders, gold has taken a back seat as markets try to assess the impact of disrupted supply chains and the amount of supply shortfall in raw materials and food. At the same time, medium-term traders should not lose sight of the fact that the current situation will not allow central banks to act adequately. As a result, the supply of fiat money will increase faster than the supply of commodities. In other words, we should expect greater tolerance for higher inflation from the CBs. In addition, governments should also be expected to provide financial support to the economy. In practice, that means more money supply and a higher level of public debt to GDP. And that is another disincentive for monetary policy, which is negative for the currency. It is also favourable for gold, which is used as protection against capital depreciation. Oil is gradually becoming the opposite of gold. After bouncing back to the trend support level of the last four months, Brent got back above $100 reasonably quickly and is adding 4% on Monday, trading at $109. Speculative demand for oil is picking up again amid discussions of a Russian energy divestment, which could be the agenda for the EU leaders and Biden meeting later this week. In addition, the US oil supply has been slow to rise, with data on Friday showing that the number of working oil drilling rigs declined a week earlier. Oil producers appear to be cautious about demand prospects with record fuel prices and are in no hurry to flood the market. This will fuel prices in the short term but is becoming an increasing drag on the economy in the medium term. Locally, we also risk suggesting that Europe will once again make it clear that it cannot substitute Russian energy, preferring to focus on sanctions against other sectors. And that could prove to be a dampening factor for oil later in the week. Oil prices above 110 still look unsustainably high, and a range with support at $85 looks more adequate for the coming months.

German Index doesn’t shock investors with significant fluctuations despite the fact many countries interact with persistent conflict between Russia and Ukraine. DAX opened only a bit lower than it closed on Friday, March 17th and seems to end the day without any major move. As before we highlight below three companies which have gained the most during today’s session. BMW Bavarian automotive company is today’s leader, as until now it has gained over 2%. BAYN - Bayer Well-known brand associated with medicaments until now has gained over 2% DBK – Deutsche Bank One of the most recongizable banks of the world has gained ca. 2% until now Charts: courtesy of TradingView.com Source: TradingView.com

Blackberry stock is back trending on retail investment sites after a long break.BB stock was one of the old meme stock favorites from last year.The stock also catches a major investment bank upgrade on Monday.Blackberry shares are back. The BB ticker is once again trending all over social media and retail trading sites after quite a long hiatus in the wilderness. That's break to you and me but my editor likes the fancy words! But Blackberry (BB) is definitely back. It was one of the original stocks caught up in the frenzy of short squeeze speculation last year but dropped off most people's attention lists as the stock was unable to push on and gave up all of its gains. BB stock fell from $20.17 in June 2021 to $5.80 in February 2022. Also read: AMC stock starts Monday with more gainsBlackberry (BB) stock news: Announces 13 channel partners for Jarvis 2.0Blackberry was the go-to business phone in the early 2010 decade before being totally outmaneuvered by the emergence of the smartphone. Holding a Blackberry was a sign that you had made it in the business world but the company and phone went the way of Nokia, totally demolished by Apple and other smartphone makers. But both companies Blackberry and Nokia have struggled along with varying degrees of success. Blackberry caught some renewed attention on Monday as it announced its Jarvis 2.0 testing tool will be offered by 13 partners to companies in the Asia Pacific region. “Asia-Pacific is at a tipping point in how it protects infrastructure and industries against growing IoT security threats as digital automation continues to advance,” said Dhiraj Handa, vice president of BlackBerry QNX for the Asia-Pacific region. Jarvis is a testing tool that allows companies to look for potential branches of security in their systems. "BlackBerry® Jarvis® 2.0 is a software composition analysis and static application security testing solution that is designed to analyze binaries within complex embedded systems. It lets you identify security vulnerabilities in products that have software from multiple sources, without the need for source code. It’s a powerful tool that provides you insights into your binaries and helps you catch potential security issues with the click", from Blackberry. This is timely given the heightened security and hacker issues surrounding many systems and companies are spending increasing amounts of their IT budgets on security issues. Blackberry (BB) stock forecastThis certainly reads positively but it is early days in the process. BB stock price has recovered but remains in a powerful downtrend. The recent spike up to the 50-day moving average is encouraging but only a break of $9.47 would really get momentum back towards bulls. Breaking above $48.50 is the first target and would put BB back in a neutral stance. Above $9.47 BB stock is bullish. The first resistance is the 50-day moving average at $7.41. Blackberry (BB) chart, daily

Shiba Inu price is hovering above the $0.0000223 support level, eyeing a 40% upswing. A quick liquidity run below $0.0000202 is likely before triggering the move to $0.0000283. A daily candlestick close below $0.0000158 will invalidate the bullish thesis for SHIB. Shiba Inu price action seems to be repeating itself after a recent breakout from its downtrend. The rebound is pausing and might go for a liquidity run below a vital support level before a full-blown rally kicks off. Shiba Inu price prepares for a new leg-up Shiba Inu price crashed 77% from its all-time high before setting up a swing low around $0.0000202. The downswing, however, was breached on February 3, as price undertook a u-turn and made a 75% ascent. The new uptrend failed to sustain, however, leading to another downswing. After a brief period of consolidation, SHIB breached through its mini downtrend and is currently establishing a support level around $0.0000223 before triggering an explosive rally higher. However, investors can expect Shiba Inu price to slide lower first in search of liquidity below the $0.0000202 barrier. Such a move will signal the start of an uptrend and interested investors can enter long at $0.0000202. The resulting momentum will likely catapult SHIB to retest the immediate hurdle at $0.0000283. This move would constitute a 40% gain and is where market participants can book profits. SHIB/USDT 1-day chart Even if Shiba Inu price breaches the $0.0000202 barrier, the bulls will have another chance to regroup and attempt a run-up into the nine-hour demand zone, ranging from $0.0000158 to $0.0000193. A daily candlestick close below $0.0000193, however, will produce a lower low and invalidate the bullish thesis. In this scenario, Shiba Inu price could crash 15% and retest the $0.0000135 support level.

Having added more than 8.2% to Tuesday's lows last week through Friday, S&P500 futures have surpassed the 50-day moving average and are testing the 200-day average by the start of US trading. We mentioned last week that the "death cross" should not be taken as a sell signal this time because it took place after a comparatively long decline. It was a repeat of 2020 when the cross appeared after the market bottomed. The recovery rally of the last week is undergoing an important test. If the S&P500 manages to get above 4500 today or tomorrow, firmly entrenched above the 200-day moving average (currently at 4480), we can confidently talk about breaking the correction. In that case, there is a potential for a quick rally towards 4600 already this week, 4800 over the next 2-3 months, and up to 5000 by the end of 2022. Looking only at the news headlines, the military action in Europe and the tightening of monetary policy by the Fed are not conducive to buyers' optimism. But, paradoxically, we are now in a situation where pessimism has reached or is close to its peak. Managers surveyed by Bank of America note the maximum pessimism since April 2020, which is near historical turning points. The only exception to the last 25 years was in 2007-2008 when pessimistic expectations persisted for an extended period due to banking sector problems. The Fear & Greed Index continues to improve from 16 (extreme fear) a week ago to 40 (fear) now. It has turned solidly around from the extreme lows, but equities are still an impressive distance from the highs at the beginning of the year, which leaves considerable room for growth from current levels. A strong sell-off in US equities from current levels and a consolidation below 4400 on the S&P500 could be a strong bearish signal, indicating an inability for the market to develop the offensive, which risks putting it back into a rapid decline situation.

A subscriber asked us recently where he should be putting his money and how to limit losses in his retirement portfolio. He expressed frustration as he watched Buffett’s Berkshire Hathaway stock going up, but at the same time, the stock indices going lower and many of his previously favored stocks experiencing substantial losses! This conversation naturally piqued our curiosity. We decided to look into this for him and, at the same time, share our findings with our subscribers.Berkshire Hathaway stock traded at an all-time record high price of $520,654.46. At a stock price of $512,991, Berkshire’s market capitalization is $756.23 billion. Last year, Berkshire generated a record $27.46 billion of operating profit, including gains at Geico car insurance, the BNSF railroad, and Berkshire Hathaway Energy.BERKSHIRE vs. S&P 500 BENCHMARKWarren Buffett, age 91 (known as the ‘Sage of Omaha’), is the chairman and CEO of Berkshire Hathaway. He is considered by many to be the most successful stock investor in the world and, according to Forbes Real-Time Billionaire List, has a personal net worth that exceeds $120 billion USD.Very few can compete with his long-term track record. Since 1965, Berkshire has provided +20% average annual returns, almost double the +10.2% average annual returns for the S&P 500 Stock Index benchmark. The 2022 year-to-date comparison is:BRK.A Berkshire Hathaway +14.53%; SPY SPDR ETF -6.36%; FB Facebook -35.64%However, according to Buffett’s own humility, he has endured years of underperformance and has had his share of bad stock picks. When Buffet was asked about drawdowns at one of Berkshire’s annual meetings, he stated, “Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market.” According to www.finance.yahoo.com, the five biggest percentage losses for Berkshire have been:1974 -48.7%, 1990 -23.1%, 1999 -19.9%, 2008 -31.8%, and 2015 -12.5%.WHAT CAN WE LEARN FROM THE ‘BUFFETT INDICATOR’?The Buffett Indicator, as dubbed by Berkshire shareholders, is the ratio of the total United States stock market valuations (the Wilshire 5000 stock index) divided by the annual U.S. GDP. The indicator peaked at the beginning of 2022 and remains near all-time highs even though many stocks are well off their record levels.This historical chart of the Buffett Indicator was created by www.currentmarketvaluation.com. Doing quantitative analysis, we learn that the indicator is more than 1.6 standard deviations above the historical average, which suggests the market is over-valued and, in time, will fall back to its historical average.Berkshire Hathaway At Fibonacci Resistance!On March 18, 2022, Berkshire hit an all-time high price of $520,654. The Fibonacci resistance level of 2.618 or 261.8% of the March 23 low of $239,440 is $520,196. As shown on the daily chart, Berkshire also met resistance at the 2.618 standard deviations of the quarterly Bollinger Band.THE BENCHMARK: S&P 500 SPY ETFThe S&P 500 Index is the industry standard benchmark when comparing investment returns. It’s worth noting that as Berkshire reached the Fibonacci 2.618 resistance, the SPY found support at the Fibonacci 1.618 of the SPY March 23, 2020 low.Central banks have begun to tighten credit by raising interest rates for the first time since 2018, attempting to bring fast-rising energy, food, and housing prices under control. More time is needed to determine the full impact that rising global interest rates will have on current markets.However, on the chart below, we can see that the SPY put in a major top around 480 and, for the time being, has found support around 420 (the Fibonacci 1.618 level). Considering the increased market volatility and that we are now entering a cycle of higher interest rates, it would not surprise us to see the SPY eventually break below 420.It is worth noting that when a market makes a top after a prolonged bull-market, we usually experience distribution. Distribution with volatility results from large institutions beginning to liquidate their holdings while smaller retail investors are trying to buy stocks on sale. In other words, the retail investors are buying the dip hoping to get a bargain, while the institutional investors are selling the rally hoping to be liquidated and/or go short. It is a battle that retail investors will eventually lose!It is important to understand we are not saying the market has topped and is headed lower. This article sheds some light on some interesting analyses that you should be aware of. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly. We provide our ETF trades with subscribers to our newsletter, and surprisingly, we have just entered five new trades.Sign up for my free trading newsletter so you don’t miss the next opportunity!WHAT STRATEGIES CAN HELP YOU NAVIGATE The CURRENT MARKET TRENDS? Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.GET READY, GET SET, GO - We invite you to learn more about how my three ETF Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

March 22, 2022  $USD, Brazil, Covid, Currency Movement, FOMC, India, Japan, UK Overview:  Hawkish comments by Fed Chair Powell stoked a jump in yields and lit the dollar.  News that Alibaba was boosting its share buyback program to $25 bln from $15 bln helped lift HK shares, while the weaker yen favored Japanese exporters.  Most equity markets in the region advanced.  European bourses are showing a modest upside bias with US futures and are little changed.  The US 10-year Treasury yield is pushing five basis points higher to 2.34%.  European yields are also 3-5 basis point higher.  The dollar is rising against most currencies today.  The Antipodean currencies are the most resilient, while the yen and Norwegian krone are taking it on the chin.  The dollar, which began last week near JPY117.30, is knocking on JPY121 today.  Emerging market currencies are also mostly softer, led by the central European complex.  Hungary is expected to hike its base rate 100 bp to 4.4% today, while the key rate (one-week deposit rate) is expected to be raised by 30 bp to 6.15% later this week.  Turning to the commodities, gold is consolidating inside yesterday’s range.  The higher yields appear to be sapping demand.  May WTI is reversing lower after completing a (61.8%) retracement near $113.35.  US natural gas prices are also pulling back from better levels earlier today. Europe's benchmark is firm.  Iron ore slipped by 2.5% after a 1.6% loss yesterday.  Copper is recouping most of yesterday's loss, the first decline in four sessions.  May wheat is up about 3%, adding to yesterday's 5.2% gain and soy has fully recouped last week's 1.4% decline.   Asia Pacific Japan has lifted some Covid restrictions in Tokyo and outlying areas.  This will help set the stage for a recovery in Q2.  The earthquake earlier this month and the Covid restrictions hobbled the world's third-largest economy.  As we have been tracking, Prime Minister Kishida is reportedly cobbling together a supplemental budget of around JPY10 trillion (~$83.5 bln).  Meanwhile, with inflation set to jump starting next month (cell phone charges fell sharply a year ago) and global yields tugging the JGBs, the Bank of Japan may be forced again to defend its Yield Curve Control cap of 0.25% on the 10-year bond.  The yield is pushing above 0.20%.  India, which is a member of the Quad (along with Japan, Australia, and the US) to ostensibly check China, has a more nuanced relationship with Russia.  It bought the same air defense system from Russia as Turkey did without the fanfare.  As we noted last week, India is exercising options to buy Russian oil at a discount.  Indian officials hinted that three-days of the country's oil needs are being secured.  That is about 15 mln barrels over the next 3-4 months.  Last year, India reportedly bought about 33 mln barrels from Russia.  The amount is not so much.  After all, consider that according to reports, about 9 mln barrels of Russian oil is headed to the US this month and another 1 mln at least next month.  Businesses were given a 45-day wind-down grace period.  Rather what is more interesting is the that some reports indicate that India could pay rupee for the oil, but the payment might be benchmarked to the US dollar. The dollar extended its recent gains against the yen and is testing the JPY120.50 area.  Such lofty levels have not been seen for 6-7 years.  The next important chart point is not seen until closer to JPY121.50, but a move toward JPY125 over the slightly longer-term cannot be ruled out.  The dollar's ascent pushed it through the upper Bollinger Band (two standard deviations above the 20-day moving average) repeatedly last week.  It comes in near JPY120.30 today.  As we noted, the exchange rate is more correlated to rising US yields than as a safe haven (when it is inversely correlated to equities). The JPY120 area, which was "resistance" may now offer support.   The Australian dollar is trading inside yesterday's range (~$0.7375-$0.7425).  The high from earlier this month was near $0.7440, and the upper Bollinger Band is found slightly above it.  A break of $0.7360 would weaken the technical tone. After a few larger than normal moves, the dollar-yuan was confined to a narrow range today (~CNY6.3590-CNY6.3660).  It has remained within yesterday's range, which was itself within the pre-weekend range.  Recall that in the first part of March, the dollar was in a CNY6.3070-CNY6.3270 range.  It jumped to a higher range, roughly CNY6.3400-CNY6.3670.  The PBOC set the dollar's reference rate at CNY6.3664 today compared with projections for CNY6.3660 (seen in the Bloomberg survey).  Note that the China's premium over the US of 10-year yields is about 50 bp, the least in three years.   Europe Russia's invasion of Ukraine is a watershed in a way that Moscow's 2008 invasion of Georgia or the war with Ukraine when it took Crimea was not.  It is not only because of the widespread sanctions, but as many noted, it is spurring German (and others) military spending.  While a monetary and banking union is not complete, a common defense policy is strengthening.  Europe is on the verge of establishing a rapid response force that could be ready for joint exercises as early as next year. Meanwhile, the debate about whether the EU can ban Russian oil imports continues and is one of the drivers of oil prices.   Tomorrow is an important day for the UK.  February inflation is expected to have accelerated. The swaps market is pricing in another 25 bp hike at the next BOE meeting (May 5).  Chancellor of the Exchequer Sunak will deliver his Spring Statement.  Today's data seems to give him more room to maneuver.  The deficit in the first 11 months of the fiscal year is about GBP26 bln smaller than projected.  Sunak is expected to offer some relief from the jump in food and energy prices, while going forward with the tax increase next month for the National Health Service.  Still, on balance, given the great uncertainty, and the political considerations, Sunak is expected to be restrained in new commitments.   The euro fell to a four-day low near $1.0960 in late Asian turnover before recovering to almost $1.1015 in the European morning.  Nearby resistance is seen in the $1.1020-$1.1040 area.  Note two sets of option expirations today.  The first is at $1.10 for about 935 mln euros and the second is for nearly 680 mln euros at $1.1025.  The intraday momentum indicators are stretched, and North American participants may be inclined to buy dollars, for which they are increasingly paid to do.  A break of $1.0960 could see $1.0930 tested.  Sterling is faring a bit better, but it remains for the third consecutive session in the range forged on March 17 (~$1.3090-$1.3210).  It has flirted with $1.32, which we identified at a possible neckline of a bottoming pattern.  It has yet to close above it, but if it does, it would still seem to target $1.34.  The euro has been sold from nearly GBP0.8460 on March 17 to almost GBP0.8340 today, almost a two-week low. A break of GBP0.8330 would target GBP0.8280-GBP0.8300.  America Federal Reserve Chair Powell sharpened his hawkish message yesterday and reiterated that the central bank is prepared to move further and faster.  The market responded as one might imagine and boosted the risk of a 50 bp move at the next meeting (May 4).  The market has a little more than 190 bp of tightening discounted for the remainder of the year.  There are six meetings left.  This means that the market is leaning toward two 50 bp hikes.  Powell's remarks were conditioned with "if necessary" and "if appropriate."  Some observers think it is necessary, and was so last week, though were disappointed that Governor Waller did not join his former boss, St. Louis Fed President Bullard in dissenting in favor of a 50 bp move.   While different parts of the US curve are flattening or, like the 5-10-year curve turning inverted, Powell played it down.  The Chair cited Fed staff research that found that the 18-month curve to be more important and it has steepened not flattened as the market prices in a more aggressive tightening path. What can challenge this trajectory?  Disappointing economic data.  The February durable goods orders due Thursday may not be it, as the series is volatile in any event.  However, the preliminary PMI is due the same day.  It is expected to have slipped, but a composite lower than expected and edging back toward the 50 boom/bust level would be a yellow flag.  The March employment data is due on April 1. A significant disappointment there could temper the rate hike fever.  Separately, we note that supply chain disruptions are hitting the auto sector and share prices have fallen to reflect it.  That is in addition to surging oil and metal prices.   It is a light economic calendar for North America today.  The Fed's Mester, Daly, and Williams speak.  Mester is a voting member of the FOMC, and Williams, the President of the NY Fed, has a permanent vote.  Williams is part of the Fed's leadership, and we will see how much he echoes Powell.  He had expressed doubts about a 50 bp move before this month's meeting, well ahead of Powell's endorsement of a 25 bp hike before Congress.      The US dollar is recovering from the dip to CAD1.2565 yesterday, its lowest level since late January.  It is pushing back above CAD1.26 in the European morning.  A move above CAD1.2650 would likely confirm that a near-term low is in place, with initial potential toward CAD1.2700.  The greenback recovered after dipping below MXN20.27 yesterday, its low here in March, but has been turned back from MXN20.42, just shy of the 200-day moving average. Banixco is expected to hike its overnight target by 50 bp to 6.50% in a couple of days.  Still, this month, the peso has gained almost 0.75% and is lagging behind the Brazilian real (~4.4%) and the Colombian peso (~3.2%). Strong demand for Brazilian equities has been reported.  Yesterday, the dollar fell to almost BRL4.93, which has not been seen since mid-2020.  The next major chart point is near BRK4.82 and the 200-day moving average close to BRL4.71.         Disclaimer

S&P 500 wavered but is bound to get its act together in the medium term. Powell‘s statements shouldn‘t have stunned the bulls, but they did – the mere reiteration of the tightening plans coupled with remarks on the need to stamp out aggressive inflation before it‘s too late (anchored inflation expectations, anyone? I talked that in the run up to the Sep 2021 P&G price hikes and how the competition would be following in a nod to high input costs, with heating job market on top of the commodities pressure pinching back then already), sent stocks and bonds down.Add the recession fears that were assuaged during the Wednesday‘s conference, and you get the S&P 500 bulls having to dust off after Monday‘s setback. Given how early we‘re in the tightening cycle, and that the real economy isn‘t yet breaking down no matter what‘s in the pipeline geopolitically as regards various consequences to commodities, goods, services and money flows, the stock market bulls are still likely to take on the 4,600 as discussed already.Only this time, the upswing would be accompanied by a more measured and balanced commodities upswing, joined in by precious metals. Great profits ahead and already in the making.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 is consolidating above 4,400, and the relative strength in value as opposed to tech, is boding well – the bulls are pushing their luck a bit too hard as a further TLT decline would pressure growth stocks.Credit MarketsHYG is getting under pressure again, but its decline would be uneven in the short run – as in I‘m looking for quite some back and forth action. First, higher in taking on yesterday‘s selling.Gold, Silver and MinersPrecious metals aren‘t turning lower in earnest – the miners‘ leadership bodes well for further gains, and is actually a very good performance given the hawkish Fed „surprise“ (surprise that wasn‘t, shouldn‘t have been).Crude OilCrude oil strength returning is a very good omen for commodities bulls broadly, and the rising volume hints at return of bullish spirits. The upswing is far from over – look how far black gold got on relatively little conviction, and where oil stocks trade at the moment.CopperCopper is acting strongly, and the downswing didn‘t entice the bears much. The path of least resistance remains higher, and the red metal isn‘t yet outperforming the CRB Index. Great pick for portfolio gains with as little volatility as can be.Bitcoin and EthereumBitcoin went on to recover the weekend setback – Ethereum upswing presaged that. They‘re both a little stalling now, but entering today‘s regular session on a constructive note. I‘m looking for modest gains extension.SummaryS&P 500 is bound to recover from yesterday‘s intraday setback – the animal spirits and positive seasonality are there to overcome the brief realization that the Fed talks seriously about tightening and entrenched inflation. While not even the implied readiness to hike by 50bp here and there won‘t cut it and send inflation to the woodshed, let alone inflation expectations, the recession fears would be the next powerful ally of stock market bears. For now though, we‘re muddling through generally higher (I‘m still looking for a tradable consolidation of last week‘s sharp gains), and will do so over the coming several weeks. The real profits are to be had in commodities and precious metals, as I had been saying quite often lately… Enjoy!Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

The last raise of Fed’s interest rate seems to be tip of the iceberg as hawkish rhetoric is vivid in following Jerome Powell’s testimonies. Inflation is still here and according to Investing.com Goldman Sachs predicts that Fed’s next moves are 50bps raises in the two following months. As we’re waiting for tomorrows midday (GMT) which is the time Fed Chairman speaks, let’s review how have most traded, dollar-based pairs traded over last 24 hours. EUR/USD Morning declines appear to be only temporary, USD has weakened in the afternoon and slightly decreased as the pair gained 0.1% until now. GBP/USD The pair has gained ca. 0.6% and can be threated as a ‘trailer’ of the dollar strengthening later this week. USD/JPY After today’s news about Russian-Japanese end of negotiations considering official truce of World War II (!) and ongoing hawkish Fed’s rhetoric Japanese yen has weakened and the pair has gained ca. 1.1% USD/PLN Exotic pair shows an interesting performance once again after an increase of over 0.4% USDPLN has decreased by over 0.5% as the pair seems to be affected by many factors as the country lies close to Ukraine and had its interest rate increased two weeks ago. Source/Data: Investing.com, TradingView.com Charts: Courtesy of TradingView.com

In the new series we focus on some interesting, meme and other… non-typical coins. Today we highlight fluctuations of popular SHIB, DOGE and tasty PancakeSwap. PancakeSwap (CAKE) Price has risen by 5% today what’s probably not so surprising as it seems to be very activating project with loads of announcements on Twitter. Dogecoin (DOGE) The project which is, let’s say, “supported” by Elon Musk keeps arousing interest. Price has risen by ca. 2% until now. The price has reached but declined suddenly… Shiba Inu (SHIB) Another iteration of Doge-inspired coin has declined recently as well, ranging between 2-3% gain at the time I’m writing. Source/Data: TradingView.com, coinmarketcap.com Charts: Courtesy of TradingView.com

All the markets’ old boys like crude, gold and silver are still vulnerable for the mix of the factors shaping the prices. Naturally, stocks seems to be more dynamic as the recent events show. China stocks have been fluctuating recently as, among others, COVID-19 and negotiations with the USA were topping the headlines. Global sanctions affect WTI/BRENT price – the supplies from Russia are about to be limited in Europe so the price is to rise again. Going back to gold - Hawkish rhetoric of Fed keeps precious metals investors uncertain. There’s no doubt safe-haven must be watched all the time to decide if it’s the best moment to sell or buy. Crude Oil – WTI Luckily crude oil price has decreased by 3% over last 24 hours and it’s probably ‘waiting’ for the next significant geopolitical updates. According to Reuters, some countries of the EU are still hesitating to stop importing crude oil from Russia. Gold – XAUUSD Yes, price of gold has decreased by almost 1%, but… it could be worse as Powell doesn’t hesitate to present hawkish comments. Silver – XAGUSD Silver price chart shows a significant decline which has helped it to decrease by 1.7% over last day. As wrote above, Powell testimony will let us visualise a more detailed outlook. Source/Data: Reuters, TradingView.com Charts: Courtesy of TradingView.com

As we said in the week before, this week is not full of major and certain monetary policy statements. Powell speaks in a hawkish manner and BoE's Bailey testifies as well, but a certain interest rate decision comes on Thursday as SNB releases interest rate decision. The previos one amounted to -0.75% Monay-noon As mentioned at 8:30 a.m. SNB speaks its mind. One hour later it's time for a press conference. At 8:30 a.m. as well in Germany Manufacturing PMI is released. One hour later there's a series of indicators going public. It's about UK Composite PMI, Manufacturing PMI and Services PMI. At 10 a.m. the European Union Leaders meet and are expected to obviously all the currrent factors which are also shaping markets. Afternoon At 12:30 p.m. Core Durable Goods Orders (prev. 0.7%) and Initial Jobless Claims (prev. 214K) are released in the USA Source/Data: Investing.com Economic Calendar Time: GMT

Investors and traders alike are concerned about what investments they should make on behalf of their portfolios and retirement accounts. We, at TheTechnicalTraders.com, continue to monitor stocks and commodities closely due to the Russia-Ukraine War, market volatility, surging inflation, and rising interest rates. Several of our subscribers have asked if changes in monitor policy may lead to a recession as higher rates take a bigger bite out of corporate profits.As technical traders, we look exclusively at the price action to provide specific clues as to the current trend or a potential change in trend. We review our charts for both stocks and commodities to see what we can learn from the most recent price action. Before we dive into that, let’s review the various stages of the market; with special attention given to expansion vs. contraction in a rising interest rate environment which you can see illustrated below.PAY ATTENTION TO YOUR STOCK PORTFOLIOWe are keeping an especially close eye on the price action of the SPY ETF. The current resistance for the SPY is the 475 top that happened around January 6, 2022. This top was 212.5% of the March 23, 2020, low that was put in at the height of the Covid global pandemic.The SPY found support in the 410 area at the end of February. If you recall (or didn't know), 410 was the Fibonacci 1.618 or 161.8% percent of the Covid 2020 price drop. Now, after experiencing a nice rally back, of a little over 50%, we are waiting to see if the rally can continue or if rotation will occur, sending the price back lower.COMMODITY MARKETS SURGEDThe commodity markets experienced a tremendous rally due to fast-rising inflation, especially energy, metals, and food prices.The GSG ETF price action shows that we recently touched 200%, or the doubling of the April 21, 2020, low. Immediately following, similar to the SPY, the GSCI commodity index promptly sold off only to then find substantial buying support at the Fibonacci 1.618 or 161.8 percent of the starting low price of the bull trend. Resistance for the GSG is at 26, and support is 21.A STRENGTHENING US DOLLARThe strengthening US dollar can be attributed to investors seeking a safe haven from geopolitical events, surging inflation, and the Fed beginning to raise rates. The US Dollar is still considered the primary reserve currency as the greatest portion of forex reserves held by central banks are in dollars. Furthermore, most commodities, including gold and crude oil, are also denominated in dollars.Consider the following statement from the Bank of International Settlements www.bis.org ‘Triennial Central Bank Survey’ published September 16, 2019: “The US dollar retained its dominant currency status, being on one side of 88% of all trades.” The report also highlighted, “Trading in FX markets reached $6.6 trillion per day in April 2019, up from $5.1 trillion three years earlier.” That’s a lot of dollars traded globally and confirms that we need to stay current on the dollars price action.Multinational companies are especially keeping a close eye on the dollar as any major shift in global money flows will seriously negatively impact their net profit and subsequent share value.The following chart by www.finviz.com provides us with a current snapshot of the relative performance of the US dollar vs. major global currencies over the past year:KNOWLEDGE, WISDOM, AND APPLICATION ARE NEEDEDIt is important to understand that we are not saying the market has topped and is headed lower. This article is to shed light on some interesting analyses of which you should be aware. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly. We provide our ETF trades to our subscribers, and somewhat surprisingly, we entered five new trades earlier this week, two of which have now hit their first profit target levels. Our models continually track price action in a multitude of markets, asset classes, and global money flow. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list.Sign up for my free trading newsletter so you don’t miss the next opportunity! WHAT STRATEGIES CAN HELP YOU NAVIGATE The CURRENT MARKET TRENDS? Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

The Russian rubles adds more than 3% to the dollar, trading around 100 on news that "so-called unfriendly countries" will have to pay for gas in rubles. Impulsively (as the Russian currency market remains extremely illiquid), the USDRUB dropped below 95. This is indeed positive news for the Russian currency as it increases demand. But is it such a significant step? All exporters are now obliged to convert at least 80% of their foreign currency earnings into rubles. On the foreign exchange side, buying gas for rubles raises the bar to 100% for Gazprom and several other smaller exporters, but not for all jurisdictions (about 70% of total gas exports). For the balance of supply and demand of the ruble, this is a much less strong move than the initial order to convert 80% of all foreign exchange earnings into rubles. The news itself carries more of an emotional message for the markets. Still, the initial optimism could correct very quickly and is unlikely to be the mainstay for a sustained rally in the rubles. It also looks like an attempt to jab the USA, as selling energy for dollars has often been referred to as the basis of the reserve status of the USD in recent months. A secondary effect was the inversion of the spread between the USDRUB exchange rate on the Moscow Exchange and in Forex. Previously, in early March, USDRUB was traded up to 10 rubles less in Russia than abroad (though the spread diminished over time). Now USDRUB is settling at 98 on FX versus 100.4 on MOEX. Another secondary effect is a rise in oil prices of more than 5% since the start of the day, as some buyers will try to use the remaining alternative to gas, which can still be bought with dollars. Among the adverse effects, albeit in the medium term, it is worth pointing out that the switch to ruble settlements will accelerate a pullback of Russian gas by Europe, reducing export revenues, which has been a guarantee of ruble stability and a driver of economic growth.

Bitcoin is trading above $43K on Thursday morning, gaining 2.5% over the past 24 hours. Moderate but steady optimism around bitcoin is the best breeding ground for altcoin buyers. Bitcoin is trading around the resistance For the last ten days, we have seen a systematic increase in prices, although with a very modest amplitude by the standards of the crypto market. Ethereum added 3.4%, other leading altcoins from the top ten are in the range from +1% (XRP) to +12% (Dogecoin). According to CoinMarketCap, the total capitalization of the crypto market grew by 2.8% over the past day, to $1.96 trillion. The Bitcoin Dominance Index lost another 0.2% to 41.7%. The crypto-currency index of fear and greed has grown by 9 points, to 40. This is still a fear zone, but already close to neutral territory. Bitcoin retreated from the resistance at $43K on Tuesday. However, on Thursday it is making attempts to gain a foothold above this mark again. The last rollback in this case could be nothing more than a tactical retreat of the bulls in order to develop growth with renewed vigor. Nevertheless, confidence in the formation of a strong bullish momentum will come only after BTCUSD fixes above 45 thousand, from where we saw reversals in February and early March. Moderate but steady optimism around bitcoin is the best breeding ground for altcoin buyers. It is clearly seen that their dynamics is now better than that of the first cryptocurrency. If this trend continues for a couple more days, the effect of a feedback loop may work, when the outstripping growth of altcoins will pull Bitcoin up. Market Cap may grow in 15 times Bank of America predicts that regulation of the cryptocurrency market will increase confidence and increase its capitalization by 15 times, up to $30 trillion. The former head of one of the divisions of Bank of America, David Woo, believes that bitcoin will face economic and geopolitical pressure after the launch of the state digital currency (CBDC) of the United States. China has already acted in a similar way, which has come closest to the introduction of the digital yuan. Thailand will ban the usage of cryptocurrencies as a means of payment from April 1. They declared that such payments have a negative impact on the financial system and reduce the effectiveness of the state's monetary policy.

PanCake Swap shows a good performance ending the previous day with a sharp rise and keeping the uptrend. Smooth Love Potion was really, really high but has decreased losing almost all 10% gain. Doge (DOGE) Price doesn’t look like the recent optimistic Elon Musk’s dance as memecoin trades below 0. PanCake Swap (CAKE) Price (CAKEUSD) – 24h Chart Smooth Love Potion (SLP) Price (SLPUSD) – 24 Chart Doge Price (DOGEUSD) – 24 Chart Source/Data: TradingView.com Charts: Courtesy of TradingView.com

NVDA stock dropped 3.4% on Wednesday trading.Nvidia CEO says focus on software gives chipmaker $1 trillion market.Nvidia could reshore chip fabrication using Intel.Nvidia stock (NVDA) is up 3.2% to $264.42 on Wednesday after management announced a broader focus on software that could give Nvidia a total addressable market of $1 trillion. Additionally, Nvidia CEO Jensen Huang told Reuters on Wednesday that he was in discussion with Intel to use the legacy chipmaker's semiconductor foundries to produce Nvidia's chips in the United States.Nvidia Stock News: $1 trillion opportunityAt an investor day presentation earlier this week, Nvidia executives walked analysts through a much larger strategy that entailed a total addressable market (TAM) for Nvidia's various business segments of $1 trillion per year. The larger market for Nvidia products than earlier estimates stems from Nvidia's new focus on software platform offerings. The bigger TAM breaks down to $150 billion from omniverse enterprise software, $150 billion from artificial intelligence software, $100 billion from gaming, $300 billion from the existing semiconductor chip business, and $300 billion from the automotive segment. A solid section of the automotive opportunity also comes from software.Evercore ISI's C.J. Muse found the large figures hard to fathom but said his investment colleagues are, “firm believers in the company’s hardware and software strategies that should deliver world-class organic growth for years to come.”Evercore and Bernstein both have recently reiterated outperform ratings for Nvidia stock. Evercore has a $375 price target on NVDA shares, a solid 44% upside, while Bernstein has a price target of $350. Bernstein pointed out in a letter to clients that Nvidia only makes a few hundred million dollars in annual revenue now from software but sees well over $300 billion in opportunity for that segment.In separate news, CEO Jensen Huang said he was quite willing to work with Intel to produce Nvidia chips onshore in the US. Currently, the company has Taiwan Semiconductor (TSM) producing much of its catalog. He told reporters that it could take years of discussions to finalize a fabrication deal, however, as it is an extremely detailed process. Intel CEO Pat Gelsinger was on Capitol Hill on Wednesday to brief the US Senate's Commerce Committee on his company's plans to utilize funding from the $52 billion CHIPS Act to reshore and expand US semiconductor fabrication.Nvidia Stock Forecast: NVDA bulls hope for $284Monday and Tuesday of this week both saw Nvidia stock break above the February 10 swing high at $269.25. Right now in the $264s, Nvidia is at support. If it falls below $255.50, volume pressure may push NVDA down to $240, where there is support from both February and the 50-day moving average. To keep the rally going, bulls will try to make a play for $284.22. This level acted as resistance in early to mid-January.Back on March 16, Nvidia shares broke out of a descending trend that began on November 22, 2021. For the rally to continue, the 20-day moving average needs to break above the 50-day moving average fairly soon, possibly by the end of next week at the latest. Long-term support continues to sit at $208.90.NVDA 1-day chart

Bitcoin price set to touch $45,000 by tomorrow if current tailwinds keep supporting price action. Ethereum price set to rally another 12%, with bulls targeting $3,500.00XRP price undergoes consolidation as the next profit level is $0.90.Bitcoin price, Ethereum and other cryptocurrencies are enjoying a calm week with tailwinds finally able to thrive without constant interruption from headlines about Ukraine or Russia. Markets are also starting to adjust to the situation, with no immediate or significant movements anymore triggered by headlines coming out. Expect to see more upside with several possible cryptocurrencies eking out the best week of the year thus far.Bitcoin price has a defined game plan with $44,088 as the target for today and $45,261 by the weekendBitcoin (BTC) price is on the front foot for a third consecutive day as the rally turns into a broader uptrend. The crucial thing will be to see where BTC price will close this week, as bears need to get weakened with several short squeezes and breakouts running stops from short-sellers. Despite being elevated, the Relative Strength Index (RSI) is still not near the 'overbought' level, providing enough incentive for bulls and investors to keep buying BTC price action.BTC price is set to hit $44,088.73 today, the level of the March 03 highs. If that is gained – and given the current tailwinds – markets will start to expect Bitcoin to eke out new highs for the month with still a week to go. This additional bullish element should help conclude a daily close above $44,088.73. A support test on that same level will trigger new inflows from investors and provide the needed juice to pump price action up to $45,261.84, topping $45,000.00.BTC/USD daily chartA tail risk comes from the big joint meeting today in Brussels, with Biden meeting NATO, the G7 and E.U. leaders. An embargo on gas is on the table and could roil markets if the E.U. decides to walk away from Russian gas supplies, opening up the possibility of further Russian retaliation in Ukraine. That would make global markets move back to risk-off mode, with Bitcoin price dropping back to support at $39,780.68, and intersecting with the green ascending trend line. Ethereum price targets $3,500 after bulls force a daily close above $3,018.55Ethereum (ETH) price is performing a 'classic long' trading plan today after bulls pushed a daily close above $3,018.55. With price action in ETH opening slightly above this level, this morning, the price has faded slightly back towards that same $3,018.55 level to find support and offer the opportunity for new bulls and investors to enter the market. Ethereum price will move back to the upside and continue its rally, which is currently looking more and more like an uptrend that could continue over a broader time frame.ETH price will therefore need to find support around $3,018.55 as the fade will need to be kept in check, as too large a fade could spook investors. Seeing as the current favourable tailwinds are quite broadly present in global markets, expect to see another uplift towards $3,200 and $3,391.52 depending on the number of new positive headlines acting as additional accelerators. With those moves, at least new highs for March will be printed and possibly for February, depending on how steep the rally can continue.ETH/USD daily chartThe risk for Ethereum price is that price action slips back below $3,018.55. That could open the door for bears to jump in again and run price action back to $2,835.83, which is the low of March 21 and the monthly pivot. An additional fail-safe system is the 55-day Simple Moving Average at $2,808.84 as an additional supportive factor to take into account.https://youtu.be/wgpCSH70SIQXRP price undergoes consolidation as the bullish breakout hits $0.90Ripple's (XRP) price has bears and bulls being pushed towards each other as the bodies of the candles from the past two sessions grow very thin. This points to bulls and bears fighting it out and neither yet having the upper hand. Bears are defending the area above $0.8390 from bulls running to $0.8791, and bulls are trying to defend their support at $0.7843. With lower highs and higher lows, the stage is set for a breakout that, seeing the current tailwinds, will probably favour bulls, and result in a quick move towards $0.8791.XRP price is thus set to print new highs for March. With the stock markets having their best performing week for this year, expect to see even more tailwinds spilling over to cryptocurrencies and bulls targeting $0.9110. At that level, bulls will run into the 200-day SMA which will possibly be the halting point of the current uptrend as investors will need to reassess the situation before they advance. Where global markets are at that point and how far off a peace treaty is between Russia and Ukraine will determine if bulls will advance towards $1.00 in XRP price.XRP/USD daily chartAlthough several statements suggest it is unlikely, should Putin be backed further into a corner, the use of nuclear weapons could cast a dark shadow on markets. Expect a massive drop in equities and cryptocurrencies with those headlines coming out, where XRP price will fall towards $0.7843 or even $0.7600. In the first case, the historic pivotal level will provide support and further down, the monthly pivot is set to intertwine with the 55-day SMA, which should be enough to catch any falling-knife action. https://youtu.be/ZWrKMd2CiL8

While everybody was wondering about the end of the COVID-19 pandemy and Russia invaded Ukraine what started affecting the markets. Obviously natural gas and crude oil price are volatile recently. EU leaders accompanied by Joe Biden discuss outlooks and most probably next sanctions. As we wrote in the report about natural gas price the rise started to confuse the world few days after the invasion. It seems that all sanctions and fail of ceasefire negotiations made the crude oil price rise gain momentum. In the middle of March prices got back to the levels of the beginning of the month, but aggressive rhetoric of Russia made BRENT and WTI trading higher again. Let’s have a look at the Crude Oil Price monthly chart (courtesy of TradingView.com) 5-days chart (courtesy of TradingView.com) of Crude Oil Price shows a significant rise in recent days Data/Source: TradingView.com Charts: Courtesy of TradingView.com

Current levels of oil and petroleum products are high. Given that, what can explain such a surprising drop in US crude inventories?Energy Market UpdatesCommercial crude oil reserves in the United States fell much more than expected in the week ended March 18, according to figures released on Wednesday by the US Energy Information Administration (EIA).US crude inventories have shrunk by more than 2.5 million barrels, which implies greater demand and is obviously another bullish factor for crude oil prices. Such a decline in inventories is particularly remarkable as the American strategic reserves have also recorded a significant drop. This is the 25th consecutive week of falling strategic reserves since the Biden administration started to make those adjustments in an attempt to relieve the market.(Source: Investing.com)WTI Crude Oil (CLK22) Futures (May contract, daily chart)Furthermore, some additional figures extracted from the same EIA report were released and surprised the markets.These are US Gasoline Reserves, which plunged by about 2.95 million barrels over a week, while the market was not even forecasting a two-million decline.(Source: Investing.com)Thus, US exports jumped by more than 30% compared to the previous week, not only due to large flows to Europe to replace Russian barrels, but also marked by a significant rebound in Asian demand.RBOB Gasoline (RBJ22) Futures (April contract, daily chart)Beware that a NATO summit, a G7 summit, and a European Union summit are being held on Thursday, when the various countries could set a new round of sanctions against Moscow.So, how will black gold progress from now on? Do you think that the on-going negotiations with Iran and Venezuela could flood the market with additional barrels? Let us know in the comments!That’s all folks for today. Happy trading!Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Sebastien BischeriOil & Gas Trading Strategist* * * * *The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Imagine all the people… living life in the Metaverse. Once we immerse ourselves in the digital sphere, gold may go out of fashion. Or maybe not?Do you already have your avatar? If not, maybe you should consider creating one, as the Metaverse is coming! What is the Metaverse? It is a digital, three-dimensional world where people are represented by avatars, a network of 3D virtual worlds focused on social connection, the next evolution of the internet, “extended reality,” and the latest buzzword in the marketplace since Facebook changed its name to Meta. If you still have no idea what I’m talking about, you can watch this or just Spielberg’s Ready Player One.The idea of personalities being uploaded online is an intriguing concept, isn’t it? In this vision, people meet with others, play, and simply hang out in a digital world. Imagine friends turning group chats on Messenger or WhatsApp into group meetups in the Metaverse of family gatherings in virtual homes. Ultimately, people will probably be doing pretty much everything there, except eating, sleeping, and using the restroom.Sounds scary? For people in their 30s and older who were fascinated by The Matrix, it does. However, this is really happening. The augmented reality technology market is expected to grow from $47 billion in 2019 to $1.5 trillion in 2030, mainly thanks to the development of the Metaverse. China’s virtual goods and services market is expected to be worth almost $250 billion this year and $370 billion in the next four years.In a sense, it had to happen as the next phase of the digital revolution. You see, we now experience much of life on the two-dimensional screens of our laptops and smartphones. The Metaverse moves us from a flat and boring 2D to a 3D virtual universe, where we can visualize and experience things with a more natural user interface. Let’s take shopping as an example. Instead of purchasing items on Amazon, customers could enter a virtual shop, see and touch all products in 3D, and buy whatever they wanted (actually, Walmart launched its own 3D shopping experience in 2018).OK, we get the idea, but why does Metaverse matter, putting aside sociological or philosophical issues related to transferring our minds into the digital world? Well, it might strongly affect every aspect of business and life, just as the internet did earlier. Here are a couple of examples. Famous brands, like Dolce & Gabbana, are designing clothes and jewelry for the digital world. Some artists are giving concerts in virtual reality. You could also visit some museums virtually, and instead of taking a business trip, you can digitally teleport to remote locations to meet with your co-workers’ avatars.Finally, what does the Metaverse imply for the gold market? Well, it’s difficult to grasp all the possible implications right now. However, the main threat is clear: as people immerse deeper and deeper into the digital world, gold could become obsolete for many users. Please note that cryptocurrencies and non-fungible tokens (NFTs) are and will continue to be widely used as payment methods in the Metaverse.However, there are some caveats here. First, the invention and spread of the internet didn’t sink gold. Actually, the internet enabled gold to be widely traded by investors all over the world. Just take a look at the chart below. Although gold was in a bear market in the 1990s and struggled during the dot-com bubble, it rallied after the bubble burst.Second, the digital world didn’t kill the analog reality. Despite digital streaming of music, vinyl record sales soared last year, reaching a record high in a few decades. The development of the Metaverse could trigger a similar backlash and a return to tangible goods like gold.Third, some segments of the Metaverse look like bubbles. Maybe I’m just too old, but why the heck would anybody spend hundreds of thousands, or even millions of dollars to buy items in the virtual world? These items include virtual real estates (CNBC says that sales of real estate in the metaverse topped $500 million last year and could double this year), digital pieces of art or even tweets (yup, the founder of Twitter sold the first tweet ever for just under $3 million)! It does not make any sense to me, as I can right-click and download a copy of the same digital files (like a PNG file of a grey pet rock) for which people pay thousands and millions of dollars.Of course, certain items could increase the utility of the game or virtual experience, but my bet is that at least some buyers simply speculate on prices, expecting that they will be able to resell these items to greater fools. When this digital gold rush ends – and given the Fed’s tightening cycle, it may happen in the not-so-distant future – real gold could laugh last.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

Bitcoin rose 9.1% over the past week, ending it around $46,100. Ethereum added 9.5%, while other leading altcoins from the top ten rose in price from 3.2% (XRP) to 27.4% (Cardano). The exception was Terra (-0.4%). Bitcoin broke the resistance According to CoinGecko, the total capitalization of the crypto market increased by 9.9% in a week, to $2.14 trillion. The Bitcoin Dominance Index added 0.2% to 40.6%. The Cryptocurrency Fear and Greed Index rose 18 points in a week to 49 and moved from "fear" to neutral. Bitcoin rose for the second week in a row against the backdrop of strengthening stock indices. On Sunday, BTC broke through strong resistance around $45,000, which reversed its downward movement several times in February and early March. The technical picture favors further gains as Bitcoin climbed above the 100-day moving average (MA) for the first time since early December and heads towards the 200-day MA ($48,200). Cryptos found new drivers for the growth The FxPro analyst team mentioned a possible driver of the uptrend in BTC are rumors about the intentions of the non-profit organization Luna Foundation Guard (LFG) to invest in bitcoin. On March 27, it became known that LFG bought more than $1.1 billion worth of coins to ensure the stability of the Terra USD (UST) algorithmic stablecoin. The best dynamics among altcoins was demonstrated by Cardano against the backdrop of the announcement of ADA staking by Coinbase crypto exchange. Meanwhile, well-known crypto critic Peter Schiff again criticized the cryptocurrency, comparing it to a financial bubble and calling it stupid for people to save their savings from inflation by buying BTC. According to Schiff, cryptocurrencies have no real value and are backed by people's trust in the same way as fiat currency.

The week kicks off on a mixed note as US President Joe Biden called Putin a ‘butcher’ and said in a speech in Warsaw that ‘for God’s sake, this man cannot remain in power’. Then, the news that Shanghai is going to a phased lockdown didn’t help lifting the mood in Asia. Oil, which rallied last Friday on news of a drone attack on a Saudi storage facility, slumped again this morning below $110pb. OPEC+ will announce its latest decision this week. In the FX, the US dollar begins the week on strong footage, as the dollar index advances above the 99 mark on geopolitical tensions and the Fed hawks, but the flattening and the inversion of the yield curve bring about the worries of a recession in the US. The EURUSD slips below the 1.10 mark on the back of a stronger US dollar. Besides the OPEC decision, investors will watch inflation data from the US and Eurozone, US jobs report, EV deliveries and US House vote on cannabis. Pot stocks are on fire, as Bitcoin and Ethereum rallies over the weekend. Could the optimism last? Watch the full episode to find out more! 0:00 Intro 0:21 Market update 0:55 Oil slumps on Shanghai lockdown: opportunity in price pullbacks? 4:32 Bitcoin, Ethereum rally 5:22 Pot stocks on fire before US House vote 6:39 Week Ahead: US jobs, inflation 7:48 US dollar up, as more portions of the curve invert Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

  Stocks extended their short-term uptrend on Friday, but this week we may see some more uncertainty and a possible profit-taking action. The S&P 500 index gained 0.53% on Friday following its Thursday’s advance of 1.4%. The broad stock market’s gauge extended its short-term uptrend after breaking above the 4,500 level. It gained over 380 points from the Mar. 14 local low of around 4,162. There have been no confirmed negative signals so far. However, we may see another correction and a profit-taking action at some point. There’s still a lot of uncertainty concerning the ongoing Ukraine conflict, but investors were recently jumping back into stocks despite that geopolitical uncertainty. This morning the index is expected to open virtually flat after an overnight advance followed by its retracement. The nearest important resistance level is at around 4,550-4,600, marked by the previous local highs. On the other hand, the support level is at 4,400-4,450. The S&P 500 index trades closer to its January-February local highs along the 4,600 level, as we can see on the daily chart (chart by courtesy of http://stockcharts.com): Futures Contract Remains Above the 4,500 Level Let’s take a look at the hourly chart of the S&P 500 futures contract. It is trading close to the new local high. Potential resistance level is at around 4,585, marked by the previous highs. There have been no confirmed negative signals so far. We are maintaining our profitable long position from the 4,340 level, as we are still expecting a bullish price action in the near-term. However, to protect our gain, we decided to move the stop-loss (take profit) and price target levels higher. (our premium Stock Trading Alert includes details of our trading position along with the stop-loss and profit target levels) (chart by courtesy of http://tradingview.com): Conclusion The S&P 500 index will likely open virtually flat this morning. However, the futures contract retraced its overnight advance, so we may see more uncertainty and a potential profit-taking action. The war In Ukraine remains a negative factor for the markets. The global markets will also be waiting for this Friday’s monthly jobs data release. Here’s the breakdown: The S&P 500 index extended its uptrend on Friday; this morning the futures contract retreated from its new local high. We are maintaining our profitable long position (opened on Feb. 22 at 4,340), but we moved stop-loss (take profit) and price target levels higher. We are still expecting an advance from the current levels. Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Paul Rejczak,Stock Trading StrategistSunshine Profits: Effective Investments through Diligence and Care * * * * * The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Proponents noted a 63.07% spike in the total transaction volume of cryptocurrencies across exchanges. Coinmarketcap data reveals a month-on-month increase of 4.75% in crypto trading volume. Bitcoin price crossed $47,000, fueled by $200 million shorts liquidated across exchanges. Bitcoin price is rallying, fueled by a frenzy of massive short liquidations on crypto exchanges. Proponents believe bulls have flocked to the market, as transaction volume exceeded $100 billion. Bitcoin price pushes past $47,000 in recent rally Bitcoin price crossed key resistance to hit a high above $47,000 in a rally fueled by the liquidation of millions of short positions. Analysts at the crypto intelligence platform Santiment observed a massive liquidation of shorts across exchanges at 1 pm and 6 pm UTC across crypto exchanges on March 27, 2022. Analysts argue that Bitcoin’s recent price rally to $47,000 was a response to liquidation in large quantities over the weekend. The average funding rate entered the long zone, where uncertainty among market participants increased. Therefore, analysts conclude that Bitcoin shorts have fueled the asset’s ongoing rally. Bitcoin and altcoin shorts liquidatedColin Wu, a Chinese journalist, reported a spike in the total transaction volume of cryptocurrencies, exceeding $100 billion over the past 24 hours. Wu referred to data from Coinmarketcap and observed a 63.07% increase in crypto transaction volume compared to March 26, 2022. The total crypto market value now exceeds $2.12 trillion. Historically, analysts have witnessed high transaction activity when large wallet investors flock to the market or scoop up crypto. Bloomberg analysts argue that Bitcoin looks overbought, compared to its 50-day Moving Average. Bitcoin price crossed key resistance at $45,000 in the current rally, erasing its losses for the year. FXStreet analysts have evaluated Bitcoin price and predicted the start of a new uptrend in the asset, as it crossed the $45,000 level.

The CBOE Volatility Index (VIX) is a real-time index. It is derived from the prices of SPX index options with near-term expiration dates that are utilized to generate a 30-day forward projection of volatility. The VIX allows us to gauge market sentiment or the degree of fear among market participants. As the Volatility Index VIX goes up, fear increases, and as it goes down, fear dissipates.Commodities and equities are both showing renewed strength on the heels of global interest rate increases. Inflation shows no sign of abating as energy, metals, food products, and housing continues their upward bias.During the last 18-months, the VIX has been trading between its upper resistance of 36.00 and its lower support of 16.00. As the Volatility Index VIX falls, fear subsides, and money flows back into stocks.VIX – VOLATILITY S&P 500 INDEX – CBOE – DAILY CHARTSPY RALLIES +10%The SPY has enjoyed a sharp rally back up after touching its Fibonacci 1.618% support based on its 2020 Covid price drop. Money has been flowing back into stocks as investors seem to be adapting to the current geopolitical environment and the change in global central bank lending rate policy.Resistance on the SPY is the early January high near 475, while support remains solidly in place at 414. March marks the 2nd anniversary of the 2020 Covid low that SPY made at 218.26 on March 23, 2020.SPY – SPDR S&P 500 ETF TRUST - ARCA – DAILY CHARTBERKSHIRE HATHAWAY RECORD-HIGH $538,949!Berkshire Hathaway is up +20.01% year to date compared to the S&P 500 -4.68%. Berkshire’s Warren Buffet has also been on a shopping spree, and investors seem to be comforted that he is buying stocks again. Buffet reached a deal to buy insurer Alleghany (y) for $11.6 billion and purchased nearly a 15% stake in Occidental Petroleum (OXY), worth $8 billion.These acquisitions seem to be well-timed as insurers and banks tend to benefit from rising interest rates, and Occidental generates the bulk of its cash flow from the production of crude oil.As technical traders, we look exclusively at the price action to provide specific clues as to the current trend or a potential change in trend. With that said, Berkshire is a classic example of not fighting the market. As Berkshire continues to make new highs, its’ trend is up!BRK.A – BERKSHIRE HATHAWAY INC. - NYSE – DAILY CHARTCOMMODITY DEMAND REMAINS STRONGInflation continues to run at 40-year highs, and it appears that it will take more than one FED rate hike to subdue prices. Since price is King, we definitely want to ride this trend and not fight it. It is always nice to buy on a pullback, but the energy markets at this point appear to be rising exponentially. The XOP ETF gave us some nice buying opportunities earlier at the Fibonacci 0.618% $71.78 and the 0.93% $93.13 of the COVID 2020 range high-low.Remember, the trend is your friend, as many a trader has gone broke trying to pick or sell a top before its time! Well-established uptrends like the XOP are perfect examples of how utilizing a trailing stop can keep a trader from getting out of the market too soon but still offer protection in case of a sudden trend reversal.XOP – SPDR S&P OIL & GAS EXPLORE & PRODUCT – ARCA – DAILY CHARTKNOWLEDGE, WISDOM, AND APPLICATION ARE NEEDEDIt is important to understand that we are not saying the market has topped and is headed lower. This article is to shed light on some interesting analyses of which you should be aware. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly. We provide our ETF trades to our subscribers, and somewhat surprisingly, we entered five new trades last week, four of which have now hit their first profit target levels. Our models continually track price action in a multitude of markets, asset classes, and global money flow. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list.Sign up for my free trading newsletter so you don’t miss the next opportunity! Furthermore, successfully trading is not limited to when to buy or sell stocks or commodities. Money and risk management play a critical role in becoming a consistently profitable trader. Correct position sizing utilizing stop-loss orders helps preserve your investment capital and allows traders to manage their portfolios according to their desired risk parameters. Additionally, scaling out of positions by taking profits and moving stop-loss orders to breakeven can complement ones’ success.WHAT STRATEGIES CAN HELP YOU NAVIGATE The CURRENT MARKET TRENDS? Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

USDJPY seeks support The Japanese yen recouped some losses after a drop in February’s unemployment rate. The pair surged to August 2015’s high and the psychological level of 125.00. An overwhelmingly overbought RSI may cause a pullback if short-term buyers start to unwind their bets. As the market mood stays upbeat, trend followers could be waiting to jump in at a discount. 122.20 is the closest level if the greenback needs to gather support. A break above the current resistance would propel the pair to new highs above 127.00. AUDUSD hits major resistance The Australian dollar stalls as caution prevails ahead of major economic data. The rally slowed down at last October’s peak at 0.7550. A combination of profit-taking and fresh selling weighs on the Aussie. The bulls may see a pullback as an opportunity to accumulate in hope of a new round of rally. 0.7400 from the latest bullish breakout would be key support should this happen. On the upside, an extended rally could propel the pair to last June’s highs around 0.7770 and pave the way for a reversal in the medium-term. US 100 to test major resistance Growth stocks rose amid a sell-off in the bond market. Short-term sentiment remains bullish after a series of higher lows which indicates sustained buying interest. The Nasdaq 100 is heading to the daily resistance at 15050. A bearish RSI divergence suggests a deceleration in the rally, foreshadowing a potential retracement. 14600 is the support and its breach may trigger a sell-off towards 14200 which sits at the base of the recent breakout. A close above the said hurdle may put the index back on track in the weeks to come.

BTC is up 4% on Monday, ending the day around $48K, and corrected by about 1% to $47.5K on Tuesday morning. Ethereum was up 1.8% in the last 24 hours to $3.4K. Terra is a leader of the day According to CoinMarketCap, the total capitalization of the crypto market increased by 1% over the day, to $2.15 trillion. The Bitcoin dominance index fell by 0.1 points to 42.1%. The crypto-currency index of fear and greed rose by 11 points over the day, to 60, and moved from neutral level to the "greed" grade. On Tuesday, the index dropped to 56 points. Among the leading altcoins, Terra soared by 10%, Doge corrected by 2%. In most others, there is a slight correction in the growth of the last days, but they are in positive territory over the last day. Bitcoin continued to rise on Monday after it broke through the strong resistance of the February highs around $45K in the previous evening. By the end of the day, BTC has renewed the highs of early January above $48K, having won back the decline since the beginning of the year. Bitcoin is correlating with S&P500 The growth of the first cryptocurrency rested on the 200-day moving average ($48.2K). Confident consolidation above it promises to strengthen and expand the growth of the entire crypto market and breathe fresh impetus into the growth of bitcoin. In December, we saw a false break, but then the price levels were higher, and corrective sentiment intensified in the stock markets. Now Bitcoin is growing along with the rise of stock indices and often even acts as a leading indicator of investor sentiment. According to Arcane Research, BTC's correlation with the S&P 500 stock indicator recently hit a 17-month high. According to CoinShares, institutions invested $193 million in crypto funds last week, and it was the most significant amount in three months. Glassnode believes that the Bitcoin trend has already changed to bullish, as evidenced by the increase in the number of addresses accumulating BTC.

USDCHF tests support The US dollar edged lower as traders ditched its safe-haven appeal. The pair met strong support at 0.9260 over the 30-day moving average. A break above the immediate resistance at 0.9340 prompted short-term sellers to cover their positions, opening the door for potential bullish continuation. A break above 0.9370 could bring the greenback back to the 12-month high at 0.9470. 0.9260 is major support in case of hesitation and its breach could invalidate the current rebound. XAUUSD struggles for support Gold struggles as risk appetite returns amid ceasefire talks. A fall below 1940 forced those hoping for a swift rebound to bail out. On the daily chart, gold’s struggle to stay above the 30-day moving average suggests a lack of buying power. Sentiment grows cautious as the metal tentatively breaks the psychological level of 1900. A drop below 1880 could make bullion vulnerable to a broader sell-off to 1850. An oversold RSI attracted some bargain hunters, but buyers need to lift offers around 1940 before they could expect a rebound. UK 100 heads towards recent peak The FTSE 100 continues upward as Russia promises to de-escalate. A bullish close above the origin of the February sell-off at 7550 has put the index back on track. Sentiment has become increasingly upbeat over a series of higher highs. The lack of selling pressure would send the index back to this year’s high at 7690. A bullish breakout may resume the uptrend in the medium term. As the RSI shot into the overbought zone, profit-taking could drive the price down temporarily and 7460 would be the closest support.

Some of crucial releases are behind us, but there is more to come! Tomorrow China, Great Britain, the USA, Germany and Canada have their economic indicators released so don’t miss a thing! Night-morning – 31/03/22 The day begins with the release of Chinese Manufacturing PMI indicator which previously hit 50.2 This one is released at 2:30 a.m. Four and half hours later we move to Great Britain to follow the announcement of GDP (QoQ and YoY). The Quarter on Quarter one reached 1% previously and Year on Year hit 6.5% At 8:55 a.m. German Unemployment Change goes public (prev. -33K). Afternoon – 31/03/22 Shortly after midday (1:30 p.m.) the US Initial Jobless Claims and Canadian GDP are announced. The previous values amounted to 187K and 0% respectively. Source/Data: Investing.com Economic Calendar

American households increased spending by 0.2% in February, compared with a 0.5% rise in income. But this data only looks optimistic at first glance. Americans saved 6.3% of disposable income compared to 6.1% in January. In other words, we are seeing a stabilisation at levels that last occurred 12 years ago. The decline in the propensity to save can easily be explained by higher inflation, just like in the first decade of the 21st century. While people largely ignore inflation of 2%, a 7% price increase burns up the value of money stored under the mattress rather quickly. Inflation is also a significant incentive to return to the labour market searching for work. An indirect confirmation of this is the weekly jobless claims data. Initial claims rose from 188K the week before to 202K. But the number of continued claims has dipped to 1.307M, last seen at the end of 1969. The published data is good for the Dollar as it sets the stage for a more aggressive policy tightening from the Fed. But the statistics are neutral for the stock market, where participants take the strong labour market as carte blanche for the FOMC to put more pressure on the policy tightening pedal.

Nonfarm Payrolls in US is forecast to increase by 490,000 in March. Gold is likely to react more significantly to a disappointing jobs report than an upbeat one. Gold's movement has no apparent connection with NFP deviation four hours after the release. Historically, how impactful has the US jobs report been on gold’s valuation? In this article, we present results from a study in which we analyzed the XAU/USD pair's reaction to the previous 20 NFP prints*. We present our findings as the US Bureau of Labor Statistics (BLS) gets ready to release the March jobs report on Friday, April 1. Expectations are for a 490,000 rise in Nonfarm Payrolls following the 678,000 increase in February. *We omitted the NFP data for March 2021, which was published on the first Friday of April, due to lack of volatility amid Easter Friday. Methodology We plotted gold price’s reaction to the NFP release at 15 minutes, one hour and four hours intervals after the release. Then we compared the gold price reaction to the deviation between the actual NFP release result and the expected result. We used the FXStreet Economic Calendar for data on deviation as it assigns a deviation point to each macroeconomic data release to show how big the divergence was between the actual print and the market consensus. For instance, the August (2021) NFP data missed the market expectation of 750,000 by a wide margin and the deviation was -1.49. On the other hand, February’s (2021) NFP print of 536,000 against the market expectation of 182,000 was a positive surprise with the deviation posting 1.76 for that particular release. A better-than-expected NFP print is seen as a USD-positive development and vice versa. Finally, we calculated the correlation coefficient (r) to figure out at which time frame gold had the strongest correlation with an NFP surprise. When r approaches -1, it suggests there is a significant negative correlation, while a significant positive correlation is identified when r moves toward 1. Since gold is defined as XAU/USD, an upbeat NFP reading should cause it to edge lower and point to a negative correlation. Results There were 11 negative and nine positive NFP surprises in the previous 20 releases, excluding data for March 2021. On average, the deviation was -0.92 on disappointing prints and 0.65 on strong figures. 15 minutes after the release, gold moved up by $3.66 on average if the NFP reading fell short of market consensus. On the flip side, gold declined by $1.68 on average on positive surprises. This finding suggests that investors’ immediate reaction is likely to be more significant to a disappointing print. However, the correlation coefficients we calculated for the different time frames mentioned above don’t even come close to being significant. The strongest negative correlation is seen 15 minutes after the releases with the r standing at -0.48. One hour after the release, the correlation weakens with the r rising to -0.3 and there is virtually no correlation to speak of four hours after the release with the r approaching 0. Several factors could be coming into play to weaken gold’s correlation with NFP surprises. Several hours after the NFP release on Friday, investors could look to book their profits toward the London fix, causing gold to reverse its direction after the initial reaction. Additionally, US Treasury bond yields’ movements have been impacting gold’s action lately and a decline in the benchmark 10-year T-bond yield on an upbeat jobs report could make it difficult for the USD to gather strength against its rivals, limiting XAU/USD’s downside.  

The US economy created 431K new jobs in March, less than the expected 500K. However, a substantial upward revision of the February data (750K instead of the initially reported 678K) shows that the labour market is still recovering ahead of schedule, which is good news for the Dollar as it unleashes the hands of tighter monetary authority rhetoric. There are also several additional positives. The unemployment rate has fallen from 3.8% to 3.6%, one tick away from the 2020 low. Such a low figure was briefly recorded as long as in 1969, consistent with the weekly jobless claims data signals. Wage growth accelerated to 5.6% in the previous March, faster than the 5.2% (revised from 5.1%) a month earlier. While there was not a solid initial reaction in the markets to this report, it should be seen as positive for the Dollar as it demonstrates the labour market’s strength. The combination of historically low unemployment, accelerated hiring, and higher wage rates are adding to the USA’s inflationary pressure. In the current environment, the chances are increasing that the Fed will announce active asset sales from the balance sheet at the 05th of May meeting or raise the rate by 50 points at once. So far, we are more inclined towards the first option to not create problems for the US treasury at the longer-term end of the curve.

April 25, 2022  $USD, Australia, China, Currency Movement, Federal Reserve, France, Germany Overview:  Fears that the Chinese lockdowns to fight Covid, which have extended for four weeks in Shanghai, are not working, and may be extended to Beijing has whacked equity markets, arrested the increase in bond yields, and lifted the dollar.  Commodity prices are broadly lower amid concerns over demand.  China's CSI 300 fell 5% today and Hong Kong's Hang Seng was off more than 3.5%.  Most of the major markets in Asia Pacific were off more than 1%.  Europe's Stoxx 600 is off around 1.9% after falling 1.4% last week.  US futures are about 0.7%-0.8% lower. The S&P 500 fell last week for the third consecutive week, the longest losing streak in 18 months.  The US 10-year Treasury yield is almost seven basis points lower at 2.83%.  European benchmark yields are 4-6 bp lower.  The BOJ bought JPY727 bln of 10-year bonds at the pre-committed fixed rate operation, more than in the previous three operations last week combined.  The yield slipped half of a basis point.  The dollar rides high.  It has appreciated against all the major currencies but the yen. The Australian dollar, Scandis, and sterling have been hit the hardest and are around 0.9-1.2% lower in the European morning.  Emerging market currencies are heavy as well.  Hungary, Mexico, and China have seen their currencies decline by around 1% to lead the complex.  Gold fell to new lows for the month around $1912 before stabilizing.  June WTI is 4.3% lower near $97.70 after falling around 4% last week.  US natgas is extending last week's 10.5% sell-off, while the European benchmark is up 2.5% after a flat showing last week.  Iron prices are off 8.7%, after tumbling closer to 12% at one juncture today.  It fell a little less than 5% last week.  Copper is off around 2.1% after declining about 3% last week.  July wheat is up about 0.5% as it tries to snap a four-day slide.   Read next: Tightening Alert! How Have Exchange Rates Of Singapore Dollar (SGD), NZD, Canadian Dollar And Korean Won (KRW) Changed?| FXMAG.COM Asia Pacific China's Covid has emerged as a powerful economic force in its own right.   It is threatening demand for commodities and threatening to extend supply chain disruptions.  Shanghai reported a record number of fatalities, and the infection is spreading to Beijing.  The Chaoyang district will submit to three days of testing this week for people who live and/or work in the area.  Reports suggest 14 smaller communities have been sealed and another 14 have imposed limitations on movement.  China's demand for gasoline, diesel, and jet fuel has reportedly fell by 20% year-over-year, which may translate to 1.2 mln barrels of oil a day.   The US has threatened unspecified action if Beijing's new security pact with the Solomon Islands result in a permanent Chinese military presence.   While the US has defended Ukraine's right to make its own foreign policy decisions, it seems to want to limit Solomon Island's choices.  Prime Minister Sogavare has articulated his own 3 No's Policy.  He says that the secret treaty has no provision for a Chinese military base, no long-term presences, and no ability to project power from the islands. The Solomon Islands are about 2k kilometers of Australia's coast.    Read next: President Of France To Be Chosen. It Is Another Factor Which Is Shaping Markets| FXMAG.COM The dispute over the Solomon Islands has emerged as a campaign issue in the May 21 Australian elections.  Prime Minister Morrison, who seeks a fourth term, has defended his foreign policy, and tried shifting the focus back to domestic issues with a promise to cap tax revenue at 23.9% of GDP and A$100 bln of tax relief over the next four years if re-elected.  Government revenues were 22.9% of GDP in FY21.  Labor leader Albanese has been diagnosed with Covid at the end of last week.  This disrupted his campaign in the tight contest.  Morrsion had contracted the disease in early March.   The dollar initially approached JPY129 but falling US yields saw it come off and traded below JPY128, where a $425 mln option expires today.   The greenback remains in the range set last Wednesday (~JPY127.45-JPY129.40).  Indeed, it is trading within the pre-weekend range (~JPY127.74-JPY129.10).  The takeaway is two-fold.  First the exchange rate is still closely tracking the US 10-year yield.  Second, after surging in March and most of April, the exchange rate is consolidating.  The Australian dollar is falling sharply for the third consecutive session.  It fell 1% last Thursday and 1.75% before the weekend and is off another 1% today. It is lower for the 11th session in the past 14.  It fell to a two-month low near $0.7150 in late Asian turnover before stabilizing.  The $0.7200 area now offers resistance.  The sell-off of the Chinese yuan continued.  The greenback gapped higher and never looked back.  Recall that the dollar settled around CNY6.3715 on April 15.  A week later, last Friday, it settled above CNY6.50 and today, pushed over CNY6.56.  It is the greenback's 5th consecutive gain and today's advance of a little more than 0.9% is the largest advance since March 2020. The dollar is trading at its best level in nearly a year and a half.  The PBOC set the dollar's reference rate at CNY6.4909, slightly lower than market projections (CNY6.4911 in the Bloomberg survey). The next key chart area is CNY6.60.   Europe Macron was easily re-elected with a roughly 58%-42% margin.   Partisans, perhaps trying to bolster the turnout and some press accounts seemed to exaggerate Le Pen's chances.  No poll showed her in the lead.  Still, the euro initially trading higher (~$1.0850) before falling to almost $1.07 before the end of the Asia Pacific session.  The June parliamentary election will shape Macron's second term and his ability to enact his program.  Separately Slovenia voted not to grant Prime Minister Jansa another term.  This further isolates Hungary's Orban.  Golob, the former head of the state-owned power company before dismissed by Jansa, will lead what appears to be a center-left government.   Last week, Germany's flash PMI was mostly better than expected.   Recall that helped by the surprising gain in the service PMI, the composite fell to 54.5 not the 54.1 economists expected (median, Bloomberg survey).  Today, the IFO survey was also better than expected.  The current assessment ticked up to 97.2 from 97.1, while the expectations component rose to 86.7 from a 84.9.  The overall business climate reading rose to 91.8 from 90.8.  Separately, the government is expected to announce a supplemental budget on Wednesday that will boost this year's net new debt to at least 140 bln euros.  This is a 40 bln euro increase to fund government measures to cushion the impact of the war and the surge in energy prices.  Some of the off-budget 100-bln euro defense spending initiative will may also be funded this year.   The euro traded to almost $1.0705 in late Asia Pacific turnover, its lowest level since March 2020.   There is a 945 mln euro option struck at $1.07 that expires today.  The pre-weekend low near $1.0770 may now serve as resistance.  There are large options at $1.08 expiring over the next two days (1.6 bln euros tomorrow and 1.2 bln euros on Wednesday). The Covid-low was set in March 2020 near $1.06.  Sterling has been pounded again.  It dropped nearly 1.5% before the weekend, a roughly two-cent fall that took it to around $.12825.  It has lost another cent today to about $1.2730.  While we noted chart support near $1.2700, the next important chart area is closer to $1.25.  It finished last week below its lower Bollinger Band, and it remains well below it (~$1.2850) today. In fact, it is more than three standard deviations from the 20-day moving average (seen near $1.2755).   America St. Louis Fed President Bullard opined last week that a 75 bp hike may be needed at some juncture.   He explicitly said that it was not his base case.  Yet some in the markets, and more in the media seemed to play it up.  No other Fed official seemed to endorse it; Fed futures are pricing in a 51 bp for next week rather than 50 bp.  The Fed's quiet period ahead of the May 4 FOMC meeting means no more official talk.  Today's economic calendar features the Chicago Fed's March national activity index, which is reported with too much of a lag to provide new insight or a market reaction.  The Dallas Fed's April manufacturing survey is due as well.  The early Fed surveys have not generated a consistent signal.  The Empire State survey was stronger than expected while the Philadelphia Fed survey was weaker than anticipated.  The Dallas survey is expected to have softened.   Canada's calendar is light until Friday's February GDP print.   The Bank of Canada does not meet until June 1.  The swaps market currently has a little more than a 25% chance that it hikes by 75 bp instead of 50 bp.  However, the Canadian dollar itself seems more sensitive to the risk-off impulse spurred by falling equities than the policy mixed in Canada.   Mexico reports IGAE economic activity survey for February.   It is too dated to have much impact, and in any event, is being overwhelmed by the risk-off attitude.  The bi-weekly CPI report, covering the first half of April, released before the weekend, was stronger than expected.  The headline rate rose to 7.72% and the core rate rose above 7% for the first time in this cycle.  It is particularly disappointing because seasonal considerations, like the summer discount on electricity taxes, often point to less price pressures.  The risk of a 75 bp hike at the May 12 Banxico meeting is increasing.   Read next: How Are Markets Doing? US Bonds, EuroStoxx 600, CSI 300 And More| FXMAG.COM The US dollar jumped 0.65% against the Canadian dollar last Thursday and slightly more than 1% before the weekend.   It is up another 0.2% in the European morning to around CAD1.2740, after having approached CAD1.2760 in Asia Pacific turnover.  The greenback finished last week above its upper Bollinger Band and has spent most of today's session above it (~CAD1.2720).  The market is over-extended but there is little chart resistance ahead of CAD1.28.  The peso's fall is also continuing.  The US dollar traded above its 200-day moving average (~MXN20.42) for the first time since March 18.  It is also above the (38.2%) retracement objective of the slide since the March 8 high (~MXN21.46), which is found around MXN20.39.  The next retracement (50%) is closer to MN20.60 and the measuring objective of the potential double bottom is near MXN20.60.     Disclaimer

Today our focus is on Arweave (ARUSD). Buyers, for now, have pulled back most of yesterday’s losses and continue to push at a possible engulfing bar pattern. Last month, price was supported by news 17M was raised to help make Arweaves data storage blockchain more usable. Up until today, thing’s haven’t been the best for Arweave, with the last four weeks of trade being lower. A shift has started this week, and we can see buyers trying to pull back from losses. Pattern focus, for now, remains on the daily. Today’s candle is close to forming an engulfing bar which sits just above a level of demand. A fair bit of pressure remains on today’s bar. We really want to see a firm close that really needs to beat yesterday’s open or high, and we would prefer to see a close above yesterday’s high, confirming the bar pattern. A close at that point should also lift the CCI above the 0, moving back into a bullish area and set up a break of the current downtrend. If those are achieved by the end of today’s NY session, we could be seeing a new up-leg developing. If price retraces today and closes below $27, that would cancel out the engulfing idea. If heavy selling resumes, a break of the demand area would suggest that the current downtrend has further to run. If we do see a new move higher get going, we have marked two levels of potential resistance, but we would think that key resistance could be the first real test if reached. Arweave D1 Chart The post Crypto News: Arweave, rally watch as buyers clear $27 appeared first on Eightcap.

Meet Stuart McPhee, Eightcap’s newest guest market analyst. Stuart is a private equity and FX trader with over 20 years of experience in the industry, having made guest appearances on ASX, CNA, CNBC, and Sky News Business. Whilst being an accomplished bestselling author, Stuart is also considered to be Australia’s most compelling keynote speaker on everything trading, who has delivered countless talks to tens of thousands of traders at investment expos all around the world. He has helped countless traders improve their performance with his expertise in technical analysis, trading psychology, risk management, the trading process, and developing a trading plan. If you would like to know more about Stuart, check out his best-selling book, Trading in a Nutshell, 4th Edition. To keep up-to-date with Stuart, follow him on Twitter and LinkedIn for more information. The post Introducing June’s Trade Zone Guest Analyst Stuart McPhee appeared first on Eightcap.

Well, it was another week of ranges traders, as we saw a few moves by both sides, but the picture remains relatively the same, with many of the top 10 coins remaining heavily range-bound for another week. BTC, ETH, SOL, XRP, BNB, and Doge are looking quite similar as traders continue to look for that reason to break the deadlock. Solana looked like it was trying to get a move higher going yesterday, but that was cut down into Thursday’s NY session. For now, it looks like the smart move will be to continue to sit if you’re long-term and stay on the lines if you’re a short-term trader. Until we see a shift in momentum, it could continue to be death by one thousand cuts if you continue to try and play the mini breakouts. It’s not to say we didn’t see some movement this week. ADA, a member on the top 10, did trade up to 20% higher before the fade set in yesterday. For now, ADA is in a minor uptrend, but we want to see 67 beaten to resume thinking that buyers are flat out in control. Other movers in the top 60 have been Helium +36% and THETA +12.2%. In the Top 25, ChainLink has seen a solid seven days up 23.4%. In other news, the SEC has stated that BTC and ETH are commodities. It’s going to be hard to get delivery of those. The SEC is also set to investigate the recent TerraUSD crash. Once again, we are going to end with an index to gauge the overall mood we see on the boards at present. It’s a very clear picture at the moment with the CRYPTO25 index as the price remains hemmed in its range between 11,250 and 9860. Recent price action has started to form a squeeze but that might just produce another mini-break that remains held between the range high and low. We are now at a point where we are looking for a high momentum break, either higher or lower, to set some direction. The post Crypto Focus: Many of the Top 10 Coins Remaining Heavily Range-Bound for Another Week appeared first on Eightcap.

The Swing Overview - Week 23 Major global stock indices broke through their support levels after several days of range movement in response to the tightening economy, the ongoing war in Ukraine, slowing economic growth and high inflation. The Reserve Bank of Australia raised its interest rate by 0.50%. The ECB decided to start raising interest rates by 0.25% from July 2022. The winner of last week is the US dollar, which continues to strengthen. Macroeconomic data Data from the US labour market was highly anticipated. The job creation indicator, the so-called NFP, surprised the markets positively. Analysts expected that 325,000 new jobs had been created in May. In fact, 390 thousand jobs were created in the US. Unemployment is at 3.6%. The information on the growth of hourly wages, which is a leading indicator of inflation, was important. Average hourly earnings rose 0.3% in May, less than analysts who expected 0.4%.   Unemployment claims reached 229,000 this week. This is the highest levels since 3/3/2022. However, this is not an extreme increase. The number of claims is still in the pre-pandemic average area. Nevertheless, it can be seen that since 7/4/2022, when the number of applications reached 166 thousand, the number of applications is slowly increasing and this indicator will be closely monitored.  The ISM index of purchasing managers in the US service sector reached 55.9 in May. This is lower than the previous month's reading of 57.1. A value above 50 still points to expansion in the sector although the decline in the reading indicates  economy.   The yield on the US 10-year bond is close to its peak and is currently around 3%. The rise in yields has been followed by a rise in the US dollar. The dollar index has surpassed 103. The reason for the strengthening of the dollar is the aggressive tightening of the economy by the US Fed, which began reducing the central bank's balance sheet on June 1, 2022. In practice, this means that the Fed will let expire the government bonds it previously bought as part of QE and will not reinvest them further. The first tranche of bonds will expire on June 15, so the effect of this operation remains to be seen. Figure 1: The US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has been moving in a narrow range for the past few days between 4,200, where resistance is and 4,080, where support has been tested several times. This support was broken and has become the new resistance as we can see on the H4 chart.   Figure 2: The SP 500 on H4 and D1 chart   The catalyst for this strong initiation move is the strong US dollar and rising bond yields. Therefore, the current resistance is in the 4,075 - 4,085 range.  The nearest support is 3,965 - 3,970 according to the H4 chart. The next support is 3,879 - 3,907.   German DAX index Macroeconomic data that affected the DAX was manufacturing orders for April, which fell 2.7% month-on-month, while analysts were expecting a 0.3% rise. Industrial production in Germany rose by 0.7% in April (expectations were for 1.0%). The war in Ukraine has a strong impact on the weaker figures. The catalyst for breaking support was the ECB's decision to raise interest rates, which the bank will start implementing from July 2022. Figure 3: German DAX index on H4 and daily chart The DAX is below the SMA 100 moving average according to the daily and H4 chart. This shows a bearish sentiment. The nearest resistance is 14,300 - 14,335. Support is at 13,870 - 13,900 according to the H4 chart.   The ECB left the interest rate unchanged  The ECB left interest rates unchanged on June 9, 2022, so the key rate is still at 0.0%. However, the bank said that it will proceed with a rate hike from July, when the rate is expected to rise by 0.25%. The next hike will then be in September, probably again by 0.25%. The bank pointed to the high inflation rate, which is expected to reach 6.8% for 2022. Inflation is expected to fall to 3.4% in 2023 and 2.1% in 2024.  Figure 4: The EUR/USD on H4 and daily chart According to the bank, a significant risk is Russia's unjustified aggression against Ukraine, which is causing problems in supply chains and pushing energy and some commodity prices up. The result is a slowdown in the growth of the European economy. The bank also announced that it will end its asset purchase program as of July 1, 2022. This is the soft end of this program, as the money that will flow from matured assets will continue to be reinvested by the bank. In practice, this means that the ECB's balance sheet will not be further inflated, but for now, unlike the Fed’s balance sheet, the bank has no plans to reduce its balance sheet. This, coupled with the more moderate rate hike plans and the existence of the above risks, has supported the dollar and the euro has begun to weaken sharply in response to the ECB announcement. The resistance is 1.0760-1.0770. Current support at 1.063-1.064 is broken and it will become new resistance if the break is confirmed. The next support according to the H4 chart is 1.0530 - 1.0550.   Australian central bank surprises with aggressive approach In Australia, the central bank raised its policy rate by 0.50%. Analysts had expected the bank to raise the rate by 0.25%. Thus, the current rate on the Australian dollar is 0.80%. However, this aggressive increase did not strengthen the Australian dollar, which surprisingly weakened. The reason for this is the strong US dollar and also the risk off sentiment that is taking place in the equity indices.  Also impacting the Aussie is the situation in China, where there is zero tolerance of COVID-19. This will impact the country's economic growth, which is very likely to fall short of the 5.5% that was originally projected.  Figure 5: The AUD/USD on H4 and daily chart According to the H4 chart, the AUD/USD currency pair has broken below the SMA 100 moving average, which is a bearish signal. The nearest resistance is 0.7140 - 0.7150. The support is in the zone 0.7030 - 0.7040. 

The Swing Overview – Week 25 There was a rather quiet week in which the major world stock indices shook off previous losses and have been slowly rising since Monday. However, this is probably only a temporary correction of the current bearish trend.  The CNB Bank Board met for the last time in its old composition and raised the interest rate to 7%, the highest level since 1999. However, the koruna barely reacted to this increase. The reason is that the main risks are still in place and fear of a recession keeps the markets in a risk-off sentiment that benefits the US dollar. Macroeconomic data We had a bit of a quiet week when it comes to macroeconomic data in the US. Industrial production data was reported, which grew by 0.2% month-on-month in May, which is less than the growth seen in April, when production grew by 1.4%. While the growth is slower than expected, it is still growth, which is a positive thing.   In terms of labor market data, the number of jobless claims held steady last week, reaching 229k. Thus, compared to the previous week, the number of claims fell by 2 thousand.   The US Dollar took a break in this quiet week and came down from its peak which is at 106, 86. Overall, however, the dollar is still in an uptrend. The US 10-year bond yields also fell last week and are currently hovering around 3%. The fall in bond yields was then a positive boost for equity indices. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has been gaining since Monday, June 20, 2022. However, this is probably not a signal of a major bullish reversal. Fundamental reasons still rather speak for a weakening and so it could be a short-term correction of the current bearish trend. The rise is probably caused by long-term investors who were buying the dip. Next week the US will report the GDP data which could be the catalyst for further movement.  Figure 2: The SP 500 on H4 and D1 chart   The index has currently reached the resistance level according to the H4 chart, which is in the region of 3,820 - 3,836. The next strong resistance is then in the area of 3,870 - 3,900 where the previous support was broken and turned into the resistance. The current nearest support is 3 640 - 3 670.    German DAX index The manufacturing PMI for June came in at 52.0. The previous month's PMI was 54.8. While a value above 50 indicates an expected expansion, it must be said that the PMI has essentially been declining since February 2022. This, together with other data coming out of Germany, suggests a certain pessimism, which is also reflected in the DAX index. Figure 3: German DAX index on H4 and daily chart The DAX broke support according to the H4 chart at 12,950 - 12,980 but then broke back above that level, so we don't have a valid breakout. Overall, however, the DAX is in a downtrend and the technical analysis does not show a stronger sign of a reversal of this trend yet. The nearest resistance according to the H4 chart is 13,130 - 13,190. The next resistance is then at 13 420 - 13 440. Strong support according to the daily chart is 12,443 - 12,600.   Eurozone inflation at a new record Consumer inflation in the Eurozone for May rose by 8.1% year-on-year as expected by analysts. On a month-on-month basis, inflation added 0.8% compared to April. The rise in inflation could support the ECB's decision to raise rates possibly by more than the 0.25% expected so far, which is expected to happen at the July meeting.  Figure 4: EUR/USD on H4 and daily chart From a technical perspective, the euro has bounced off support on the pair with the US dollar according to the daily chart, which is in the 1.0340 - 1.0370 range and continues to strengthen. Overall, however, the pair is still in a downtrend. The US Fed has been much more aggressive in fighting inflation than the ECB and this continues to put pressure on the bearish trend in the euro. The nearest resistance according to the H4 chart is at 1.058 - 1.0600. Strong resistance according to the daily chart is at 1.0780 - 1.0800.   The Czech National Bank raised the interest rate again Rising inflation, which has already reached 16% in the Czech Republic, forced the CNB's board to raise interest rates again. The key interest rate is now at 7%. The last time the interest rate was this high was in 1999. This is the last decision of the old Bank Board. In August, the new board, which is not clearly hawkish, will decide on monetary policy. Therefore, it will be very interesting to see how they approach the rising inflation.   The current risks, according to the CNB, are higher price growth at home and abroad, the risk of a halt in energy supplies from Russia and generally rising inflation expectations. The lingering risk is, of course, the war in Ukraine. The CNB has also decided to continue intervening in the market to keep the Czech koruna exchange rate within acceptable limits and prevent it from depreciating, which would increase import inflation pressures. Figure 5: The USD/CZK and The EUR/CZK on the daily chart Looking at the charts, the koruna hardly reacted at all to the CNB's decision to raise rates sharply. Against the dollar, the koruna is weakening somewhat, while against the euro the koruna is holding its value around 24.60 - 24.80. The appreciation of the koruna after the interest rate hike was probably prevented by uncertainty about how the new board will treat inflation, and also by the fact that there is a risk-off sentiment in global markets and investors prefer so-called safe havens in such cases, which include the US dollar.  

The Swing Overview – Week 28 2022 This week's new record inflation readings sent a clear message to central bankers. Further interest rate hikes must be faster than before. The first of the big banks to take this challenge seriously was the Bank of Canada, which literally shocked the markets with an unprecedented rate hike of a full 1%. This is obviously not good for stocks, which weakened again in the past week. The euro also stumbled and has already fallen below parity with the usd. Uncertainty, on the other hand, favours the US dollar, which has reached new record highs.   Macroeconomic data The data from the US labour market, the so-called NFP, beat expectations, as the US economy created 372 thousand new jobs in June (the expectation was 268 thousand) and the unemployment rate remained at 3.6%. But on the other hand, unemployment claims continued to rise, reaching 244k last week, the 7th week in a row of increase.   But the crucial news was the inflation data for June. It exceeded expectations and reached a new record of 9.1% on year-on-year basis, the highest value since 1981. Inflation rose by 1.3% on month-on-month basis. Energy prices, which rose by 41.6%, had a major impact on inflation. Declines in commodity prices, such as oil, have not yet influenced June inflation, which may be some positive news. Core inflation excluding food and energy prices rose by 5.9%, down from 6% in May.   The value of inflation was a shock to the markets and the dollar strengthened sharply. We can see this in the dollar index, which has already surpassed 109. We will see how the Fed, which will be deciding on interest rates in less than two weeks, will react to this development. A rate hike of 0.75% is very likely and the question is whether even such an increase will be enough for the markets. Meanwhile, there has been an inversion on the yield curve on US bonds. This means that yields on 2-year bonds are higher than those on 10-year bonds. This is one of the signals of a recession. Figure 1: The US Treasury yield curve on the monthly chart and the USD index on the daily chart   The SP 500 Index Apart from macroeconomic indicators, the ongoing earnings season will also influence the performance of the indices this month. Among the major banks, JP Morgan and Morgan Stanley reported results this week. Both banks reported earnings, but they were below investor expectations. The impact of more expensive funding sources that banks need to finance their activities is probably starting to show.   We must also be interested in the data in China, which, due to the size of the Chinese economy, has an impact on the movement of global indices. 2Q GDP in China was 0.4% on year-on-year basis, a significant drop from the previous quarter (4.8%). Strict lockdowns against new COVID-19 outbreaks had an impact on economic situation in the country. Figure 2: SP 500 on H4 and D1 chart The threat of a recession is seeping into the SP 500 index with another decline, which stalled last week at the support level, which according to the H4 is in the 3,740-3,750 range. The next support is 3,640 - 3,670.  The nearest resistance is 3,930 - 3,950. German DAX index The German ZEW sentiment, which shows expectations for the next 6 months, reached - 53.8. This is the lowest reading since 2011. Inflation in Germany reached 7.6% in June. This is lower than the previous month when inflation was 7.9%. Concerns about the global recession continue to affect the DAX index, which has tested significant supports. Figure 3: German DAX index on H4 and daily chart Strong support according to the daily chart is 12,443 - 12,500, which was tested again last week. We can take the moving averages EMA 50 and SMA 100 as a resistance. The nearest horizontal resistance is 12,950 - 13,000.   The euro broke parity with the dollar The euro fell below 1.00 on the pair with the dollar for the first time in 20 years, reaching a low of 0.9950 last week. Although the euro eventually closed above parity, so from a technical perspective it is not a valid break yet, the euro's weakening points to the headwinds the eurozone is facing: high inflation, weak growth, the threat in energy commodity supplies, the war in Ukraine. Figure 4: EUR/USD on H4 and daily chart Next week the ECB will be deciding on interest rates and it is obvious that there will be some rate hike. A modest increase of 0.25% has been announced. Taking into account the issues mentioned above, the motivation for the ECB to raise rates by a more significant step will not be very strong. The euro therefore remains under pressure and it is not impossible that a fall below parity will occur again in the near future.   The nearest resistance according to the H4 chart is at 1.008 - 1.012. A support is the last low, which is at 0.9950 - 0.9960.   Bank of Canada has pulled out the anti-inflation bazooka Analysts had expected the Bank of Canada to raise rates by 0.75%. Instead, the central bank shocked markets with an unprecedented increase by a full 1%, the highest rate hike in 24 years. The central bank did so in response to inflation, which is the highest in Canada in 40 years. With this jump in rates, the bank is trying to prevent uncontrolled price increases.   The reaction of the Canadian dollar has been interesting. It strengthened significantly immediately after the announcement. However, then it began to weaken sharply. This may be because investors now expect the US Fed to resort to a similarly sharp rate hike. Figure 5: USD/CAD on H4 and daily chart Another reason may be the decline in oil prices, which the Canadian dollar is correlated with, as Canada is a major oil producer. The oil is weakening due to fears of a drop in demand that would accompany an economic recession. Figure 6: Oil on the H4 and daily charts Oil is currently in a downtrend. However, it has reached a support value, which is in the area near $94 per barrel. The support has already been broken, but on the daily chart oil closed above this value. Therefore, it is not a valid break yet.  

Summary:  The U.S. Department of Treasury has blacklisted the largest mixer on Ethereum used in hiding blockchain traces. On to companies, Coinbase and BlackRock have announced a partnership in trading and custody of Bitcoin, while Nvidia feels the heat of the upcoming Ethereum merge. U.S. Sanctioned Tornado Cash Yesterday, the U.S. Department of Treasury blacklisted every smart contract and address connected to Ethereum-based mixer Tornado Cash for its use in money laundering. The latter is a popular decentralized protocol used to hide the blockchain trace of Ether and Ethereum-based tokens. It has allegedly been used by North Korean state-backed hacking group Lazarus Group in a $615mn hack earlier this year, however, the protocol is also used by ordinary people wanting to interact on Ethereum with a higher degree of privacy. Elliptic, a blockchain analytics company, has estimated that over $1.5bn has been laundered through Tornado Cash out of a total amount of $7bn. The blacklisting bans American citizens alongside American entities such as exchanges from engaging with clients depositing funds from Tornado Cash. Since the protocol is fully decentralized, governments cannot disable the protocol itself. However, since many crypto users and exchanges are based in the US, the blacklisting might be enough to remove sufficient liquidity from the protocol for it to work properly. This was somewhat the case some hours after the announcement yesterday, as the issuer behind the second-largest stablecoin Circle froze every USDC in Tornado Cash’s smart contracts, meaning users are not able to transfer them out of Tornado Cash anymore. Coinbase and BlackRock announce partnership Coinbase announced a partnership with the world’s largest asset manager BlackRock last week. The partnership enables institutional clients of BlackRock to access Bitcoin brokerage and custody facilitated by Coinbase but handled through their existing portfolio management. Even though we are in a bear market it does genuinely not seem that institutions are shy to interact with crypto, as also both Morgan Stanley and Citigroup have announced positions concerning crypto in the past week to strengthen their internal crypto resources. On another note, Coinbase is set to announce its Q2 earnings later today. Nvidia stock drops. Ethereum got involved As Ethereum miners generated a record-high revenue of $16.5bn in 2021 by validating blocks on the network, there was an equal demand for GPUs utilized in mining operations. Nvidia has for years been the main supplier of GPUs to Ethereum miners. Although Nvidia does not directly state its revenue from providing GPUs to mainly Ethereum miners, it is anticipated that the company generates an appreciable part of its revenue from miners. However, that may soon come to an end, since the Ethereum merge is expected to happen sometime next month, completely taking miners off the equation. Since miners have known this for some time, it seems few acquire new equipment, as it will be challenging to break even in such a short period. It seems Nvidia felt this in its second quarter (ended 31st July). The company cut its expected revenue to $6.7bn from $8.1bn yesterday while simultaneously writing down its inventory by $1.3bn, mainly since the secondary market of GPUs has been flooded by cheap GPUs. If the merge occurs successfully in September, then the market of GPUs used in Ethereum mining will by default never exist again. Bitcoin/USD - Source: Saxo Group Ethereum/USD - Source: Saxo Group Souce: https://www.home.saxo/content/articles/cryptocurrencies/crypto-weekly-09082022

Summary:  US equities were not impressed by the lower inflation expectations in the New York Fed’s consumer survey, and Micron’s revenue warning added to the fears with broad losses seen across the semiconductor space. Equity losses broadened as earnings continued to disappoint, and the yield curve inverted further. The US CPI wait game is unlikely to be much more than just noise, but upside risks to USD are seen on stronger underlying dynamics. On the radar today will also be China’s inflation data will be parsed for hints on demand recovery and Fed speakers who may continue to bring up market expectations of Fed’s rate hike path. Markets latest news     Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  US. Equities traded lower in a quiet session, awaiting today’s CPI data.  Nasdaq 100 fell 1.2% after Micron Technology (MU:xnas), added to investors’ concern over weakening demand for microchips when the company issued a negative revenue warning, just a day after another leading chip maker, Nvidia (NVDA:xnas) similarly announced.  The company said that the current quarter revenue could come in at or below the low end of prior guidance. Share price of Micron fell 3.7%. S&P 500 fell 0.4%. After the close, Coinbase Global, Roblox, and Wynn Resorts reported weaker-than-expected results and declined in after-hours trades. U.S. yield curve inverts further Front-end U.S. treasury yields rose 6bps and caused the 2-10-year yield spread further inverted to -49.5bps. The 10-year treasury note yield edged up by 2bps to 2.78% after the Q2 unit labor costs in the U.S. came in at 10.8%, higher than expected.  The 3-year action showed decent demand from investors after yields had risen ahead of the auction.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Shares of leading Hong Kong property developers surged as much as 5% at one point in the morning session, following newswires, citing Executive Council convener Regina Ip, suggested that Hong Kong is considering to remove the punitive double stamp duty imposed on residential property buyers from the mainland.  The Hang Seng Index rose as much as 1% in the morning but both the Hang Seng Index and Hong Kong developers pared gains after the office of the Financial Secretary refuting the speculation after midday.  Hung Kai Properties (00016:xhkg) and CK Assets (01113:xhkg) finished the day 2% higher and Henderson Land (00012:xhkg) +0.7%. The Hang Seng Index reversed and closed 0.2% lower.  Shares of coal miners surged 2% to 5% across the board following reports that a large Shanxi coal mine had an incident and caused temporary suspension of production.  Chinese EV names traded lower on concerns spurred by a 64% MoM fall of Tesla sales in July despite that the China Passenger Car Association raised EV sales estimate to 6 million, 9% higher from its previous estimate. In A-shares, CSI300 was modestly higher, with coal mining, auto parts, wind and solar power storage, and chiplet concept shares outperformed.   EURUSD and USDJPY stucked The US inflation will be relevant beyond the headline print. Key focus is likely to be on the core measure, as it is evident that lower commodity prices may have helped to cool the headline measure. The US dollar rallied sharply on Friday after a solid jobs print, but has since steadied. The next leg higher could depend on the stickiness of the inflation print, which may raise further the expectations of a 75bps rate hike at the September Fed meeting. EURUSD took another look above 1.0240 overnight but reversed back towards 1.0200 in early Asia. USDJPY is also stuck in the middle of the 130-140 range, awaiting triggers for a breakout one way or another. Oil prices (CLU2 & LCOV2) Oil prices steadied in the Asian morning on Wednesday amid renewed concerns on Russian flows to Europe. WTI futures were seen around the key $90 level, while Brent futures touched $96/barrel. API report also showed another week of strong inventory build, coming in at 2.2 million for week ended August 5 as compared to expectations of 73k. The official government inventory report is due today, and China’s inflation data will also be on watch. Grains eye the USDA report US grain futures led by corn traded higher on Tuesday in response to worsening crop conditions. Just like central Europe, soaring heat and drought have raised concerns about lower production and yields. USDA will publish its monthly supply and demand estimates on Friday. The crop condition report, published every Monday by the USDA throughout the growing season, shows the proportion of the US crop being rated in a good to excellent condition. Silver against Gold. Gold (XAUUSD) looking to test $1800 Gold’s focus remains on the geopolitical tensions, despite the recent rise in US Treasury yields. The US CPI and the $1800 resistance area are now the key tests for Gold ahead, and any pickup in rate hike expectations from the Fed could bring bears of the yellow metal back in force. Silver (XAGUSD) has been outshining Gold and in the process managing to mount a challenge above its 50-day moving average, now support at $20.33 with focus on resistance at $20.85.   What to consider?     US CPI due today will be just noise The highly-watched US inflation data is due to be released today, and the debate on inflation peaking vs. higher-for-longer will be revived. Meanwhile, the Fed has recently stayed away from providing forward guidance, which has now made all the data points ahead of the September 21 FOMC meeting a lot more important to predict the path of Fed rates from here. Bloomberg consensus expects inflation to slow down from 9.1% YoY in June to 8.8% YoY last month, but it will be more important to think about how fast inflation can decelerate from here, and how low it can go. The core print will gather greater attention to assess stickiness and breadth of price pressures. However, any surprise will still just be a noise given that we have another print for August due ahead of the next FOMC meeting. Fed’s Evans will take the hot seat today Chicago President Charles Evans discusses the economy and monetary policy today. Evans is not a voter this year, but he votes in 2023. He said last week a 50bps rate hike is a reasonable assessment for the September meeting, but 75bps is a possibility too if inflation does not improve. He expects 25bps from there on until Q2 2023 and sees a policy rate between 3.75-4% in 2023, which is in line with Fed’s median view of 3.8% for 2023, but above the 3.1% that the market is currently pricing in. US New York Fed survey of inflation expectations show sharp decline Median 1-year ahead and 3-year ahead inflation expectations declined sharply in July, from 6.8%/3.6% in June to 6.2%/3.2% in July. Lower income households showed the greatest shift lower in expectations, possibly linked to the sharp drop in petrol prices (the peak in June in one national measure was over $5.00/gallon, a level that fell to below $4.25/gallon by the end of July. China’s PPI inflation is set to ease while CPI is expected to pick up in July The median forecasts from economists being surveyed by Bloomberg are 4.9% (vs June: 6.1%) for PPI and 2.9% (vs 2.5% for June). The higher CPI forecast is mainly a result of a surge in pork prices by 35% in July from June. On the other hand, PPI is expected to continue its recent trend of deceleration due to a low base and a fall in material prices. The convergence of the gap between PPI and CPI is likely to benefit downstream manufacturing industries. Japan PPI shows continued input price pressures Japan’s July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are waddling high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. The government is also set to announce a cabinet reshuffle today, and households may see increased measures to help relieve the price pressures. That will continue to ease the pressure on the Bank of Japan to tighten policy. Coinbase is still losing but is going to give a fight Coinbase (COIN:xnas) reported la loss of USD1.1 billion in Q2, larger-than-expected. Revenues dropped to USD808 million, sharply lower from last year’s USD2.2 billion. Monthly transaction users fell to 9 million, 2% lower from prior quarter. The company sees average monthly transaction users 7 millions to 9 millions in the current quarter. Coinbase Global is worth watching given the fallout in cryptocurrency trading and the recent partnership with BlackRock to ease access for institutional investors. Chipmaker warnings continue, with Micron warning of ‘challenging’ conditions After Nvidia, now Micron (MU) has issued warning of a possible revenue miss in the current quarter and ‘challenging’ memory conditions. The company officials said that they expect the revenue for the fiscal fourth quarter, which ends in August, “may come in at or below the low end of the revenue guidance range provided in our June 30 earnings call.” The company had called for $6.8-7.6 billion in revenue in its June earnings report. Moreover, they also guided for a tough next quarter as well as shipments could fall on a sequential basis, given the inventory buildup with their customers.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-10-aug-2022-10082022

Summary:  Market sentiment weakened again yesterday, with the US Nasdaq 100 index interacting with the pivotal 13,000 area that was so pivotal on the way up ahead of today’s US July CPI release, which could prove important in either confirming or rejecting the complacent market’s expectations that a slowing economy and peaking inflation will allow the Fed to moderate its rate hike path after the September meeting. A surprisingly strong core CPI reading would likely unsettle the market today.   Our trading focus   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US interest rates are moving higher again and US equities lower with the S&P 500 at 4,124 yesterday with today’s price action testing the 100-day moving average around the 4,110 level. The past week has delivered more negative earnings surprises and weak outlooks impacting sentiment and the geopolitical risk picture is not helping either. In the event of a worse than expected US CPI release today we could take out the recent trading range in S&P 500 futures to the downside and begin the journey back to 4,000. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Tech Index (HSTECH.I) fell 3%. China internet stocks declined across the aboard, losing 2-4%. Shares of EV manufacturers plunged 4-8% despite the China Passenger Car Association raised its 2022 EV sales estimate yesterday to 6mn, 9% higher from its previous estimate. Hang Seng Index plunged 2.4% and CSI300 fell 1.1%. USD decision time The USD remains largely stuck in neutral and may remain so unless or until some incoming input jolts the US treasury market and the complacent view that the US is set to peak its policy rate in December, with the potential to ease by perhaps mid-next year. Technical signs of a broad USD recovery, whether on yields pulling higher or due to a sudden cratering in market sentiment on concerns for the economic outlook or worsening liquidity as the Fed QT schedule is set to continue for now regardless of incoming data, would include USDJPY pulling above 136.00, EURUSD dropping down through 1.0100 and AUDUSD back down below 0.6900. Today’s July US CPI could prove a catalyst for a directional move in the greenback in either direction. Gold (XAUUSD) briefly tested a key area of resistance above $1800 on Tuesday ... before retracing lower as the recent support from rising silver and copper prices faded. With the dollar and yields seeing small gains ahead of today’s US CPI print, and with key resistance levels in all three metals looming, traders decided to book some profit. The market is looking for US inflation to ease from 9.1% to 8.8% and the outcome will have an impact on rate hike expectations from the Fed with a a higher-than-expected number potentially adding some downward pressure on metal prices. Silver (XAGUSD), as highlighted in recent updates, has been outshining Gold and in the process managing to mount a challenge above its 50-day moving average, now support at $20.33 with focus on resistance at $20.85.  Crude oil Crude oil prices rose on Tuesday on news pipeline flows of crude oil from Russia via Ukraine to Europe had been halted over a payment dispute of transit fees. The line, however, is expected to reopen within days but it nevertheless highlights and supports the current price divergence between WTI futures stuck around $90, amid rising US stockpiles and slowing gasoline demand, and Brent which trades above $96. The API reported a 2.2-million-barrel increase in US stockpiles last week with stocks at Cushing, the key storage hub, also rising. The official government inventory report is due today, with surveys pointing to a much smaller build at just 250k barrels. In addition, the market will be paying close attention to implied gasoline demand with recent data showing a slowdown. Also focus on China as lockdowns return, US CPI and Thursday’s Oil Market Reports from OPEC and the IEA. Grains eye Friday’s WASDE report US grain futures led by soybeans and corn trade higher on the week in response to worsening crop conditions. Just like central Europe, soaring heat and drought have raised concerns about lower production and yields. USDA will publish its monthly supply and demand estimates on Friday and given the current conditions a smaller yield could tighten the ending stock situation. The crop condition report, published every Monday by the USDA throughout the growing season, shows the proportion of the US crop being rated in a good to excellent condition. Last week the rating for corn dropped by 3% to 58% versus 64% a year ago. US Treasuries (IEF, TLT) US 10-year yields are poised in an important area ahead of the pivotal 3.00% level that would suggest a more determined attempt for yields to try toward the cycle top at 3.50%. Of late, the yield curve inversion has been the primary focus as long yields remain subdued relative to the front end of the curve, a development that could deepen if inflation remains higher than expected while economic activity slows. The three-year T-note auction yesterday saw solid demand, while today sees an auction of 10-year Treasuries.   Newsfeed   Taiwan officials want Foxconn to withdraw investment in Chinese chip company Foxconn announced a $800 million investment in mainland China’s Tsinghua Unigroup last month, but national security officials want the company to drop the investment, likely in connection with recent US-China confrontation in the wake of the visit to Taiwan from US House Speaker Pelosi and the ensuing Chinese military exercises around Taiwan. US Q2 Unit Labor costs remain high at 10.8%, while productivity weak at –4.6% These number suggest a very tight labor market as companies are beset with rising costs for work and less output per unit of worker effort. This number was down from the Q1 levels, but in many past cycles, rising labor costs and falling productivity often precede a powerful deceleration in the labor market as companies slow hiring (and once the recession hits begin firing employees which registers as lower unit costs and rising productivity). Japan PPI shows continued input price pressures Japan’s July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are waddling high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. The government is also set to announce a cabinet reshuffle today, and households may see increased measures to help relieve the price pressures. That will continue to ease the pressure on the Bank of Japan to tighten policy. Chipmaker warnings continue, with Micron warning of ‘challenging’ conditions After Nvidia, now Micron has issued warning of a possible revenue miss in the current quarter and ‘challenging’ memory conditions. The company officials said that they expect the revenue for the fiscal fourth quarter, which ends in August, “may come in at or below the low end of the revenue guidance range provided in our June 30 earnings call.” The company had called for $6.8-7.6bn in revenue in its June earnings report. Moreover, they also guided for a tough next quarter as well as shipments could fall on a sequential basis, given the inventory build-up with their customers. Vestas Q2 result miss estimates The world’s largest wind turbine maker has posted Q2 revenue of €3.3bn vs est. €3.5bn and EBIT of €-182mn vs est. €-119mn. The company is issuing a fiscal year revenue outlook of €14.5-16bn vs est. €15.2bn. Coinbase misses in revenue issues weak guidance Q2 revenue missed by 5% against estimates and the user metric MTU was lowered to 7-9mn from previously 5-15mn against estimates of 8.7mn. The crypto exchange is saying that retail investors are getting more inactive on cryptocurrencies due to the recent violent selloff. China’s PPI inflation eased while CPI picked up in July China’s PPI came in at 4.2% y/y in July, notably lower from June’s 6.1%).   The decline was mainly a result of lower energy and material prices.  The declines of PPI in the mining and processing sectors were most drastic and those in downstream industries were more moderate.  CPI rose to 2.7% y/y in July from 2.5% in June, less than what the consensus predicted.  Food inflation jumped to 6.3% y/y while the rise in prices of non-food items moderated to 1.9%, core CPI, which excludes food and energy, rose 0.8% y/y in July, down from June’s 1.0%. China issues white paper on its stance on Taiwan Despite extending the military drills near Taiwan beyond the originally schedule, in a less confrontational white paper released today, the Taiwan Affairs office and the Information Office of China’s State Council reiterated China’s commitment to “work with the greatest sincerity” and exert “utmost efforts to achieve peaceful reunification”.  The paper further says that China “will only be forced to take drastic measures” if “separatist elements or external forces” ever cross China’s red lines.    What are we watching next?   US CPI due today: the core in focus The highly watched US inflation data is due to be released today, and the debate on inflation peaking vs. higher-for-longer will be revived. Meanwhile, the Fed has recently stayed away from providing forward guidance, which has now made all the data points ahead of the September 21 FOMC meeting a lot more important to predict the path of Fed rates from here. Bloomberg consensus expects inflation to slow down from 9.1% YoY in June to 8.8% YoY last month. The core print will gather greater attention to assess stickiness and breadth of price pressures. Will any surprise just be noise given that we have another print for August due ahead of the next FOMC meeting, os is this market looking for an excuse to be surprised as it has maintained a rather persistent view that US inflation data will soon roll over and see a Fed set to stop tightening after the December FOMC meeting? Fed’s Evans will take the hot seat today Chicago President Charles Evans discusses the economy and monetary policy today. Evans is not a voter this year, but he votes in 2023. He said last week a 50bps rate hike is a reasonable assessment for the September meeting, but 75bps is a possibility too if inflation does not improve. He expects 25bps from there on until Q2 2023 and sees a policy rate between 3.75-4% in 2023, which is in line with Fed’s median view of 3.8% for 2023, but above the 3.1% that the market is currently pricing in. Earnings to watch Today’s US earnings in focus are marked in bold with the most important earnings release being Walt Disney and Coupang. Disney is expected to deliver revenue growth of 23% y/y with operating margins lower q/q as the company is still facing input cost headwinds. Coupang, which is the largest e-commerce platform in South Korea, is expected to deliver revenue growth of 13% y/y and another operating loss as e-commerce platforms are facing slowing demand and still significant input cost pressures. Today: Commonwealth Bank of Australia, Vestas Wind Systems, Genmab, E.ON, Honda Motor, Prudential, Aviva, Walt Disney, Coupang, Illumina Thursday: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0700 – Czech Jul. CPI 1230 – US Jul. CPI 1430 – US Weekly DoE Crude Oil and Product Inventories 1500 – US Fed’s Evans (non-voter) to speak 1600 – UK Bank of England economist Pill to peak 1700 – US Treasury to auction 10-year notes 1800 – US Fed’s Kashkari (non-voter) to speak 2301 – UK Jul. RICS House Price Balance 0100 – Australia Aug. Consumer Inflation Expectations Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-aug-10-2022-10082022

August 10, 2022  $USD, China, CPI, Currency Movement, Inflation, Italy, UK Overview: The US dollar is trading with a heavier bias ahead of the July CPI report. The intraday momentum indicators are overextended, and this could set the stage for the dollar to recover in North America. Outside of a handful of emerging market currencies, which include the Mexican peso and Hong Kong dollar, most are trading lower. Losses in US equities yesterday and poor news from another chip maker (Micron) weighed on Asia Pacific equities. Europe’s Stoxx 600 is steady and US futures are a little higher. The US 10-year yield is going into the CPI report softly around 2.76%. The US Treasury sells 10-year notes today as the second leg of the quarterly refunding. European benchmark yields are 2-3 bp lower. Gold continues to press against the $1800 cap. It has not closed above it for over a month. September WTI is hovering around $90. It appears stuck for the time being in an $87-$93 range. US natgas is about 1.1% higher after rising 3.2% yesterday. Europe’s benchmark is up 3%. It rose 1.5% yesterday. Iron ore is flat, while September copper is about 0.5% stronger after a small loss yesterday snapped a three-day advance. September wheat is up 1%, as it extends this week’s rise. If sustained, it would be the third consecutive gain, which matches the longest rally since March.   Asia Pacific China's July inflation readings underscore scope for easier monetary policy, but officials have shown a reluctance to use this policy lever. The key one-year medium term lending rate will be set in the coming days, but it is unlikely to be reduced from the 2.85% rate since January. July CPI rose to 2.7% from 2.5%, its highest level in two years, but shy of the 2.9% median forecast in Bloomberg's survey. Food prices were up 6.3% from a year ago, driven by a 20.2% jump in pork prices, the first rise since September 2020. Fresh food prices rose 16.9% and vegetable prices rose almost 13%. However, this seems to be a function of supply, while demand still seems soft. Service prices pressures slowed to 0.7% from June's 1.0% increase. The core rate eased to 0.8%. Meanwhile, producer price increases slowed to 4.2% from 6.1%. The median forecast (Bloomberg's survey) was for a 4.9% increase. Chinese producer prices have slowed for nine consecutive months. It peaked at 13.5% last October. Japan's well-telegraphed cabinet reshuffle was not about policy. Key ministers kept their posts, including the finance minister and chief cabinet secretary. Former Prime Minister Abe's brother, Defense Minister Kishi was replaced by Hamada, but he will stay on as a national security adviser. Trade Minister Hagiuda, an Abe acolyte was replaced by Nishimura, also for the Abe faction, but will become party policy chief. Prime Minister Kishida named his one-time rival Takaichi as minister of economic security. The reshuffle seemed to be about re-balancing power among the key factions and solidifying the government whose support has waned. The next economic policy focus may be on the drafting of a supplemental budget. In terms of monetary policy, BOJ Kuroda's term ends next April, while the term of his two deputies ends in March. The dollar is in narrow range of less than half a yen today, hovering around JPY135.00. It did edge above yesterday's JPY135.20 high but held below Monday's high slightly below JPY135.60. The exchange rate will likely take its cues from the reaction of the US Treasury market to today's CPI report. The US 10-year yield remains within the range set at the end of last week with the stronger than expected employment report (~2.67%-2.87%). The Australian dollar held support near $0.6945 but has stalled near $0.6975 in the European morning, where this week's hourly trendline is found. Intraday momentum indicators are stretched, suggesting that even if there is some penetration, follow-through buying may be capped. There are options for A$400 mln at $0.6985 that expire today. The greenback edged a little higher against the Chinese yuan, but it remains subdued. It is well within recent ranges. The dollar's reference rate was set at CNY6.7612, slightly above expectations (median in Bloomberg's survey) for CNY6.7606. Europe The more potent risk is not that the center-right wins next month's Italian election. That is increasing looking like a foregone conclusion. It is hard difficult to tell how much this reflects the judgment of voters and how much reflects the ineptitude of the center-left parties. The risk is that the center-right secures a two-thirds majority in both chambers, which would make constitutional changes possible. A poll published yesterday by Istituto Cattaneo shows the center-right drawing 46% of the vote and securing 61% of the deputies and 64% of the Senators. Analysis by Istituto Cattaneo suggested that even if the center-right saw its share of the votes go up, it might not be able to increase the number of deputies or senators. Italy's 10-year premium over German has fallen in eight of the past ten sessions, including today. It is around 2.10% today, slightly more than 25 bp off its recent peak, and a little below its 20-day moving average. Italy's 2-year premium fell to 0.73% yesterday, the lowest since mid-July. It peaked above 1.30% in late July.  Ironically as it may sound, but it is not Italy's center-right that is attacking the Bank of Italy or the European Central Bank. It is Truss who is leading Sunak to become the next leader of the Conservatives and Prime Minister. BOE Governor Bailey warned that UK was about to go into a five-quarter contraction (that does not even count the 0.2% contraction that economists expect the UK will announce for Q2 ahead of the weekend). Truss quickly responded that her GBP39 bln tax cuts (~$$7 bln) could avert that scenario. Sunak hiked the payroll tax this past April. She would unwind it. Truss would suspend the green levy on household energy bills and nix Sunak's corporate tax increase that was to be implemented next year. The swaps market is 85% confident of a 50 bp hike at the mid-September MPC meeting, less than a fortnight after the new Tory leaders is chosen. In the last two meetings of the year, the swaps market is pricing another 75 bp in hikes.  The euro is first firm holding above $1.02 so far today, the first time since August 1. However, it remains within last Friday's range (~$1.0140-$1.0250). The 1.2 bln euro options at $1.0210 that expire today likely have been neutralized ahead of today's US CPI report. The session high, slightly above $1.0225 was set in the European morning. This stretched the intraday momentum indicator, and we suspect it will probe lower now. Initial support below $1.02 is seen in the $1.0170-80 area. Sterling is in the same boat. It too is consolidating within the range seen before the weekend (~$1.2000-$1.2170). The push to session highs, a little above $1.21, in Europe has stretched the intraday momentum indicators. The risk is for a return to the $1.2050-60 area. America Today's CPI report is interesting but at the risk of exaggerating, it does not mean much. First, the strength of the employment data, even if flattered by seasonal adjustments or is incongruous with other labor market readings, suggests the labor market slowdown that the Fed wants to see is still in the very early stages. Second, as we have noted, financial conditions have eased recently, and the Fed has pushed back against this. Third, before the FOMC meets again, it will have the August CPI in hand. Fourth, no matter what the data shows today, it will not and cannot meet the Fed's definition of a sustained move toward the 2% target. The median in Bloomberg's survey has converged with the Cleveland Fed's Inflation Nowcast. The median in the survey is for an 8.7% headline rate (down from 9.1%) and a 6.1% core rate (up from 5.9%). The Cleveland's Fed Nowcast has it at 8.8% and 6.1%, respectively. The Fed funds futures market has about an 80% chance of a 75 bp hike next month discounted. It may not change very much after the CPI report.  The US Treasury sold $34 bln 1-year bills yesterday at 3.20%. That represents a 24 bp increase in yield. The bid-cover dipped but was still three-times oversubscribed and the indirect bidders took down almost 63%, a sharp rise from a little less than 51% last time. The US also sold $42 bln 3-year notes, also at 3.20%. This was an 11-bp increase in yield. The bid-cover edged up to 2.5% and the indirect participants took 63.1% of the issue, up from 60.4% previously. Today, Treasury goes back to the well with $30 bln 119-day cash management bill and $35 bln 10-year notes. At the last auction, the 10-year was sold at 2.96%. In the when-issued market, the 10-year yield is about 2.79%. The US dollar traded between around CAD1.2845 and CAD1.2900 yesterday and remains in that range today. There are options for almost 1.15 bln at CAD1.29 that expire today. The greenback slipped to session lows in Europe but as in the other pairs, we look it to recover. A move above the CAD1.2910 area could spur a move toward CAD1.2950. Mexico reported slightly higher than expected inflation yesterday. It underscored expectations for a 75 bp hike by Banxico tomorrow. The US dollar is offered against the peso today and it is pressed near yesterday's low around MXN20.20. The top side is blocked around MXN20.27-MXN20.30. Options for around $765 mln at MXN20.30 expire today. A convincing break of the MXN20.20 area could target the MXN20.05 area    Disclaimer

Summary:  Today we discuss the possible reactivity to today's US July CPI data point, especially if a hotter than expected core reading challenges the market's determined bet that inflation is set to roll over and normalize over the next couple of years. We also look at an equity market that is technically rolling over, a US dollar that needs to choose a direction, and compelling commodity stories and chart points in gold, crude oil and coffee. A semiconductor, EV, deglobalization, and Walt Disney focus on the equity coverage today. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via this link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-aug-10-2022-10082022

USD/JPY continues to show little movement this week, in sharp contrast to Friday, when the pair jumped a massive 1.55%. In the European session, USD/JPY is trading at 135.02 down 0.09%. The yen had shown some strength against the dollar recently, but took a tumble after the stunning US nonfarm payroll report on Friday. The gain of 528 thousand more was more than double the estimate of 250 thousand, and the dollar responded with sharp gains against the majors. All eyes on US inflation Inflation has been rising in the US and hit 9.1% in June. The July inflation report will be released later today, and the release could have a strong impact on the direction of the US dollar. Headline CPI is expected to fall to 8.7%, down from 9.1%. If the reading does drop to around 8.7%, the markets may start thinking “peak” when it comes to inflation, and the dollar could lose ground. Conversely, if inflation stays around 9% or moves higher, it should be a catalyst for the dollar, as the Fed will have to consider a 75 or even a 100 basis point increase in September. After the inflation release, we’ll hear from Fed members Evans and Kashkari, and it will be interesting to hear their remarks on the heels of today’s inflation release. Last week, the Fed sent out the message that its rate-tightening cycle is not about to end, as the inflation fight is far from over. The spectacular nonfarm payrolls release pointed to continued strong wage growth and the participation rate dropping a notch, from 62.2% to 61.1%. These numbers point to a tighter labour market and stronger inflationary pressures. If today’s inflation report confirms that inflation is still accelerating, I would expect to hear hawkish remarks from Fed officials, which would likely give the US dollar a boost. . USD/JPY Technical USD/JPY is putting pressure on resistance at 134.40, which was tested on Wednesday. 136.30 is the next resistance line There is support at 133.65 and 131.80 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: https://www.marketpulse.com/20220810/yen-drifting-as-us-inflation-looms/

Summary:  The market was happy to adjust US yields higher recently on stronger than expected US data points, but failed to take the USD lower, which in perfect hindsight suggests that the USD was set for a sharp drop on a soft CPI print today. And that’s what we got, with the headline CPI figure flat on month-on-month comparisons and the core rising less than expected. But how far can the market run on a single data print as data reactions have been fickle and fleeting of late. FX Trading focus: USD bears celebrate weak CPI print, but… The US CPI print came in weaker than expected for both the headline and for the ex Food and Energy figure. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category market -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure. Risk sentiment is off to the races as this fits the market’s Goldilocks soft-landing scenario, particularly given recent stronger-than-expected activity data. It’s hard to tell how far the market can take the reaction function to a data point like this when we are trading in an illiquid month and some very volatile categories are behind the surprise inflation number today, and recent data reactions have failed to hold beyond the end of the day. But for now, the USD has triggered lower and taken out some important local support. We suspect it is far too early in the cycle to call the aggressive shift from the Fed that the market has been pricing, as this July CPI data point has seen the market marking the September FOMC decision down close to 50 basis points now and taking more of the tightening out of the meetings beyond. The market’s interpretation of a profound shift in the Fed, the Fed’s own protestations notwithstanding, has driven a strong easing of financial conditions since mid-June. Could this result in the economy showing a heating up in the coming months, also as the shock of higher gasoline price in particular may have eased the pressure on consumer sentiment? The preliminary Aug. University of Michigan Sentiment survey could be an interesting test on that front. For now, USDJPY posted the biggest reaction to the data point today as one would expect on the big move in treasury yields – more on USDJPY below. EURUSD has broken above the local resistance just below 1.0300, but faces a more significant resistance level in the 1.0350 area – one that could lead to a return to 1.0500+ if this move sticks through the Friday close. Again, as mentioned recently, it is too early to call an end of the EURUSD bear – the market’s view will have to play out as currently priced, with all of the Goldilocks implications, etc., for the USD to shift to a sustained and broad bear market here. Elsewhere, AUDUSD has vaulted above 0.7000, the tactical bull/bear line, with a huge zone up into 0.7150-0.7250 the more structural area of note for direction. Gold not holding above 1,800 in reaction to this data point as of this writing is already a weak performance, and I am watching much of the treasury market kneejerk reaction higher seeping out of the US treasury market as well – so some of the reaction is already fading fast – stay tuned! A US treasury auction is up today at 1700 GMT – the longer end of the US yield curve may be the most important coincident indicator for all markets here – if yields pull back higher, for example the US 10-year benchmark moving back above 2.87% and especially toward 3.00%, today’s reaction in the USD and the JPY, etc.. should quickly reverse. Chart: USDJPYThe bottom dropped out of USDJPY on the softer than expected US July CPI data this afternoon, just as it vaulted higher on Friday on the stronger than expected US July jobs report – with US yields the key coincident indicator. On that note, the US Treasury market reaction fading fast in the wake of today’s data point suggests USDJPY bears should be cautious here – if the US 10-year benchmark closes back above 2.75% and especially above 2.87% in coming days, this move may be quickly neutralized, although if we do close down here well south of 133.50, the candlestick looks rather bearish for a test lower. If the pair closes back well above 134.00, the next step would be a move above 136.00 to suggest the bull market is back on (likely as US 10-year treasury yields pull to 3.00% or higher). Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strength.Let’s have a look at how the market behaves after the knee-jerk reaction to the US data point today before drawing conclusions. As noted above, some important coincident indicators for the US dollar are suggesting caution for USD bears here. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Today’s USD moves important if they stick into the close today and the close to the week – data reactions have been fickle and fleeting of late – so some patience may be required. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1600 – UK Bank of England economist Pill to peak 1700 – US Treasury to auction 10-year notes 1800 – US Fed’s Kashkari (non-voter) to speak 2301 – UK Jul. RICS House Price Balance 0100 – Australia Aug. Consumer Inflation Expectations Source: FX Update: : Soft US CPI sparks significant kneejerk USD selling, but...    

Summary:  Risk on mode activated with a softer US CPI print, both on the headline and core measures. Equities rallied but the Treasury market reaction faded amid the hawkish Fedspeak. The market pricing of Fed expectations also tilted more in favor of a 50 basis points rate hike for September immediately after the CPI release, but this will remain volatile with more data and Fed speakers on tap ahead of the next meeting. Commodities, including oil and base metals, surged higher as the dollar weakened and demand outlook brightened but the gains appeared to be fragile. Gold unable to hold gains above the $1800 level. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities surged after the CPI prints that came in at more moderate level than market expectations. Nasdaq 100 jumped 2.9% and S&P500 gained 2.1%. Technology and consumer discretionary stocks led the market higher. Helped by the fall in treasury yields and better-than-feared corporate earnings in the past weeks, the Nasdaq 100 has risen 21% from its intraday low on June 16 this year and may technically be considered in a new bull market. The U.S. IPO market has reportedly become active again this week and more activities in the pipeline. Tesla (TSLA:xnas) climbed nearly 4% on news that Elon Musk sold USD6.9 billion of Tesla shares to avoid fire sale if having to pay for Twitter. Walt Disney (DIS:xnys) jumped 7% in after-hours trading on better-than-expected results. U.S. yields plunged immediately post CPI but recouped most of the decline during the US session The yields of the front-end of the U.S. treasury curve collapsed initially after the weaker-than-expected CPI data, almost immediately after the CPI release, 2-year yields tumbled as much as 20bps to 3.07% and 10-year yield fell as much as 11bps to 2.67%. Treasury yields then spent the day gradually climbing higher. At the close, 2-year yields were only 6bps at 3.21% and the 10-year ended the day at 2.78% unchanged from its previous close. The 2-10 yield curve steepened by 6bps to -44bps. Hawkish Fedspeak contributed to some of the reversal in the front-end from the post-CPI lows. At the close, the market is pricing in 60bps (i.e. 100% chance of at least a 50bps hike and about 40% chance of a 75bps rate hike) for the September FOMC after having come down to pricing in just about 50bps during the initial post-CPI plunge in yields. Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hang Sang Index declined nearly 2% and CSI300 was down 1.1% on Wednesday. Shares of Chinese property developers plunged.  Longfor (00960) collapsed 16.4% as there was a story widely circulated in market speculating that the company had commercial paper being overdue. In addition, UBS downgraded the Longor together with Country Garden, citing negative free cash flows in the first half of 2022.  Country Garden (02007) fell 7.2%.  After market close, the management held a meeting with investors and said that all commercial papers matured had been duly repaid. China High Speed Transmission Equipment (00658) tumbled 19% after releasing negative profit warnings.  The company expects a loss of up to RMB80 million for first half of 2022. Guangzhou Baiyunshan Pharmaceutical (00874) declined 4.1% after the company filed to the Stock Exchange of Hong Kong that the National Healthcare Security Administration was investigating the three subsidiaries of the company for allegedly “obtaining funds by ways of increasing the prices of pharmaceutical products falsely”. Wuxi Biologics (02269) dropped 9.3% as investors worrying its removal from the U.S. unverified list may be delayed in the midst of deterioration of relationship between China and the U.S. Oversized USD reaction on US CPI The US dollar suffered a heavy blow from the softer US CPI print, with the market pricing for September FOMC getting back closer to 50 basis points just after the release. As we noted yesterday, the July CPI print is merely noise with another batch of US job and inflation numbers due ahead of the September meeting. USD took out some key support levels nonetheless, with USDJPY breaking below the 133.50 support to lows of 132.10. Next key support at 131.50 but there possibly needs to be stronger evidence of an economic slowdown to get there. EURUSD broke above 1.0300 to its highest levels since July 5 but remains at risk of reversal given the frothy equity strength. Crude oil prices (CLU2 & LCOV2) Oil prices were relieved amid the risk on tone in the markets as softer US CPI and subsequent weakness in the dollar underpinned. WTI futures rose towards $91.50/barrel while Brent futures were at $97.40. EIA data also suggested improvement in demand. US gasoline inventories fell 4,978kbbl last week, which helped push gasoline supplied (a proxy for demand) up 582kb/d to 9.12mb/d. This was slightly tempered by a strong gain in US crude oil inventories, which rose 5,457kbbl last week. Supply concerns eased after Transneft resumed gas supplies to three central European countries which were earlier cut off due to payment issues. European Dutch TTF natural gas futures (TTFMQ2) European natural gas rallied amid concerns over Russian gas supplies and falling water levels on the key Rhine River which threatens to disrupt energy shipments. Dutch front month futures rose 6.9% to EUR 205.47/MWh as a drought amid extreme temperatures has left the river almost impassable. European countries have been filling up their gas storage, largely by factories cutting back on their usage. Further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter. Gold (XAUUSD) and Copper (HGc1) Gold saw a run higher to $1800+ levels immediately after the US inflation report as Treasury yields plunged. However, the precious metal gave up much of these gains after Fed governors warned that it doesn’t change the US central bank’s path toward higher rates this year and next. With China also ceasing military drills around Taiwan, geopolitical risks remain capped for now easing the upside pressure on Gold. Copper was more buoyant as it extended gains on hopes of a stronger demand amid a fall in price pressures.   What to consider? Softer US CPI alters Fed expectations at the margin The US CPI print came in weaker than expected for both the headline and the core measures. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category market -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex-Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure – again primarily a result of lower energy prices. While this may be an indication that US inflation has peaked, it is still at considerably high levels compared to inflation targets of ~2% and the pace of decline from here matters more than the absolute trend. Shelter costs – the biggest component of services inflation – was up 5.7% y/y, the most since 1991. Fed pricing for the September meeting has tilted towards a 50bps rate hike but that still remains prone to volatility with another set of labor market and inflation prints due ahead of the next meeting. Fed speakers continued to be hawkish Fed speaker Evans and Kashkari were both on the hawkish side despite being some of the most dovish members on the Fed panel. Evans again hinted that tightening will continue into 2023 as inflation remains unacceptably high despite a first sign of cooling prices. The strength of the labor market continued to support the case of a soft landing. Kashkari reaffirmed the view on inflation saying that he is happy to see a downside surprise in inflation, but it remains far from declaring victory. He suggested Fed funds rate will reach 3.9% in 2022 (vs. market pricing of 3.5%) and 4.4% in end 2023 (vs. market pricing of 3.1%). China’s PPI inflation eased while CPI picked up in July China’s PPI came in at 4.2% YoY in July, notably lower from June’s 6.1%).   The decline was mainly a result of lower energy and material prices.  The declines of PPI in the mining and processing sectors were most drastic and those in downstream industries were more moderate.  CPI rose to 2.7% YoY in July from 2.5% in June, less than what the consensus predicted.  Food inflation jumped to 6.3% YoY while the rise in prices of non-food items moderated to 1.9%. Core CPI, which excludes food and energy, rose 0.8% YoY in July, down from June’s 1.0%. In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China expects the CPI to be at around 3% for the full year of 2022 and the recent downtrend of the PPI to continue. China issues white paper on its stance on Taiwan China ended its military drills surrounding Taiwan on Wednesday, which lasted three days longer what had been originally announced. In a less confrontational white paper released, the Taiwan Affairs Office and the Information Office of China’s State Council reiterated China’s commitment to “work with the greatest sincerity” and exert “utmost efforts to achieve peaceful reunification”.  The paper further says that China “will only be forced to take drastic measures” if “separatist elements or external forces” ever cross China’s red lines.  Walt Disney results beat estimates Disney reported solid Q2 results with stronger than expected 152.1 million Disney+ subscribers, up 31% YoY and beating market expectations (148.4 million).  Revenues climbed 26% YoY to USD21.5 billion and adjusted EPS came in at USD1.09 versus consensus estimates (USD0.96). Singapore Q2 GDP revised lower The final print of Singapore’s Q2 GDP was revised lower to 4.4% YoY from an advance estimate of 4.8% earlier, suggesting a q/q contraction of 0.2% as against gains of 0.2% q/q earlier. The forecast for annual 2022 growth was also narrowed to 3-4% from 3-5% earlier amid rising global slowdown risks. Another quarter of negative GDP growth print could now bring a technical recession in Singapore, but the officials have, for now, ruled that out and suggest a mild positive growth in Q3 and Q4. Softbank settled presold Alibaba shares early and Alibaba let go of a large number of employees The news that Softbank expects to post a gain of over USD34 billion from early physical settlement of prepaid forward contracts to unload its stake in Alibaba (09988:xhkg/BABA:xnas) and Alibaba laid off more than 9,000 staff between April and June this year added to the pressures over the share price of Alibaba.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 11, 2022  

Summary:  Equity markets are ebullient in the wake of the softer than expected US July CPI data print yesterday, as a sharp drop in energy prices helped drag the CPI lower than expected for the month. The knee-jerk reaction held well in equities overnight, if to a lesser degree in the weaker US dollar. But US yields are nearly unchanged from the levels prior to the inflation release, creating an interesting tension across markets, also as some Fed members are explicitly pushing back against market anticipation of the Fed easing next year.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The July CPI report showing core inflation rose only 0.3% m/m compared to 0.5% m/m expected was just what the market was hoping for and had priced into the forward curve for next year’s Fed Funds rate. Long duration assets reacted the most with Nasdaq 100 futures climbing 2.9%. However, investors should be careful not to be too optimistic as we had a similar decline in the CPI core back in March before inflation roared back. As Mester recently stated that the Fed is looking for a sustained reduction in the CPI core m/m, which is likely a 6-month average getting back to around 0.2% m/m. Given the current data points it is not realistic to be comfortable with inflation before late Q1 next year. In Nasdaq 100 future the next natural resistance level is around 13,536 and if the index futures can take out this then the next level be around 14,000 where the 200-day average is coming down to. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities climbed, Hang Seng Index +1.8%, CSI300 Index +1.6%. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +16%, Sunny Optical (02382:xhkg) +7%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. Semiconductors gained, SMIC (00981:xhkg) +3%, Hua Hong (01347:xhkg) +4%. After collapsing 16% in share price yesterday, Longfor (00960) only managed to recover around 3% after the company denied market speculation that it failed to repay commercial papers due. UBS’ downgraded Longfor and Country Garden (02007:xhkkg) yesterday citing negative free cash flows for the first half of 2022 highlighted the tight spots even the leading Chinese private enterprise property developers are in. Chinese internet stocks rallied, Alibaba (09988:xhkg) +3%, Tencent (0700:xhkg) +1%, Meituan (03690:xhkkg) +2.7%. China ended its military drills surrounding Taiwan on Wednesday, which lasted three days longer what had been originally announced. USD: Treasuries don’t point to further weakness here The US dollar knee-jerked lower on the softer-than-expected July CPI data, although US yields ended the day unchanged, creating an interesting tension in a pair like USDJPY, which normally takes its lead from longer US yields (unchanged yesterday after a significant dip intraday after the US CPI release). USDJPY dipped almost all the way to 132.00 after trading above 135.00 earlier in the day. What are traders to do – follow the coincident US yield indicator or the negative momentum created by yesterday’s move? Either way, a return above 135.00 would for USDJPY would likely require an extension higher in the US 10-year yield back near 3.00%. EURUSD is another interesting pair technically after local resistance just below 1.0300 gave way, only to see the pair hitting a brick wall in the 1.0350 area (major prior range low from May-June). Was this a break higher or a misleading knee-jerk reaction to the US data? A close below 1.0250 would be needed there to suggest that EURUSD is focusing back lower again. A similar setup can be seen in AUDUSD and the 0.7000 area, with a bit more sensitivity to risk sentiment there. Gold (XAUUSD) did not have a good day on Wednesday Gold was trading lower on the day after failing to build on the break above resistance at $1803 as the dollar weakened following the lower-than-expected CPI print, thereby reducing demand for gold as an inflation hedge. Instead, the prospect for a potential shallower pace of future rate hikes supported a major risk on rally in stocks and another daily reduction in bullion-backed ETF holdings. Yet comments by two Fed officials saying it doesn’t change the central bank’s path toward even higher rates – and with that the risk of a gold supportive economic weakness - did not receive much attention. Gold now needs to hold $1760 in order to avoid a fresh round of long liquidation, while silver, which initially received a boost from higher copper prices before following gold lower needs to hold above its 50-day SMA at $20.26. Crude oil Crude oil futures (CLU2 & LCOV2) traded higher on Wednesday supported by a weaker dollar after the lower US inflation print gave markets a major risk on boost. Also, the weekly EIA report showed a jump in gasoline demand reversing the prior week’s sharp drop. Gasoline inventories dropped 5 million barrels to their lowest seasonal level since 2015 on a combination of strong exports and improved domestic demand while crude oil stocks rose 5.4m barrels primarily supported by a 5.3 million barrels release from SPR. Focus today on monthly Oil Market Reports from OPEC and the IEA. Dutch natural gas The Dutch TTF natural gas benchmark futures (TTFMQ2) rallied amid concerns over Russian gas supplies and falling water levels on the key Rhine River which threatens to disrupt energy shipments of fuel and coal, thereby forcing utilities and industries to consumer more pipelined gas. Dutch front month futures rose 6.9% to EUR 205.47/MWh while the October to March winter contract closed at a fresh cycle high above €200/MWH. European countries have been filling up their gas storage, largely by factories cutting back on their usage and through LNG imports, the flow of the latter likely to be challenged by increased demand from Asia into the autumn. Further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter. US Treasuries (IEF, TLT) shrug off soft July CPI data US yields at first reacted strongly to the softer-than-expected July CPI release (details below), but ended the day mostly unchanged at all points along the curve, suggesting that the market is unwilling to extend its already aggressive view that the Fed is set to reach peak policy by the end of this year and begin cutting rates. Some Fed members are pushing back strongly against that notion as noted below (particularly Kashkari). A stronger sign that yields are headed back higher for the US 10-year benchmark would be on a close above 2.87% and especially 3.00%. Yesterday’s 10-year auction saw strong demand. What is going on? US July CPI lower than expected The US CPI print came in lower than expected for both the headline and the core measures. The headline softness was driven by huge drops in energy prices from June levels, with the entire energy category marked -4.6% lower month-on-month and gasoline down -7.7%, much of the latter on record refinery margins collapsing. The ex-Food & Energy category was up only +0.3% vs. the +0.5% expected, with soft prices month-on-month for used cars and trucks (-0.4%) and especially airfares (-7.8%) dragging the most on figure. While this may be an indication that US inflation has peaked, it is still at considerably high levels compared to inflation targets of ~2% and the pace of decline from here matters more than the absolute trend. Shelter costs – the biggest component of services inflation – was up 5.7% y/y, the most since 1991. Fed pricing for the September meeting has tilted towards a 50bps rate hike but that still remains prone to volatility with another set of labor market and inflation prints due ahead of the next meeting. Fed speakers maintain hawkish message Fed speaker Evans and Kashkari were both on the hawkish side in rhetoric yesterday. Evans again hinted that tightening will continue into 2023 as inflation remains unacceptably high despite a first sign of cooling prices. The strength of the labor market continued to support the case of a soft landing. Kashkari reaffirmed the view on inflation saying that he is happy to see a downside surprise in inflation, but it remains far from declaring victory. Long thought of previously as the pre-eminent dove among Fed members, he has waxed far more hawkish of late and said yesterday that nothing has changed his view that the Fed funds rate should be at 3.9% at the end of this year (vs. market pricing of 3.5%) and 4.4% by the end 2023 (vs. market pricing of 3.1%). Siemens cuts outlook Germany’s largest industrial company is cutting its profit outlook on impairment charges related to its energy division. FY22 Q3 results (ending 30 June) show revenue of €17.9bn vs est. €17.4bn and orders are strong at €22bn vs est. €19.5bn. Orsted lifts expectations The largest renewable energy utility company in Europe reports Q2 revenue of DKK 26.3bn vs est. 21.7bn, but EBITDA misses estimates and the fiscal year guidance on EBITDA at DKK 20-22bn is significantly lower than estimates of DKK 30.4bn. However, the new EBITDA guidance range is DKK 1bn above the recently stated guidance, so Orsted is doing better than expected but the market had just become too optimistic. Disney beats on subscribers Disney reported FY22 Q3 (ending 2 July) results showing Disney+ subscribers at 152.1mn vs est. 148.4mn surprising the market as several surveys have recently indicated that Amazon Prime and Netflix are losing subscribers. The entertainment company also reported revenue for the quarter of $21.5bn vs est. $21bn with Parks & Experiences deliver the most to the upside surprise. EPS for the quarter was $1.09 vs est. $0.96. If subscribers for ESPN and Hulu are added, then Disney has surpassed Netflix on streaming subscribers. Shares were up 6% in extended trading. Despite the positive result the company lowered its 2024 target for Disney+ subscriber to 135-165mn range. Coupang lifts fiscal year EBITDA outlook The South Korean e-commerce company missed slightly on revenue in Q2 but lifted its fiscal year adjusted EBITDA from a loss of $400mn to positive which lifted shares 6% in extended trading. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. What are we watching next? Next signals from the Fed at Jackson Hole conference Aug 25-27 There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. Earnings to watch Today’s US earnings in focus are NIO and Rivian with market running hot again on EV-makers despite challenging environment on input costs and increased competition. NIO is expected to grow revenue by 15% y/y in Q2 before seeing growth jumping to 72% y/y in Q3 as pent-up demand is released following Covid restrictions in China in the first half. Rivian, which partly owned by Amazon and makes EV trucks, is expected to deliver its first quarter with meaningful activity with revenue expected at $336mn but free cash flow is expected at $-1.8bn. Today: KBC Group, Brookfield Asset Management, Orsted, Novozymes, Siemens, Hapag-Lloyd, RWE, China Mobile, Antofagasta, Zurich Insurance Group, NIO, Rivian Automotive Friday: Flutter Entertainment, Baidu Economic calendar highlights for today (times GMT) 0800 – IEA's Monthly Oil Market Report 1230 – US Weekly Initial Jobless Claims 1230 – US Jul. PPI 1430 – US Weekly Natural Gas Storage Change 1700 – US Treasury to auction 30-year T-Bonds 2330 – US Fed’s Daly (Non-voter) to speak During the day: OPEC’s Monthly Oil Market Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 11, 2022  

Summary:  Today we look at the sharp correction in energy prices driving a softer than expected CPI print for the US in July, which saw sentiment responding by piling on to the recent rally and taking equities to new highs for the local cycle since June. Interestingly, the reaction to the CPI data has generated some tension as US treasury yields are trading sideways after erasing the knee-jerk drop in yields in the wake of yesterday's data. With financial conditions easing aggressively, the Fed faces quite a task if it wants to counter this development, with recent protests from individual Fed members failing to make an impression. Perhaps the Jackson Hole Fed forum at the end of this month is shaping up as a key event risk? Crude oil, the USD, metals, earnings and more also on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: Soft CPI revives risk rally, but treasury reaction creates dissonance    

Overview: The US dollar is consolidating yesterday’s losses but is still trading with a heavier bias against the major currencies and most emerging market currencies. The US 10-year yield is soft below 2.77%, while European yields are mostly 2-4 bp higher. The peripheral premium over the core is a little narrower today. Equity markets, following the US lead, are higher today. The Hang Seng and China’s CSI 300 rose by more than 2% today. Among the large bourses, only Japan struggled, pressured by the rebound in the yen. Europe’s Stoxx 600 gained almost 0.9% yesterday and is edging higher today, while US futures are also firmer. Gold popped above $1800 yesterday but could not sustain it and its in a $5 range on both sides of $1788 today. September WTI rebounded yesterday from a low near $87.65 to close near $92.00. It is firmer today near $93.00. US natgas is 1.4%, its third successive advance and is near a two-week high. Europe’s benchmark is also rising for the third session. It is up nearly 8% this week. Iron ore rose 2% today and it is the fourth gain in five sessions. September copper is also edging higher. If sustained, it would be the fifth gain in six sessions. It is at its highest level since late June. September wheat is 1.1% higher. It has risen every session this week for a cumulative gain of around 4.25%.  Asia Pacific In its quarterly report, the People's Bank of China seemed to downplay the likelihood of dramatic rate cuts or reductions in reserve requirements. It warned that CPI could exceed 3% and ruled out massive stimulus, while promising "high-quality" support, which sounds like a targeted measure. It is not tightening policy but signaled little scope to ease. Note that the 10-year Chinese yield is at the lower end of its six-month range near 2.74%. Its two-year yield is a little above 2.15%, slightly below the middle of its six-month range. Separately, Yiwa, a city of two million people, south of Shanghai has been locked down for three days starting today due to Covid. It is a manufacturing export hub. South Korea reported its first drop (0.7%) in technology exports in two years last month. While some read this to a statement about world demand, and there is likely something there given the earnings reports from the chip sector. However, there seems to be something else at work too. South Korea figures show semiconductor equipment exports to China have been more than halved this year (-51.9%) through July. China had accounted for around 60% of South Korea's semiconductor equipment. Reports suggest the main drivers are the US-China rivalry. Semiconductor investment in China has fallen and South Korea has indicated it intensions to join the US Chip 4 semiconductor alliance. Singapore's economy unexpectedly contracted in Q2. Initially, the government estimated the economy stagnated. Instead, it contracted by 0.2%. Given Singapore's role as an entrepot, its economic performance is often seen as a microcosm of the world economy. There was a nearly a 7% decline in retail trade services, while information and communication services output also fell. After the data, the Ministry of Trade and Industry narrowed this year's GDP forecast to 3%-4% from 3%-5%. While the drop in the US 10-year yield saw the dollar tumble against the yen yesterday, the recovery in yields has not fueled a recovery in the greenback. The dollar began yesterday above JPY135- and fell to nearly JPY132.00. Today, it has been confined to a little less than around half a yen on either side of JPY132.85. The cap seen at the end of last week and early this week in the JPY135.50-60 area, and the 20-day moving average (~JPY135.30) now looks like formidable resistance. Recall that the low seen earlier this month was near JPY130.40. The Australian dollar is also consolidating near yesterday's high set slightly below $0.7110. It was the best level in two months. The $0.7050 area may now offer initial support. The next upside target is seen in the $0.7150-70 band, which houses the (50%) retracement objective of the Aussie's slide from the April high (~$0.7660) and the July low (~$0.6680), and the 200-day moving average. The broad greenback sell-off yesterday saw it ease to about CNY6.7235, its lowest level in nearly a month. Despite the less-than-dovish message from the PBOC, it seemed to signal it did not want yuan strength. It set the dollar's reference rate at CNY6.7324, a bit above the median (Bloomberg's survey) of CNY6.7308. Europe Germany's coalition government has begun debating over the contours of the next relief package. The center-left government has implemented two support programs to ease the cost-of-living squeeze for around 30 bln euros. A third package is under construction now. The FDP Finance Minister Linder suggested as one of the components a 10 bln euro program to offset the "bracket creep" of higher inflation putting households into a higher tax bracket. The Greens want a more targeted effort to help lower income families. More work needs to be done, but a package is expected to be ready next month. The International Energy Agency estimates that Russian oil output will fall by around a fifth early next year as the EU import ban is implemented. The IEA warns that Russian output may begin declining as early as this month and estimates 2 mln barrels a day will be shut by early 2023. The EU's ban on most Russian oil will begin in early December, and in early February, oil products shipments will also stop. Now the EU buys around 1 mln barrels a day of oil products and 1.3 mln barrels of crude. Russia boosted output in recent months, to around 10.8 mln barrels a day. The IEA estimates that in June, the PRC overtook the EU to become the top market for Russia's seaborne crude (2.1 mln bpd vs. 1.8 mln bpd). Separately, the IEA lifted its estimate of world consumption by about 380k barrels a day from its previous forecast, concentrated in the Middle East and Europe. The unusually hot weather in the Middle East, where oil is burned for electricity, has seen stronger demand. In Europe, there has been more switched from gas to oil. The euro surged to almost $1.0370 yesterday on the back of the softer than expected US CPI. It settled near $1.03. It is trading firmly in the upper end of that range today. It held above $1.0275, just below the previous high for the month (~$1.0295). Today's high, was set in the European morning, near $1.0340. There is a trendline from the February, March, and June highs found near $1.04 today. It is falling by a little less than half a cent a week. Sterling's rally yesterday stalled in front of this month's high set on August 1 slightly shy of $1.2295. It is straddling the area where it settled yesterday (~$1.2220). We suspect the market may test the lows near $1.2180, and a break could see another half-cent loss ahead of tomorrow's Q2 GDP. The median forecast in Bloomberg's survey is for a 0.2% contraction after a 0.8% expansion in Q1.  America What the jobs data did for expectations for the Fed at next month's meeting were largely reversed by slower the expected CPI readings. On the eve of the employment data, the market was discounting a little better than a 35% chance of another 75 bp hike. It jumped to over a 75% chance after employment report but settled yesterday around a 45% chance. It is still in its early days, and the Fed will see another employment and CPI report before it has to decide. Although the market has downgraded the chances of a 75 bp hike at next month's meeting, it still has the Fed lifting rates 115 bp between now and the end of year. The market recognizes that that Fed is not done tightening no matter what trope is dragged out to use as a strawman. The truth is the market is pushing against some Fed views. Chicago Fed's Evans, who many regard as a dove from earlier cycles, said that Fed funds could finish next year in the 3.75%-4.00% area, which opined would be the terminal rate. The swaps market says that the Fed funds terminal rate is closer to 3.50% and in the next six months. More than that, the Fed funds futures are pricing in a cut late next year. At least a 25 bp cut has been discounted since the end of June. It was the Minneapolis Fed President Kashkari that surprised many with his hawkishness. Many see him as a dove because five years ago, he dissented against rate increases in 2017. However, he has been sounding more hawkish in this context and revealed yesterday that it was his "dot" in June at 3.90% this year and 4.4% next year. These were the most extreme forecasts. Perhaps it is not that he is more dovish or hawkish, labels that seemingly take a life on of their own but more activity. While neither Evans nor Kashkari vote on the FOMC this year, they do next year. San Francisco Fed President Daly seemed more willing to consider moderating the pace of tightening but still sees more work to be done. She does not vote this year or next.  Headline CPI was unchanged last month and the 0.3% rise in the core rate was less than expected. At 8.5%, the headline is rate is still too high for comfort, and the unchanged 5.9% core rate warns significant progress may be slow. Shelter is about a third of the CPI basket and it is rising about 0.5% a month. It is up 5.7% year-over-year. If everything else was unchanged, this would lift CPI to 2%. The US reports July Producer Prices. Both the core and headline readings are expected to have slowed. The headline peaked in March, 11.6% above year ago levels. It was 11.3% in June and is expected to have fallen to 10.4%. The core rate is likely to post its fourth consecutive decline. It peaked at 9.6% in March and fell to 8.2% in June. The median forecast (Bloomberg's survey) is for a 7.7% year-over-year pace, which would be the lowest since last October.  Late in the North American session, Mexico's central bank is expected to deliver its second consecutive 75 bp rate hike. It will lift the overnight target rate to 8.5%. The July CPI reported Tuesday stood at 8.15% and the core 7.65%. The swaps market has a terminal rate near 9.5% in the next six months. The subdued US CPI reading, helped spur a 0.85% rally in the JP Morgan Emerging Market Currency Index yesterday, its largest gain in almost four weeks. The peso, often a liquid and accessible proxy, rose around 1.1%. The greenback briefly traded below MXN20.00 for the first time since late June. The move was so sharp that closed below its lower Bollinger Band (~MXN20.08) for the first time in six months. The US dollar slumped to almost CAD1.2750 yesterday to hold above the 200-day moving average (~CAD1.2745). It is the lowest level in nearly two months, and it has not traded below the 200-day moving average since June 9. Like the other pairs, it is consolidating today near the lower end of yesterday's greenback range. The swaps market downgraded the likelihood that the Bank of Canada follows last month's 100 bp hike with a 75 bp move when it meets on September 7. It is now seen as a 30% chance, less than half of what was projected at the end of last week. We suspect that the US dollar can recover into the CAD1.2800-20 area today.     Disclaimer   Source: US Dollar Soft while Consolidating Yesterday's Drop

Oil treading water after volatile 24 hours Needless to say, it was quite a volatile session in oil markets on Wednesday. A positive surprise on inflation was followed by a huge inventory build reported by EIA and then the highest US output since April 2020. Meanwhile, oil transit via the Druzhba pipeline resumed after a brief pause that jolted the markets. That’s a lot of information to process in the space of a couple of hours and you can see that reflected in the price action. And it keeps coming this morning, with the IEA monthly oil report forecasting stronger oil demand growth as a result of price incentivised gas to oil switching in some countries. It now sees oil demand growth of 2.1 million barrels per day this year, up 380,000. It also reported that Russian exports declined 115,000 bpd last month to 7.4 million from around 8 million at the start of the year. The net effect of all of this is that oil prices rebounded strongly on Wednesday but are pretty flat today. WTI is back above $90 but that could change if we see progress on the Iran nuclear deal. It’s seen plenty of support around $87-88 over the last month though as the tight market continues to keep the price very elevated. Gold performs handbrake turn after breakout It was really interesting to see gold’s reaction to the inflation report on Wednesday. The initial response was very positive but as it turned out, also very brief. Having broken above $1,800, it performed a swift u-turn before ending the day slightly lower. It can be difficult to gauge market reactions at the moment, in part because certain markets seem to portray far too much economic optimism considering the circumstances. With gold, the initial response looked reasonable. Less inflation means potentially less tightening. Perhaps we then saw some profit-taking or maybe some of that economic optimism crept in and rather than safe havens, traders had the appetite for something a little riskier. Either way, gold is off a little again today but I’m not convinced it’s peaked. From a technical perspective, $1,800 represents a reasonable rotation point. Fundamentally, I’m just not convinced the market is currently representative of the true outlook. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Oil stablizes, gold pares gains

Investors are certainly in a more upbeat mood as the relief from the US inflation data ripples through the markets. Positive surprises have been hard to come by on the inflation front this year and yesterday’s report was very much welcomed with open arms. While we shouldn’t get too carried away by the data, with headline inflation still running at 8.5% and core 5.9%, it’s certainly a start and one we’ve waited a long time for. Fed policymakers remain keen to stress that the tightening cycle is far from done and a policy u-turn early next year is highly unlikely. Once again, the markets are at odds with the Fed’s assessment on the outlook for interest rates but this time in such a way that could undermine its efforts so you can understand their concerns. I expect we’ll continue to see policymakers unsuccessfully push back against market expectations in the coming weeks while further driving home the message that data dependency works both ways. That said, the inflation report has further fueled the optimism already apparent in the markets and could set the tone for the rest of the summer. PBOC signals no further easing Unlike many other central banks, the PBOC has the scope to tread more carefully and continue to support the economy as it contends with lockdowns amid spikes in Covid cases. The country’s zero-Covid policy is a huge economic headwind and proving to be a drain on domestic demand. The PBOC has made clear in its quarterly monetary policy report though that it doesn’t want to find itself in the same position as many other countries right now. With inflation close to 3%, further easing via RRR or interest rates looks unlikely for the foreseeable future. Cautious targeted support looks the likely path forward as the central bank guards against inflation risks, despite the data yesterday surprising to the downside. Singapore trims growth forecasts A surprise contraction in the second quarter has forced Singapore to trim its full-year growth forecast range from 3-5% to 3-4% as the economy contends with a global slowdown, to which the country is particularly exposed, and Covid-related uncertainty in China. While the MAS has indicated monetary policy is appropriate after tightenings this year, inflation remains high so further pressures on this front may add to the headwinds for the economy. Where’s the momentum? Bitcoin took the inflation news very well and it continues to do so. Slower tightening needs and improved risk appetite is music to the ears of the crypto community who will be more confident that the worst is behind it than they’ve been at any point this year. Whether that means stellar gains lie ahead is another thing. The price hit a new two-month high today but I’m still not seeing the momentum I would expect and want. That may change of course and a break of $25,000 could bring that but we still appear to be seeing some apprehension that may hold it back in the near term. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Welcome relief

US consumer prices eased in July, and they eased more than expected. US yields pulled lower after the CPI print, the US 10-year yield retreated, the US dollar slipped, gold gained, and the US stock markets rallied. Forex The EURUSD jumped to 1.0370 mark, as Cable made another attempt to 1.2272 but failed to extend gains into the 1.23 mark. And It will likely be hard for the pound sterling to post a meaningful recovery even if the dollar softens more, as there are too much political uncertainties in Britain following Boris Johnson’s resignation.   The sterling is under pressure, but the FTSE100 does just fine, and I will focus on why the British blue-chip companies are in a position to extend gains in this episode. Disney Elsewhere, Disney jumped on strong quarterly results, Tesla rallied despite news that Elon Musk dumped more stocks to prepare for an eventual Twitter purchase. Twitter shares gained.   Watch the full episode to find out more!   0:00 Intro 0:27 Softer-than-expected US CPI boosts appetite… 2:03 … but FOMC members warn that inflation war is far over! 3:39 FX update: USD softens, gold, euro, sterling advance 5:55 Why FTSE 100 is still interesting? 8:06 Disney jumps on strong results, Tesla, Twitter gain Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #inflation #data #Gold #XAU #USD #EUR #GBP #FTSE #Disney #earnings #Tesla #Twitter #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq   Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH Source: Stocks up on soft US CPI, but inflation war is not over! | MarketTalk: What’s up today? | Swissquote

Summary:  Another downside surprise in US inflation in the wake of lower energy prices lifted the equity markets initially overnight. However, sustained hawkishness from Fed speakers brought the yields higher, weighing on equities which closed nearly flat in the US. Crude oil prices made a strong recovery with the IEA boosting the global growth forecast for this year. EURUSD stayed above 1.0300 and will be eying the University of Michigan report today along with UK’s Q2 GDP. What is happening in markets?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  After rising well over 1% in early trading amid the weaker-than-expected PPI prints, U.S. equities wiped out gains and closed lower, S&P 500 -0.07%, Nasdaq 100 -0.65%. Energy stocks were biggest gainers, benefiting from a 2.6% rally in the price of WTI crude, Devon Energy (DVN:xnys) +7.3%, Marathon Oil (MRO:xnys) +7%, Schlumberger (SLB:xnys) +5.7%.  Consumer discretionary and technology were the biggest decliners on Thursday. Chinese ADRs gained, Nasdaq Golden Dragon Index climbed 2.6%.  U.S. treasuries bear steepened In spite of weaker-than-expected PPI data, U.S. long-end treasury yields soared, 10-year yields +10bps to 2.99%, 30-year yields +14bps to 3.17%. The rise in long-end yields were initially driven by large blocks of selling in the T-bond and Ultra-long contracts and exacerbated in the afternoon after a poor 30-year auction. The yield of 2-year treasury notes was unchanged and the 2-10-year yield curve steepened 10bps to minus 23bps.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese equities surged, Hang Seng Index +2.4%, CSI300 Index +2.0%. Northbound inflows into A shares jumped to a 2-month high of USD1.9 billion. In anticipation of a 15% rise in the average selling price of Apple’s iPhone 14 as conjectured by analysts, iPhone parts supplier stocks soared in both Hong Kong and mainland exchanges, Q Technology (01478:xhkg) +17.7%, Sunny Optical (02382:xhkg) +9%, Cowell E (01415:xhkg) +4%, Lingyi iTech (002600:xsec) +10%. China internet names rebounded, Alibaba (09988:xhkg) +4.3%, Tencent (00700:xhkg) +2.7%, Meituan (03690:xhkkg) +4.0%, Baidu (09888:xhkg) +5.2%. Power tool and floor care manufacturer, Techtronic Industries (00669:xhkg) soared nearly 11% after reporting  a 10% year-on-year growth in both revenues and net profits in 1H22. The company rolled out a new generation of drill drivers that have embedded with machine learning algorithm. After collapsing 16% in share price yesterday, Longfor (00960) managed to stabilize and recover 5.7% following the company’s refutation of market speculation that it had failed to repay commercial papers due. EURUSD re-tested resistance levels EURUSD reclaimed the key 1.0300 on Thursday amid a softer dollar, and printed highs of 1.0364. While weaker-than-expected inflation prints in the US this week have curtailed dollar strength, it is hard for EURUSD to sustain gains amid the energy crisis and European recession concerns. A break below 1.0250 would be needed for EURUSD to reverse the trend, however. AUDUSD, likewise, trades above 0.7100 amid the risk on tone, but a turn lower in equities could reverse the trend. GBPUSD has been more range-bound around 1.2200 ahead of the Q2 GDP data scheduled to be released today, and EURGBP may be ready to break above 0.8470 resistance if the numbers come out weaker-than-expected. Crude oil prices (CLU2 & LCOV2) Crude oil prices gained further on Thursday amid signs of softer inflation, weaker dollar and improving demand. The International Energy Agency (IEA) lifted its consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch to oil. This could be aided by lower gasoline prices, which have dented demand during the US driving season. Prices fell below USD4/gallon for the first time since March. Meanwhile, OPEC may struggle to raise output in coming months due to limited spare capacity. WTI futures touched $94/barrel while Brent futures rose towards the 100-mark.   What to consider? Another downside surprise in US inflation US July PPI dipped into negative territory to come in at -0.5% MoM, much cooler than 1% last month or the +0.2% expected. But on a YoY basis, PPI remains up a shocking 9.8%. Core PPI rose 0.4% MoM, which means on a YoY basis core producer prices are up 7.6% (lower than June's +8.2% but still near record highs). Goods PPI fell 1.8%, dominated by a 9.0% drop in energy. Meanwhile, services PPI was up 0.1% in July. Despite the slowdown in both PPI and CPI this week, PPI is still 1.3% points above CPI, suggesting margin pressures and a possible earnings recession. Fed’s Daly said she will be open to a 75bps rate hike at the September meeting. US jobless claims rise, University of Michigan ahead US initial jobless claims 262K vs 265K estimate, notably higher than the 248k the prior week and the highest since November 2021. The 4-week moving average of initial jobless claims increased to 252K vs 247.5K last week, but still below 350k levels that can cause an alarm. The modest pickup in claims suggests that turnover at weaker firms is increasing. Key data to watch today is the preliminary University of Michigan survey for August, where expectations are for a modest improvement given lower gasoline prices. China’s central bank expects CPI to hover around 3% In its 2nd quarter monetary policy report released on Wednesday, the People’s Bank of China (PBOC) expects the CPI being at around 3% for the full year of 2022 and at times exceeding 3%.  The release of pend-up demand from pandemic restrictions, the upturn of the hog-cycle, and imported inflation, in particular energy, are expected to drive consumer price inflation higher for the rest of the year in China but overall within the range acceptable by the central bank.  The PBOC expects the recent downtrend of the PPI to continue and the gap between the CPI and PPI growth rates to narrow. The PBOC reiterates that it will avoid excessive money printing to spur growth so as to safeguard against inflation.  China’s President Xi is said to be visiting Saudi Arabia next week The Guardian reports that President Xi Jinping is expected to visit Saudi Arabia on an invitation extended from Riyadh in March.  China has been eager to secure its oil supply and explore the possibility of getting its sellers to accept the renminbi to settle oil trade.   While relying on the United States for security in a volatile region and supplies of weapons, Saudi Arabia with Prince Mohammed being in charge is looking for leverage in the kingdom’s relationship with the United States.  UK Q2 GDP likely to show a contraction The Q2 GDP in the UK is likely to show a contraction after April was down 0.2% and May up 0.5%. June GDP is likely to have seen a larger contraction given less working days in the month, as well as constrained household spending as inflation surged to a fresh record high. While there may be a growth recovery in the near-term, the Bank of England clearly outlined a recession scenario from Q4 2022 and that would last for five quarters. Our Macro Strategist Chris Dembik has painted a rather pessimistic picture of the UK economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 12, 2022

US Inflation Yesterday, the US inflation report was released, which came in at 8.5% in July. The market did not expect such a large drop, estimating a level of 8.7% before the data was released. The stock markets reacted positively and the major equity indexes rose significantly. The S&P 500 gained more than 2.1% during yesterday's session and the Nasdaq almost 2.9%. Crypto Cryptocurrencies, however, reacted most noticeably - on the Conotoxia MT5 platform, Bitcoin gained around 3.3% yesterday. And today, it continues its rise, breaking through the local peak of $2,485 on 30 August 2022. At 11.30 am GMT+3, the price of BTC is $24,471. The ETH price has risen even more strongly after a surprisingly low inflation reading. Ethereum gained more than 8.5% yesterday, and at 11.30 GMT+3, it is already up more than 2.3%. The token already costs $1,887 - its highest recorded level since 6 June this year.    What to expect? The market's reaction has a lot to do with expectations of interest rate hikes, which fell after the US inflation reading. However, it is still a long way from calling it a permanent decline. Inflation is still at its highest level in decades and the economy is operating in an environment of negative real interest rates.   According to CME Group data, the Federal Reserve (Fed) is likely to push rates even higher. Currently, the Fed Funds Rate is at just 2.5 pp, the level before the Covid pandemic. The CME Group estimates that we will still reach the 3.25 pp level this year, and peak in 2023 at 3.5 pp. However, as for the 2023 projections. The Federal Open Market Committee (FOMC), which decides them, is already much less unanimous and a lot may still depend on the information coming out of the economy.   Information on its state in the US is not pleasing. Most metrics - such as the yield curve, consumer sentiment, and economic growth - point to a recession. The labour market, which is surprisingly strong at the moment, is reacting last and is likely to become further evidence of a crisis soon.   The cryptocurrency market has never been in such a severe recession, so it is hard to determine exactly how it will behave. For now, the data shows a relatively high level of correlation between it and the stock market. This is not good news, as the latter almost always loses in a crash.   Polygon (MATIC) is an Ethereum token that powers the Polygon network, which is a protocol for building Ethereum-compatible blockchains and decentralised applications (DApps). Polygon is also referred to as a 2nd level (2nd level) solution to help Ethereum to scale faster, by increasing the efficiency of the network.    On Wednesday, Polygon shared data on user growth. Their total number in July was 11,800, gaining 47.5% since March and up 400% year-to-date. Interestingly, according to the project, "74% of teams integrated exclusively on Polygon, while 26% deployed on both Polygon and Ethereum,". This shows a very high level of confidence in the new technology, which can be the new foundation for the development of DApps. Since the local low on 19 July this year. MATIC has risen almost 172%.  Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Crypto soars after the low inflation reading. Polygon grows rapidly, gaining 400% users

Summary:  US treasury yields at the long end of the curve surged over 15 basis points at one point yesterday in the wake of heavy treasury futures selling and a somewhat soft T-bond auction, which helped to turn sentiment lower in the equity market after the major averages had advanced to new local highs. The jump in US yields checked the US dollar’s descent as traders mull whether a break higher in US treasury yields will offer the currency fresh support after its break lower this week in many USD pairs.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures attempted to run higher above the key 4,200 level but was rejected forcefully, closing a bit lower for the session and just above the 4,200 level. This morning the index futures are again trying to push higher trading around the 4,222 level with yesterday’s high at 4,260 being the natural resistance level in the short-term. Today’s earnings and macro calendar are light except for the Michigan surveys at 1400 GMT on consumer sentiment and expectations for the economy and inflation which could move the market on a surprise print. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities treaded water, fluctuating between small gains and losses. Sportswear and EV names gained. Li Ning (02332:xhkg) climbed more than 4% after reporting better than expected 1H results with sales growth of 22% and net profit growth of 12% from last year. The solid sales growth was led by online sales and wholesale business. China’s EV sales volumes grew 124% YoY (wholesale) and 117% YoY (retail) in July, much faster than the growth of the overall passenger vehicle market and had a penetration rate of 26.7%. XPeng (09868:xhkg) led the charge higher, gaining 4.2%, NIO (09866:xhkg) +3.6%, Li Auto (02015:xhkg) +1.7%. Leading semiconductor names, SMIC (00981:xhkg) and Hua Hong (01347:xhkg) reported inline and better-than expected results respectively. In its earnings call, the management of SMIC noted orders from some of its customers could fall meaningfully in near-term due to high inventories and suggested that recovery could come at around end of 2022 or early 2023. Share prices of SMIC declined 1.8%. USD: jump in long treasury yields checks the greenback’s descent After USDJPY traded to new local lows yesterday below 132.00, the pair snapped back well north of 133.00 in the wake of a surge in long US treasury yields (more below) and the USD sell-off was likewise checked elsewhere as risk sentiment also rolled over by late in the US equity trading session. The USD resilience is not yet technically significant and won’t be on a broad basis until/unless USDJPY surges back above perhaps 136.00, the EURUSD surge above 1.0300 is pushed back below 1.0250, and the aggressive AUDUSD move is pummeled back below 0.7000. The get a broader USD resurgence might require higher US yields and a deepening turn to the negative in risk sentiment, until then. Gold (XAUUSD) is heading for a fourth weekly gain ... supported by a weaker dollar after lower-than-expected CPI and PPI data helped reduce expectations for how high the Fed will allow rates to run. However, rising risk appetite as seen through surging stocks and bond yields trading higher on the week, have so far prevented the yellow metal from making a decisive challenge at key resistance above $1800/oz, and the recent decline in ETF holdings and low open interest in COMEX futures points to a market that is looking for a fresh and decisive trigger. Gold needs to hold $1760 in order to avoid a fresh round of long liquidation, while silver is looking for support at $20.23, its 50-day SMA. Copper and industrial metals in general have seen a strong recovery with COPPERSEP22 now eying resistance at $3.7150, its 50-day SMA. Crude oil (CLU2 & LCOV2) traded higher on Thursday ... before some light profit emerged overnight in Asia. Prices have been supported by signs of softer inflation improving the growth outlook, weaker dollar and improving demand, especially in the US where gasoline prices at the pumps have fallen below $4 per gallon for the first time since March. In addition, the International Energy Agency (IEA) lifted its consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch from expensive gas to fuel based products. Meanwhile, OPEC may struggle to raise output in coming months due to limited spare capacity. WTI futures touched $94/barrel while Brent futures returned to the 100-mark, thereby supporting our view that oil prices have reached a potential through in this correction phase.   US Treasuries (IEF, TLT) see long-end yields surging US yields at the long end of the curve ripped higher with the move aggravated by a somewhat soft 30-year T-bond auction, though the bulk of the move higher in yields unfolded earlier in the day on heavy selling of treasury futures. The 30-year yield rose a chunky 15.5 basis points at one point yesterday and traded to the highest levels in weeks, with the 10-year likewise poking above local highs in the 2.87% yield area. The jump in yields is technically significant if it holds and proceeds to 3.00%, suggesting that the consolidation phase is over. As well, the rise at the long end of the curve has significantly steepened the yield curve from a recent extreme in the 2-10 inversion of –49 basis points to –34 basis points.   What is going on?   US jobless claims rise, University of Michigan ahead US initial jobless claims 262K vs 265K estimate, notably higher than the 248k the prior week and the highest since November 2021. The 4-week moving average of initial jobless claims increased to 252K vs 247.5K last week, but still below 350k levels that can cause an alarm. The modest pickup in claims suggests that turnover at weaker firms is increasing. Key data to watch today is the preliminary University of Michigan survey for August, where expectations are for a modest improvement given lower gasoline prices. The grains sector trades at a five-week high ahead of today’s supply and demand report The Bloomberg Grains Index continues to recover following its 28% June to July correction with gains this past week being led by wheat (WHEATDEC22) and corn (CORNDEC22) in response to a weaker dollar and not least hot and dry weather in the US and another heatwave in Europe raising concerns about yield and production. Hot and dry weather at a critical stage for yield developments ahead of the soon to be harvested crop has given today’s World Agricultural Supply and Demand Estimates report some additional attention with surveys looking for lower yields and with that lower ending stocks. San Francisco Fed President Mary Daly sees 50 basis point hike at September FOMC meeting Daly is not an FOMC voter this year. Unlike her colleague (also a non-voter this year) Neel Kashkari at the Minneapolis Fed, she is satisfied with the median forecast of a 3.4% policy rate by year-end, which would be achieved with a 50 basis point move in September, followed by two 25 basis point hikes in November and December. Kashkari thinks 3.9% is more appropriate for a year-end target policy rate. Daly noted that she is happy to see inflation coming down, but is still open for a larger rate increase in September if necessary. “It really behooves us to stay data dependent and not call it”. The market is currently priced for 60 basis points of hiking at the September 21 FOMC meeting. Illumina shares down 23% on massive earnings miss The DNA-sequencing company slashed its fiscal year outlook last night due to potential penalties in Europe from its acquisition of another company. Its FY EPS forecast is now $2.75-2.90 down from previously $4-4.20.   What are we watching next?   UK Q2 GDP likely to show a contraction ... after April was down 0.2% and May up 0.5%. June GDP is likely to have seen a larger contraction given less working days in the month, as well as constrained household spending as inflation surged to a fresh record high. While there may be a growth recovery in the near-term, the Bank of England clearly outlined a recession scenario from Q4 2022 and that would last for five quarters. Our Macro Strategist Chris Dembik has painted a rather pessimistic picture of the UK economy. Another downside surprise in US inflation US July PPI dipped into negative territory to come in at -0.5% MoM, much cooler than 1% last month or the +0.2% expected. But on a YoY basis, PPI remains up a shocking 9.8%. Core PPI rose 0.4% MoM, which means on a YoY basis core producer prices are up 7.6% (lower than June's +8.2% but still near record highs). Goods PPI fell 1.8%, dominated by a 9.0% drop in energy. Meanwhile, services PPI was up 0.1% in July. Despite the slowdown in both PPI and CPI this week, PPI is still 1.3% points above CPI, suggesting margin pressures and a possible earnings recession. Fed’s Daly said she will be open to a 75bps rate hike at the September meeting. Next signals from the Fed at Jackson Hole conference Aug 25-27 There is a considerable tension between the market’s forecast for the economy and the resulting expected path of Fed policy for the rest of this year and particularly next year, as the market believes that a cooling economy and inflation will allow the Fed to reverse course and cut rates in a “soft landing” environment (the latter presumably because financial conditions have eased aggressively since June, suggesting that markets are not fearing a hard landing/recession). Some Fed members have tried to push back against the market’s expectations for Fed rate cuts next year it was likely never the Fed’s intention to allow financial conditions to ease so swiftly and deeply as they have in recent weeks. The risks, therefore, point to a Fed that may mount a more determined pushback at the Jackson Hole forum, the Fed’s yearly gathering at Jackson Hole, Wyoming that is often used to air longer term policy guidance. Earnings to watch There are no important earnings today except for Flutter Entertainment which has already reported ahead of the trading start in London. Flutter reports first-half revenue of £3.4bn vs est. £3.2bn. Today: Flutter Entertainment Economic calendar highlights for today (times GMT) 0900 – Eurozone Jun. Industrial Production 1400 – US Fed’s Barkin (non-voter) to speak 1400 – US Aug. Preliminary University of Michigan sentiment 1600 – USDA's World Agriculture Supply and Demand report (WASDE) Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 12, 2022

AUDUSD AUDUSD confirmed short-term uptrend yesterday breaking above 0.7069. RSI back above 60 indicating AUDUSD is likely to move higher towards resistance at 0.7283. AUDUSD could move higher from there after a likely correction. If closing above 0.76 AUDUSD could move toward peak at around 0.7660.To neutralise that scenario AUDUSD must move back below 0.7069. To reverse it AUDUSD must collapse to below 0.6865. Source: Saxo Group Weekly chart shows AUDUSD trading in a wide falling channel. A test of upper falling trendline is not unlikely, given that the above bullish scenario plays out. Source: Saxo Group AUDJPY AUDJPY is slowly crawling higher after the spike down below key support last week. AUDJPY is back above all Simple Moving averages and RSI is still showing positive sentiment indicating a test of the slightly falling upper trendline is likely. If AUDJPY breaks above the trendline and above resistance at 95.75 the pairs is likely to take out the peak in June at around 96.90. Source: Saxo Group GBPAUD GBPAUD is testing support at 1.7173 and seems likely to break bearish out of the range it has been trading in past 6 months. If AUDGBP closes below 1.7173 the pair is set for lower levels Source: Saxo Group Weekly chart shows that 01.7173 is a key support level rejecting GBPAUD several times. If GBPAUD finally breaks below the support a medium- to long-term move towards 1.60 area is in the cards.IF it fails to close below 1.7173 GBPAUD could resume its rangebound behaviour Source: Saxo Group Source: Technical Update - AUD pairs on the move testing or breaking resistance levels. AUDUSD , AUDJPY & GBPAUD

Summary:  Today we note that the big surge in yields at the long end of the US yield curve were likely the critical factor in capping and reversing the extension of the rally in equities yesterday. The US dollar found a bit of resilience on the development as well, if only half-hearted. Elsewhere, we zoom in on global natural gas supply concerns after the latest weekly US storage yesterday, discuss the grains outlook with a key report up late today and look ahead at the fairly busy macro calendar next week, while wondering how the Fed deals with re-establishing its hawkish credibility. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please!   We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: US yields jump, capping complacency

Summary:  While the growth outlook for Singapore is deteriorating on the back of weaker external demand, we believe exposure to the Singapore market remains a key portfolio diversifier given its safe-haven status. Rising interest rates continue to position banking stocks favourably, while the reopening of the regional and global economies brings likely benefits to retail and hospitality REITs as well as other travel related stocks and sectors. There are also some stocks to consider in-line with our preferred global equity themes of commodities and defence. Macro conditions are deteriorating The final print of Singapore’s Q2 GDP was revised lower to 4.4% y/y from an advance estimate of 4.8% earlier, suggesting a q/q contraction of 0.2% as against gains of 0.2% q/q suggested by the advance estimate or the 0.8% q/q growth seen in the first quarter. The Ministry of Trade and Industry (MTI) has also narrowed the forecast for annual 2022 growth to 3-4% from 3-5% earlier amid rising global slowdown risks. Given Singapore is an export-driven economy, it remains prone to the volatile external environment. Meanwhile, China’s Zero-covid strategy has hampered global supply chains as well as export demand from Singapore. These risks keep the threat of a technical recession – which is defined as two or more consecutive quarters of negative GDP growth – alive. The officials have, however, ruled that out for now and suggest a mild positive growth for Q3 and Q4. Is more monetary policy tightening on the cards? Singapore’s inflation remains high, but with core at 4.4%, it is still below the global inflation levels. We can certainly feel the price pressures biting, especially in rents and transportation. That is likely to remain a key concern for the Monetary Authority of Singapore (MAS), while the gloomier growth picture will only add some caution. Headwinds from external demand will be somewhat offset by a service sector growth picking up as the local and regional economies continue to broaden their reopening measures. This is boosting retail sales and tourism-led spending, while the labor market is also still tight. What could possibly be ruled out is an off-cycle move, or possibly a re-centering of the S$NEER policy band, unless core inflation surprises significantly to the upside. Singapore’s monetary policy has entered a restrictive mode with four tightening moves since October 2021, and further steepening of the S$NEER slope cannot be ruled out. What to consider in the markets? Singapore’s safe-haven status makes it an important stabilizer in the portfolios, especially in the choppy global markets. Singapore equities are riding on services demand recovery and sustained export momentum. The banking stocks such as DBS (D05:xses), UOB (U11:xses) and OCBC (O39:xses) remain well positioned to benefit from the rising interest rates, even as the wealth management income takes a haircut due to the weak market sentiment. Meanwhile, REITs offer a good dividend yield, and therefore inflation protection. Travel related stocks and sectors, such as retail REITs, hospitality REITs, Singapore Airlines (C6L:xses) or SATS (S58:xses) could also benefit from a sustained reopening momentum. Out global equity baskets have shown an outperformance from the Commodities and Defence baskets so far this year. Defence stocks could remain in focus with the increasing geopolitical tensions, and that means Singapore Technologies Engineering (S63:xses) may be worth a look. Green transformation also necessitates a look at Sembcorp Industries (U96:xses), while Singtel (Z77:xses) remains in a position to ride through the economic crisis with its rapid 5G adoption. Wilmar (F34:xses), an agribusiness firm with market cap greater than Singapore Airlines, has gained tremendous attention due to the tight edible oil markets since the Ukraine invasion, and its exposure to consumption in some of the largest emerging markets also makes it a key inflation play. Some of the sectors to remain cautious about would be the technology or manufacturing with exposure to China. REITs with exposure to China’s property market also face further threat. Key risk factors to watch While the external demand outlook remains fragile and dampens the growth prospects of Singapore economy and companies, there are also risks from a global tightening wave which could result in capital outflows. Meanwhile, rising geopolitical tensions in the region could also result in cautious investor sentiment. There remains a risk of US-China trade tensions coming back, and that could be a headwind for Singapore. Lastly, a resurgence of Covid remains a key risk to watch in Singapore and Asia, as the response will likely remain stricter than Europe despite a high level of vaccination.   Source: Singapore Market Pulse: Weaker macro conditions, but safe-haven reputation supports

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

Summary:  The easing inflation narrative has been building strength for six weeks now and the short-term vindication in the US CPI release on Wednesday has bolstered the bulls. However, the structural issues in the supply-side of the economy have been resolved and wages combined with rents will add more pressure on inflation going forward. We also highlight the unfolding scandal around the heartburn drug Zantac as it has erased $40bn in market value from Sanofi and GSK. Finally, we take a look at next week's earnings. It is too early to call inflation is tamed The US July CPI release on Wednesday has bolstered the soft-landing and easing inflation trade catapulting high duration assets higher. S&P 500 futures are attempting to push higher and the 200-day moving average sitting around the 4,325 level is suddenly not an outrageous gravitational point for US equities in the near-term. While the equity market is buying the all good scenario on inflation we would emphasise that it is too early to call. The Fed will like to see the 6-month average on the US CPI core m/m to go back to 0.2% before easing policy and that is simply not possible until at least the end of Q1 next year. Many of the structural issues except maybe for logistics, and this pain could come back again this winter if China gets another big Covid outbreak, are still not solved as capital expenditures in real terms are still not coming up in the global mining and energy industry. Labour markets remain tight with especially the US being the worst hit having lost around 1.5%-point of its labour force due to the pandemic and these people are likely never coming back. Rent dynamics are also heating up in both the US and Europe, and this winter will test the strength of the European population as the energy crisis could get much worse. We encourage investors to watch the US 10-year yield as a break above 3% again should cause a negative reaction in global equities. S&P 500 continuous futures | Source: Saxo Group US CPI core m/m | Source: Bloomberg Potential gigantic Zantac liabilities hit Sanofi, GSK, and Pfizer Health care is typically associated with stability, high valuations, and high predictability in the underlying cash flows, but the industry is being rocked by increasing concerns over the heartburn drug Zantac. Sanofi, GSK, and Pfizer have lost combined market value of $40bn and analysts are estimating that damage liabilities could reach $10-45bn. Zantac was removed from the market in 2019 by the FDA as the drug appears to be producing unacceptably high levels of a cancer-causing chemical. There is case coming up in Illinois on 22 August which will give the first indications of where this is going. There will continue to be short-term headwinds for both Sanofi and GSK where Pfizer seems to have been selling the drug for a much more reduced period than the two others. Weekly share prices of Sanofi, GSK, and Pfizer | Source: Bloomberg Earnings to watch next week The Q2 earnings season is slowly coming to end and what a quarter it has been with earnings jumping to a new all-time high (see chart) driven by a significant increase in profits in the energy sector. The technology sector measure by the Nasdaq 100 had another bad quarter with earnings declining reinforcing the need to cut costs of many of these previously fast growing technology companies. Next week’s most important earnings are highlighted below with the names in bold being those that can move market or industry sentiment. Meituan on Monday is important for gauging consumer spending and behaviour in China. BHP Group is must watch on Monday as the Australian miner is tapped into China’s growth and demand for iron ore. On Tuesday, earnings from Walmart and Home Depot can provide an updated picture on global supply chains and price pressures across a wide range of consumer products. Tencent reports on Wednesday and is an important earnings release for investors watching Chinese technology stocks as the recent amendment to China’s anti-monopoly laws is adding more pressure on the big technology platform companies. In the payments industry, Adyen’s result on Thursday will be highly watched as Adyen is really challenging PayPal on growth and dominance in the industry. Monday: China Construction Bank, Agricultural Bank of China, Meituan, China Life Insurance, China Shenhua Energy, China Petroleum & Chemical, BHP Group, COSCO Shipping, Li Auto, Trip.com Group, DiDi Global Tuesday: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Source: The soft-landing and inflation easing narrative is thriving

Summary:  The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing, driven by recent economic data strength, dollar weakness and signs inflation may have peaked. With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support, especially across the sectors of energy and key agriculture commodities. The correction that for some commodities already started back in March has since the end of July increasingly been showing signs of reversing. According to the Bloomberg commodity sector indices, the correction period triggered peak to bottom moves of 41% in industrial metals, 31% in grains and 27% in energy. The main reason for the dramatic correction following a record run of strong gains was the change in focus from tight supply to worries about demand. Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver has been the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing but recent economic data strength, dollar weakness and signs inflation may have peaked have all helped support markets that have gone through weeks and in some cases months of sharp price declines, and with that an aggressive amount of long liquidation from financial traders as well as selling from macro-focused funds looking for a hedge against an economic downturn.With the broad position adjustments having run their course, the focus has returned to supply which in many cases remains tight, thereby providing renewed support and problems for those who have been selling markets looking for even lower prices in anticipation of recession and lower demand. Backwardation remains elevated despite growth worries The behaviour of spot commodity prices, as seen through first month futures contracts, rarely gives us the full fundamental picture with the price action often being dictated by technical price-driven speculators and funds focusing on macroeconomic developments, as opposed to the individual fundamental situation. The result of this has been a period of aggressive selling on a combination of bullish bets being scaled back but also increased selling from funds looking to hedge an economic slowdown.An economic slowdown, or in a worst-case scenario a recession, would normally trigger a surplus of raw materials as demand falters and production is slow to respond to a downturn in demand. However, during the past three months of selling, the cost of commodities for immediate delivery has maintained a healthy premium above prices for later deliveries. The chart below shows the spread measured in percent between the first futures and the 12-month forward futures contract, and while the tightness has eased a bit, we are still seeing tightness across a majority, especially within energy and agriculture. A sign that the market has sold off on expectations more than reality, and it raises the prospect of a strong recovery once the growth outlook stabilises. Crude oil The downward trending price action in WTI and Brent for the past couple of months is showing signs of reversing on a combination of the market reassessing the demand outlook amid continued worries about supply and who will and can meet demand going forward. The recovery from below $95 in Brent and $90 in WTI this week was supported by signs of softer US inflation reducing the potential peak in the Fed fund rates, thereby improving the growth outlook. In addition, the weaker dollar and improving demand, especially in the US where gasoline prices at the pumps have fallen below $4 per gallon for the first time since March.In addition, the International Energy Agency (IEA) lifted its global consumption estimate by 380 kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch from expensive gas to fuel-based products. Meanwhile, OPEC may struggle to raise output in the coming months due to limited spare capacity. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold (XAUUSD) The recently under siege yellow metal was heading for a fourth weekly gain, supported by a weaker dollar after the lower-than-expected US CPI and PPI data helped reduce expectations for how high the Fed will allow rates to run. However, rising risk appetite as seen through surging stocks and bond yields trading higher on the week have so far prevented the yellow metal from making a decisive challenge at key resistance above $1800/oz, and the recent decline in ETF holdings and low open interest in COMEX futures points to a market that is looking for a fresh and decisive trigger. We believe the markets newfound optimism about the extent to which inflation can successfully be brought under control remains too optimistic and together with several geopolitical worries, we see no reason to exit our long-held bullish view on gold as a hedge and diversifier. Gold has found some support at the 50-day moving average line at $1783, and needs to hold $1760 in order to avoid a fresh round of long liquidation the short-term. While some resistance is located just above $1800 gold needs a decisive break above $1829 in order to trigger the momentum needed to attract fresh buying in ETFs and managed money accounts in futures. Source: Saxo Group Industrial metals (Copper)   Copper has rebounded around 18% since hitting a 20-month low last month, thereby supporting a general recovery across industrial metals, the hardest hit sector during the recent correction. Supported by a softer dollar, data showing the US economy remains robust, easing concerns about the demand outlook in China and not least disruptions to producers in Asia, Europe as well as South America potentially curtailing supply at a time when exchange-monitored inventories remain at a decade low. All developments that have forced speculators to cut back recently established short positions.The potential for an improved demand outlook in China and BHP's recent announcement that it has made an offer for OZ Minerals and its nickel and copper-focused assets, is the latest in a series of global acquisitions aimed at shoring up supplies of essential metals for the energy transition. With its high electrical conductivity, copper supports all the electronics we use, from smartphones to medical equipment. It already underpins our existing electricity systems, and it is crucial to the electrification process needed over the coming years in order to reduce demand for energy derived from fossil fuels.Following a temporary recovery in the price of copper around the beginning of June when China began easing lockdown restrictions, the rally quickly ran out of steam and copper went on to tumble below key support before eventually stabilizing after finding support at $3.14/lb., the 61.8% retracement of the 2020 to 2022 rally. Since then, the price has recovered strongly but may temporarily pause after reaching finding resistance in the $3.70/lb area. We maintain a long-term bullish view on copper and prefer buying weakness instead of selling into strength. Source: Saxo Group The grains sector traded at a five-week high ahead of Friday’s supply and demand report from the US Department of Agriculture. The Bloomberg Grains Index continues to recover following its 28% June to July correction with gains this past week being led by wheat and corn in response to a weaker dollar and not least hot and dry weather in the US and another heatwave in Europe raising concerns about yield and production. Hot and dry weather at a critical stage for yield developments ahead of the soon-to-be-harvested crop has given the World Agricultural Supply and Demand Estimates report some additional attention with surveys pointing to price support with the prospect of lower yields lowering expectations for the level of available stocks ahead of the coming winter. Cotton, up 8% this month has seen the focus switch from growth and demand worries, especially in China, to deepening global supply concerns as heatwaves in the US and China hurt production prospects. Friday’s monthly supply and demand report (WASDE) from the US Department of Agriculture was expected to show lower US production driving down ending stocks by around 10% to 2.2 m bales, an 11-year low. Arabica coffee, in a downtrend since February, has also seen a steady rise since bouncing from key support below $2/lb last month. A persistent and underlying support from South American production worries has reasserted itself during the past few weeks as the current on-season crop potentially being the lowest since 2014. Brazil’s drought and cold curbed flowering last season and severe frosts in July 2021 led farmers to cut down coffee trees at a time of high costs for agricultural inputs, notably fertilizer. In addition, Columbia another top producer, has seen its crop being reduced by too much rainfall. Source: WCU: Commodity correction may have exhausted itself

Relevance up to 11:00 2022-08-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. EUR/USD   Higher timeframes Bulls yesterday attempted to go beyond the nearest limit—the weekly short-term trend (1.0285). Their task now is to stay above the level and fix the achievement at the close of the week. In this case, the chances that the weekly upward correction will have development prospects will increase. On the daily timeframe, the nearest reference point for the continuation of the rise is now the Ichimoku cloud, the breakdown of which will form an additional upward reference point—the target for the breakout of the cloud. Among the supports today, we can note the levels of the daily golden cross (1.0246 – 1.0210 – 1.0160 – 1.0111). H4 – H1 The main advantage now belongs to the bulls, as the work is carried out above the key levels, but the pair is in the correction zone. The interests of bulls within the day today are the resistance of the classic pivot points (1.0378 – 1.0457 – 1.0545). The key levels now at 1.0290 (central pivot of the day) and 1.0226 (weekly long-term trend) separate the pair from a reprioritization in favor of a more bearish sentiment. Targets for decline today can be noted at 1.0211 – 1.0123 – 1.0044 (classic pivot points). *** GBP/USD Higher timeframes Bulls yesterday managed to push off the supports, around which the last few days have been consolidating (the main level 1.2082 is a weekly short-term trend), and enter the daily Ichimoku cloud. The breakdown of the cloud (1.2323) and consolidation in the bullish zone are the main tasks for bulls in the near term. When the mood changes, the relevance will return to supports. The support zone is now quite wide and includes 1.2174 (lower boundary of the daily cloud) – 1.2148 – 1.2089 – 1.2026 – 1.1963 (levels of the daily Ichimoku cross), as well as 1.2082 (weekly short-term trend) and 1.2000 (an important psychological level). H4 – H1 In the lower timeframes, the main advantage now belongs to the bulls. Among the bullish reference points during the day today, we can note 1.2303 – 1.2396 – 1.2515 (classic pivot points resistance) and 1.2301–34 (target for the breakdown of the H4 cloud). The balance of power will change if bears consolidate below key levels 1.2184 (central pivot point of the day) – 1.2120 (weekly long-term trend). After that, the reference points will be the support of the classic pivot points (1.2091 – 1.1972 – 1.1879). *** In the technical analysis of the situation, the following are used: higher timeframes – Ichimoku Kinko Hyo (9.26.52) + Fibo Kijun levels H1 - Pivot Points (classic) + Moving Average 120 (weekly long-term trend) Source: Forex Analysis & Reviews: Technical analysis recommendations on EUR/USD and GBP/USD for August 11, 2022

Relevance up to 13:00 2022-08-12 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Technical analysis: GBP/UISD has been trading flat today at the price of 1.2204 but I see potential for the second downside swing. Trading recommendation: Due to the strong growth yesterday and extreme condition, I see potential for the downside movement. Watch for potential selling opportunities with the downside objective at the price of 1.2135. Stochastic oscillator is showing overbought condition and bear cross, which is sign that sellers are taking control. Key resistance is set at the price of 1.2270 Source: Forex Analysis & Reviews: GBP/USD update for August 11, 2022 - Potential for the second downside swing to develop

Overview: The markets are putting the finishing touches on this week’s activity. Japan, returning from yesterday’s holiday bought equities, and its major indices jumped more than 2%. China, South Korea, and Australia struggled. Europe’s Stoxx 600 is firmer for the third consecutive session. It is up about 1.3% this week. US futures are also firmer after reversing earlier gains yesterday to close lower on the day. The US 10-year yield is flat near 2.88%, while European benchmarks are 4-6 bp higher. The greenback is mixed. The dollar-bloc currencies and Norwegian krone are slightly firmer, while the Swedish krona, sterling, and the yen are off around 0.3%-0.6%. Emerging market currencies are also mixed, though the freely accessible currencies are mostly firmer. The JP Morgan Emerging Market Currency Index is up about 1.15% this week, ahead of the Latam session, which if sustained would be the strongest performance in three months. Gold is consolidating at lower levels having been turned back from $1800 in the middle of the week. Near $1787.50, it is up less than 0.7% for the week. September WTI is edging higher for the third consecutive session, which would match the longest streak since January. US natgas surged 8.2% yesterday but has come back offered today. It is off 2.3%. Europe’s natgas benchmark is snapping a three-day advance of nearly 8% and is off 1.8% today. Iron ore rose 2.2% yesterday and it gave most of its back today, sliding almost 1.7%. September copper is unchanged after rallying more than 3.3% over the past two sessions. September wheat has a four-day rally in tow but is softer ahead of the Department of Agriculture report (World Agricultural Supply and Demand Estimates). Asia Pacific   Japan and China will drop some market sensitive high-frequency economic data as trading begins in the new week.  Japan will release its first estimate of Q2 GDP. The median in Bloomberg's survey and the average of a dozen Japanese think tanks (cited by Jiji Press) project around a 2.7% expansion of the world's third-largest economy, after a 0.5% contraction in Q1. Consumption and business investment likely improved. Some of the demand was probably filled through inventories. They added 0.5% to Q1 growth but may have trimmed Q2 growth. Net exports were a drag on Q1 (-04%) and may be flat. The GDP deflator was -0.5% in Q1 and may have deteriorated further in Q2. Some observers see the cabinet reshuffle that was announced this week strengthening the commitment to ease monetary policy. The deflation in the deflator shows what Governor Kuroda's successor next April must address as well. China reports July consumption (retail sales), industrial output, employment (surveyed jobless rate), and investment (fixed assets and property).  The expected takeaway is that the world's second-largest economy is recovering but slowly. Industrial output and retail sales are expected to have edged up. Of note, the year-to-date retail sales compared with a year ago was negative each month in Q2 but is expected to have turned positive in July. The year-over-year pace of industrial production is expected to rise toward 4.5%, which would be the best since January. The housing market, which acted as a critical engine of growth is in reverse. New home prices (newly build commercial residential building prices in 70 cities) have been falling on a year-over-year basis starting last September, and likely continued to do so in July. Property investment (completed investment in real estate) likely fell for the fourth consecutive month. It has slowed every month beginning March 2021. The pace may have accelerated to -5.6% year-over-year after a 5.4% slide in the 12-months through June. The surveyed unemployed rate was at 4.9% last September and October. It rose to 6.1% in April and has slipped back to 5.5% in June. The median forecast in Bloomberg's survey expects it to have remained there in July. Lastly, there are no fixed dates for the lending figures and the announcement of the one-year medium-term lending facility rate. Lending is expected to have slowed sharply from the surge in June, while the MLF rate is expected to be steady at 2.85%. Over the several weeks, foreign investors have bought a record amount of Japanese bonds.  Over the past six weeks, foreigners snapped up JPY6.44 trillion (~$48 bln). It may partly reflect short-covering after the run-in with the Bank of Japan who bought a record amount to defend the yield-curve control cap of 0.25% on the 10-year bond. There is another consideration. For dollar-based investors, hedging the currency risk, which one is paid to do, a return of more than 4% can be secured. At the same time, for yen-based investors, hedging the currency risk is expensive, which encourages the institutional investors to return to the domestic market. Japanese investors have mostly been selling foreign bonds this year. However, the latest Ministry of Finance data shows that they were net buyers for the third consecutive week, matching the longest streak of the year. Still, the size is small. suggesting it may not be a broad or large force yet. Although the US 10-year yield jumped 10 bp yesterday, extending its recovery from Monday's low near 2.75% for a third session, the dollar barely recovered against the yen.  After falling 1.6% on Wednesday, after the softer than expected US CPI, the greenback rose 0.1% yesterday and is edging a little higher today. Partly what has happened is that the exchange rate correlation with the 10-year yield has slackened while the correlation with the two-year has increased. In fact, the correlation of the change in the two-year and the exchange rate is a little over 0.60 and is the highest since March. The dollar appears to be trading comfortably now between two large set of options that expire today. One set is at JPY132 for $860 mln and the other at JPY134 for $1.3 bln. Around $0.7120, the Australian dollar is up about 3% this week and is near two-month highs. It reached almost $0.7140 yesterday. The next technical target is in the $0.7150-$0.7170 area. Support is seen ahead of $0.7050. Next week's data highlight is the employment data (August 18). The greenback traded in a CNY6.7235-CNY6.7600 on Wednesday and remained in that range yesterday and today. For the second consecutive week, the dollar has alternated daily between up and down sessions for a net change of a little more than 0.1%. The PBOC set the dollar's reference rate at CNY6.7413, tight to expectations (Bloomberg's survey) of CNY6.7415. Europe   The UK's economy shrank by 0.6% in June, ensuring a contraction in Q2.  The 0.1% shrinkage was a bit smaller than expected but the weakness was widespread. Consumption fell by 0.2% in the quarter, worse than expected, while government spending collapsed by 2.9% after a 1.3% pullback in Q1. A decline in Covid testing and slower retail sales were notable drags. The one bright spot was business investment was stronger than expected. The June data itself was miserable, though there was an extra holiday (Queen's jubilee). All three sectors, industrial output, services, and construction, all fell in June and the trade balance deteriorated. The market's expectation for next month's BOE meeting was unaffected by the data. The swaps market has about an 85% chance of another 50 bp hike discounted.  Industrial output in the eurozone rose by 0.7%, well above the 0.2% median forecast in Bloomberg's survey and follows a 2.1% increase in May.  The manufacturing PMI warned that an outright contraction is possible. Of the big four members, only Italy disappointed. The median forecast in Bloomberg's survey anticipated a decline in German, France, and Spain. Instead, they reported gains of 0.4%, 1.4%, and 1.1% respectively. Industrial output was expected to have contracted by 0.1% in Italy and instead it reported a 2.1% drop. In aggregate, the strength of capital goods (2.6% month-over-month) and energy (0.6%) more than offset the declines in consumer goods and intermediate goods. The year-over-year rise of 2.4% is the strongest since last September. The disruption caused by Russia's invasion of Ukraine and the uneven Covid outbreaks and responses are as Rumsfeld might have said known unknowns.  But the disruptive force that may not be fully appreciated is about to get worse. The German Federal Waterways and Shipping Administration is warning that water in the Rhine River will fall below a critical threshold this weekend. At an important waypoint, the level may fall to about 13 inches (33 centimeters). Less than around 16 inches (40 centimeters) and barges cannot navigate. An estimated 400k barrels a day of oil products are sent from the Amsterdam-Rotterdam-Antwerp region to Germany and Switzerland. The International Energy Agency warns that the effects could last until late this year, and hits landlocked countries who rely on the Rhine the hardest. Bloomberg reported that Barge rates from Rotterdam to Basel have risen to around 267 euros a ton, a ten-fold increase in a few months. The strong surge in the euro to almost $1.0370 on Wednesday has stalled.  The euro is consolidating inside yesterday's relatively narrow range (~$1.0275-$1.0365). The momentum traders may be frustrated by the lack of follow-through. We suspect a break of $1.0265 would push more to the sidelines. The downtrend line from the February, March, and June highs comes in slightly above $1.0385 today. The broad dollar selloff in response to the July CPI saw sterling reach above $1.2275, shy of the month's high closer to $1.2295. Similar to the euro, sterling stalled. It has slipped through yesterday's low (~$1.2180). A break of the $1.2140 area could see $1.2100. That said, the $1.20 area could be the neckline of a double top and a convincing break would signal the risk of a return to the lows set a month ago near $1.1760. America   Think about the recent big US economic news.  It began last Friday with a strong employment report, more than twice what economists expected (median, Bloomberg survey) and a new cyclical low in unemployment. The job gains were broadly distributed. That was followed by a softer than expected CPI and PPI. Some observers placed emphasis on the slump in productivity and jump in unit labor costs. Those are derived from GDP figures and are not measured separately, though they are important economic concepts. Typically, when GDP is contracting, productivity contracts and by definition, unit labor costs rise. In effect, the market for goods and services adjusts quicker the labor market, and the market for money, even quicker. If the economy expands as the Atlanta Fed GDPNow tracker or the median in Bloomberg's survey project (2.5% and 2.0%, respectively), productivity will improve, and unit labor costs will fall. Barring a precipitous fall today, the S&P 500 and NASDAQ will advance for the fourth consecutive week.  The 10-year yield fell by almost 45 bp on the last three week of July and has recovered around half here in August. That includes five basis points this week despite the softer inflation readings. The two-year note yield fell almost 25 bp in the last two weeks of July and jumped 34 bp last week. It is virtually flat this week around 3.22%. The odds of a 75 bp rate hike at next month's FOMC meeting fell from about 75% to about 47%. The year-end rate expectation fell to 3.52% from 3.56%. Some pundits claim the market is pricing in a March 2023 cut, but the implied yield of the March 2023 Fed funds futures contract is 18 bp above the December 2022 contract. It matches the most since the end of June. Still, while the Federal Reserve is trying to tighten financial conditions the market is pushing back. The Bloomberg Financial Conditions Index is at least tight reading since late April. The Goldman Sachs Financial Condition index is the least tight in nearly two months.  US import and export prices are the stuff that captures the market's imagination.  However, the preliminary University of Michigan's consumer survey, and especially the inflation expectations can move the markets, especially given that Fed Chair Powell cited it as a factor encouraging the 75 bp hike in June. The Bloomberg survey shows the median expectation is for a tick lower in inflation expectations, with the one-year slipping to 5.1% from 5.2%. The 5-10-year expectation is seen easing to 2.8% from 2.9%. If accurate, it would match the lowest since April 2021. The two-year breakeven (difference between the conventional yield and the inflation-protected security) peaked in March near 5% and this week reached 2.70%, its lowest since last October. It is near 2.80% now. Mexico delivered the widely anticipated 75 bp hike yesterday.  The overnight rate target is now 8.50%. The decision was unanimous. It is the 10th consecutive hike and concerns that AMLO's appointments would be doves has proven groundless. The central bank meets again on September 29. Like other central banks, it did not pre-commit to the size of the next move, preserving some tactical flexibility. If the Fed hikes by 75 bp, it will likely match it. Peru's central bank hiked its reference rate by 50 bp, the 10th consecutive hike of that magnitude after starting the cycle last August with a 25 bp move. It is not done. Lima inflation was near 8.75% last month and the reference rate is at 6.50%. The Peruvian sol is up about 1.2% this month, coming into today. It has appreciated by around 3.25% year-to-date, making it the second-best performer in the region after Brazil's 8.1% rise. Argentina hiked its benchmark Leliq rate by 950 bp yesterday to 69.5%. It had delivered an 800 bp hike two weeks again. Argentina's inflation reached 71% last month. The Argentine peso is off nearly 23.5% so far this year, second only to the Turkish lira (~-26%). The US dollar fell slightly below CAD1.2730 yesterday, its lowest level since mid-June. The slippage in the S&P 500 and NASDAQ helped it recover to around CAD1.2775. It has not risen above that today, encouraged perhaps by the firmer US futures. Although the 200-day moving average (~CAD1.2745) is a good mile marker, the next important chart is CAD1.2700-CAD1.2720. A convincing break would target CAD1.2650 initially and then CAD1.2600. While the Canadian dollar has gained almost 1.4% against the US dollar this week (around CAD1.2755), the Mexican peso is up nearly 2.4%. The greenback is pressing against support in the MXN19.90 area. A break targets the late June lows near MXN19.82. The MXN20.00 area provides the nearby cap.       Disclaimer   Source: Heading into the Weekend, Dollar's Downside Momentum Stalls

Summary:  PetroChina, Sinopec, Sinopec Shanghai Petrochemical, Chalco and China Life Insurance notified the New York Stock Exchange on 12 Aug 2022 of their intended application for voluntary delisting of their American depository shares and terminating the relevant ADR programs. The question now is if this is an example set for mega-cap Chinese internet and platform companies to follow. Five Chinese Central State-Owned Enterprises (“Central SOEs”) apply for delisting from the New York Stock Exchange   On August 12, 2022, after the close of the regular session of the Stock Exchange of Hong Kong, PetroChina (00857:xhkg/PTR:xnys), China Petroleum & Chemical Corporation, also known as Sinopec (00386:xhkg/SNP:xnys), Sinopec Shanghai Petrochemical (00338:xhkg/SHI:xnys), Aluminum Corporation of China, also known as Chalco (02600:xhkg/ACH:xnys), and China Life Insurance (02628:xhkg/LFC:xnys) announced that they had notified the New York Stock Exchange (“NYSE”) that they are will apply for delisting of their American depository shares (“ADSs”) from the NYSE. It is expected that the American Depository Receipt (“ADR”) programs will be terminated between September 1 and October 16, 2022, and the ADSs issued under these ADR programs can be surrendered for their underlying H shares, which will continue to trade in the Stock Exchange of Hong Kong (“SEHK”). PetroChina, Sinopec, Sinopec Shanghai Petrochemical and Chalco are Central SOEs that are owned (80.4%, 68.8%, 32.2%, and 50.4% respectively) and controlled by the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”).  These, together with 93 others that are also owned and controlled by the SASAC are known as Central SOEs or “Yang Qi” in Chinese.  China Life Insurance, not one of those under the SASAC, is not a Central SOE in the strict sense but it is usually considered a Central SOE due to the fact that it is 62.4% owned and controlled by the Ministry of Finance.  All five companies are on the U.S. Securities and Exchange Commission’s (“SEC”) conclusive list of identified entities under the HFCAA    In the U.S., the Sarbanes-Oxley Act enacted in 2002 requires publicly traded companies to give the U.S. Public Company Accounting Oversight Board (“PCAOB”) access to audit work papers. In 2009, the China Securities Regulatory Commission (“CSRC”) issued a rule that forbids overseas regulatory authorities from inspecting Chinese auditing firms without CSRC’s prior approval and audit work papers containing state secretes from being taken outside China.  The PCAOB’s attempt to inspect the China-based affiliates of the “Big”-4” accounting firms in 2010 was rejected by the CSRC.  The SEC subsequently prosecuted these China affiliates of the Big-4 and the cases were subsequently settled. In order to tighten the enforcement of the audit work papers requirement provided in the Sarbanes-Oxley Act, the U.S. enacted the Holding Foreign Companies Accountable Act (“HFCAA”) in 2020 which provides that companies failing to make available audit work papers for inspection by the PCAOB cannot be traded in a U.S. exchange.  Since March 2022, the SEC has put 162 Chinese companies listed in a U.S. bourse first on a provisional list and then 155 of them subsequently on a conclusive list of issuers identified under the HFCAA. After rounds of negotiations, the U.S. and China have so far not been able to come to some resolutions.  While the Chinese authorities have sounded optimistic, especially earlier in April and May, about eventually reaching an agreement with the U.S., SEC Chairman Gary Gensler has expressed doubts about any eventual agreement.PetroChina, Sinopec, Sinopec Shanghai Petrochemical, Chalco, and China Life Insurance are among those on the conclusive list and facing the plausibility of being delisted by the U.S. regulators from the NYSE.  The deadline for delisting is in 2024 but the U.S. Congress is considering passing a bill to bring the deadline forward to 2023.  Actions were seemingly in concert  Each of the five companies notified the NYSE on the same day, August 12, and provided similar reasons for their decisions in their filing with the SEHK, namely relatively small capitalization of H shares being represented by ADSs, small ADS trading volume compared to the turnover of H shares and administrative burden for performing reporting and disclosure. The China Securities Regulatory Commission (“CSRC”) said on Friday that the delisting decision had been made out of these companies’ own business decisions. Nonetheless, given the identical timing, similar reasons provided and status of Central SOEs, one has to wonder if they were acting in concert with coordination from the Chinese authorities.  The other two Central SOEs controlled by the SACAC and on the SEC conclusive list, China Eastern Airlines (00670:xhkg/CEA:xnys) and China Southern Airlines (01055:xhkg/ZNH:xnys) will probably apply for ADS delisting soon as well.  Chinese internet and platform companies are the focus in the coming weeks  While these Central SOEs are thinly traded on the NYSE, the shares of Chinese internet and platform private enterprises, including Alibaba (09988:xhkg/BABA:xnys), Baidu (09888:xhkg/BIDU:xnas), Bilibili (09626:xhkg/BILI:xnas), JD.COM (09618:xhkg/JD:xnas), Pinduoduo (PDD:xnas), Sohu (SOHU:xnas), iQiyi (IQ:xnas), KE Holdings (BEKE:xnys), Weibo (09898:xhkg/WB:xnas), Tencent Music Entertainment (TME:xnys) are widely held and actively traded on the NYSE or Nasdaq.  For examples, Bilibili and Weibo have larger average daily turnover in Nasdaq than in the SEHK and Pinduoduo, iQiyi, KE Holdings, Sohu and are listed only on Nasdaq and Tencent Music on the NYSE.  Alibaba is on the provisional list and the other names above are on the conclusive list of issuers identified under the HFCAA. All of them will be subject to mandatory delisting from the NYSE or Nasdaq if the Chinese and U.S. regulators cannot reach an agreement to resolve the audit work paper inspection issue in the coming months.  Given these internet and platform companies hold a huge amount of potentially sensitive data of hundreds of millions of Chinese individuals as well as numerous private as well as public enterprises and institutions, the plausibility of the Chinese government being willing to make a concession to the SEC and PCAOB regarding the latter’s unfiltered access to audit work papers of these companies is getting increasingly slim in the midst of pervasive Sino-American strategic competition.  Through the voluntary delisting of nstitutional money which is restricted by their investment mandates and retail investors who tend to have a home bias will unload their holdings instead of exchanging their ADSs for H shares.  In the case of those companies that do not yet have a listing in the SEHK, the uncertainty and disruption will be even more significant.  The southbound stock connect flows of money from mainland investors may mitigate somewhat the impact but some turbulence initially can probably be expected.   Source: China Update: State-owned giants seek to delist from the New York Stock Exchange

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 9. A relatively quiet week where a continued improvement in risk appetite drove stocks higher while softening the dollar. Some commodity positions, with crude oil the major exceptions, showed signs of having reached a trough following weeks of heavy selling Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 9. A relatively quiet summer holiday impacted week where stocks traded higher ahead of last week’s CPI and PPI print after better than expected economic data helped reduce US recession fears while the market was looking for inflation to roll over. The dollar traded a tad softer, bond yields firmed up while commodities showed signs of having reached a trough following weeks of heavy selling.    Commodities Hedge funds were net buyers for a second week with demand concentrated in metals and agriculture while the energy sector saw continued selling. Overall the net long across 24 major commodity futures rose for a second week after recently hitting a two-year low. Buying was concentrated in gold, platinum, corn and livestock with crude oil and wheat being to most notable contracts seeing net selling. Energy: Speculators responded to continued crude oil weakness by cutting bullish bets in WTI and Brent crude by a combined 14% to a pre-Covid low at 304.5k lots. The reductions were primarily driven by long liquidation in both contracts following a demand fear driven breakdown in prices. Gas oil and gasoline longs were also reduced. Metals: Buying of metals extended to a second week led by gold which saw a 90% jump in the net long to 58.2k lots. Overall, net short positions were maintained in silver, platinum and copper with the latter seing a small amount of fresh selling due to profit taking on recently established longs. Agriculture: Grains were mixed with corn and soybeans seeing continued buying ahead of Friday's WASDE  report while the CBOT corn net short jumped 36% to 20k lotsand the Kansas net long was cut to a two-year low. The total grain long rose for second week having stabilised around 300k lots having collapse from a near record 800k lot on April 22.Soft commodities saw elevated short positions in sugar and cocoa being maintained with price gains in coffee and not least cotton supporting a small increase in their respective net longs. This before Friday's surge in cotton which left it up 13% on the week after the US Department of Agriculture slashed the US crop forecast by 19% to a 12-year low. Driven by a high level of abandonment of fields in the drought-stricken Southwest.      Forex In the week to August 9 when the dollar traded close to unchanged against a basket of major currencies, speculators increased to three the number of weeks of continued dollar selling. The pace of selling even accelerated to the highest since January after the gross long against ten IMM futures and the Dollar Index was slashed by 20% to $17.4 billion, a nine week low. Most notable selling of the greenback was seen against GBP and JPY followed by EUR and CHF. The Japanese yen, under pressure for months as yield differentials to the dollar widened saw its net short being cut by 22% to a 17-month low.     What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming  Source: COT: Speculators cut oil long to pre-covid low

Summary:  The weaker-than-expected economic data from China caught much of the attention and dragged U.S. bond yields and commodities lower. U.S. equities have been in a 4-week rally. Investors are weighing if the U.S. economy is heading into a soft-landing or a recession and if the Chinese economy can recover in the coming months. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities opened lower on weak economic data prints from China as well as a weaker-than-expected Empire State manufacturing survey but climbed towards midday and finished higher. S&P 500 rose 0.4%. Nine of its 11 sectors gained, with shares of consumer staples and utilities outperforming. Nasdaq 100 rose 0.75%, led by a 3% jump in Tesla (TSLA:xnas).  U.S. treasury yields fell Treasury yields fell across the front end to the belly of the curve after a bunch of weak economic data from China and the Empire State manufacturing survey came in at -31.3, much weaker than 5.0 expected. Two-year yields fell by 7bps to 3.17% and 10-year yields declined 5bps to 2.78%.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese equities tried to move higher in early trading but soon reversed and turned south, Hang Seng -0.7%, CSI300 -0.1%.   The People’s Bank of China cut its policy on Monday but the unexpected move did not stir up much market excitement. The visit of another delegation of US lawmakers to Taiwan within 12 days of Speaker Pelosi’s visit stirred up concerns about the tension in the Sino-American relationship.   Container liner, Orient Overseas (00316:xhkg) plunged nearly 15%.   Stocks that have a dual listing of ADRs, in general, declined on Monday’s trading in Hong Kong following Friday’s decisions for five central SOEs to apply for delisting from the New York Stock Exchange, PetroChina (00857:xhkg/PTR:xnys) -3.4%, Sinopec (00386:xhkg/SNP:xnys) -2.9%, Alibaba (09988:xhkg/BABA:xnys) -1.2, Baidu (09888:xhkg/BIDU:xnas) -1%, Bilibili (09626:xhkg/BILI:xnas) -1%. SMIC (00981:xhkg) dropped more than 6% on analyst downgrades.  Chinese property names dropped as home prices continued to fall in China.  USD broadly firmer against G10 FX, expect JPY The US dollar started the week on the front foot, amid a weaker risk sentiment following a miss in China’s activity data and the disappointing US manufacturing and housing sentiments. The only outlier was the JPY, with USDJPY sliding to lows of 132.56 at one point before reversing the drop. The 131.50 level remains a key area of support for USDJPY and a bigger move in the US yields remains necessary to pierce through that level. The commodity currencies were the hardest hit, with AUDUSD getting in close sight of 0.7000 ahead of the RBA minutes due this morning. NZDUSD also plunged from 0.6450 to 0.6356. The Chinese yuan weakened and bond yields fell after disappointing economic data and surprising rate cuts USDCNH jumped more than 1% from 6.7380 to as high as 6.8200 on Monday following the weak credit data from last Friday, disappointing industrial production, retail sales, and fixed assets investment data released on Monday morning, and unexpected rate cuts by the People’s Bank of China. The 10-year Chinese government bond yield fell 8bps to 2.67%, the lowest level since April 2020, and about 20bps below the yield of 10-year U.S. treasury notes. Crude oil prices (CLU2 & LCOV2) Crude oil prices had a variety of headwinds to deal with both on the demand and the supply side. While demand concerns were aggravated due to the weak China data, and the drop in US Empire State manufacturing – both signaling a global economic slowdown may be in the cards – supply was also seen as being possibly ramped up. There were signs of a potential breakthrough in talks with Iran as Tehran said it sent a reply to the EU's draft nuclear deal and expects a response within two days. Meanwhile, Aramco is also reportedly ramping up production. WTI futures dropped back below $90 while Brent touched $95/barrel. Metals face the biggest brunt of China data weakness Copper led the metals pack lower after China’s domestic activity weakened in July, which has raised the fears of a global economic slowdown as the zero-Covid policy is maintained. Meanwhile, supply side issues in Europe also cannot be ignored with surging power prices putting economic pressure on smelters, and many of them running at a loss. This could see further cuts to capacity over the coming months. Iron ore futures were also down. What to consider? Weak Empire State manufacturing survey and NAHB Index Although a niche measure, the United States NY Empire State Manufacturing Index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic. New orders and shipments plunged, and unfilled orders also declined, albeit less sharply. Other key areas of concern were the rise in inventories and a decline in average hours worked. This further weighed on the sentiment after weak China data had already cast concerns of a global growth slowdown earlier. Meanwhile, the US NAHB housing market index also saw its eighth consecutive monthly decline as it slid 6 points to 49 in August. July housing starts and building permits are scheduled to be reported later today, and these will likely continue to signal a cooling demand amid the rising mortgage rates as well as overbuilding. European power price soared to record high European power prices continue to surge to fresh record highs amid gas flow vagaries, threatening a deeper plunge into recession. Next-year electricity rates in Germany advanced as much as 3.7% to 477.50 euros ($487) a megawatt-hour on the European Energy Exchange AG. That’s almost six times as much as this time last year, with the price doubling in the past two months alone. UK power prices were also seen touching record highs. European Dutch TTF natural gas futures were up over 6%, suggesting more pain ahead for European utility companies. China’s activity data China’s July industrial production (3.8% YoY vs consensus 4.3% & June 3.9%), retail sales (2.7% YoY vs consensus 4.9% & June 3.1%), and fixed asset investments (5.7% YTD vs consensus 6.2% & June 6.1%) released this more were weak across the board.  Property investment growth dropped to -6.4% YTD or -12.3% YoY in July, well below market expectations of -5.7% YTD.  Surprising rate cuts from the PBOC met with muted market reactions The People’s Bank of China cut its policy 1-year Medium-term Lending Facility Rate by 10bps to 2.75% from 2.85% and the 7-day reverse repo rate by 10bps to 2.0% from 2.1%.  Market reactions to the surprising move were muted as credit demand, as reflected in the aggregate financing and loan growth data was weak in China. BHP ‘s FY22 results better than expected The Australian mining giant reported FY22 results beating analyst estimates with strong EBITDA and EBITDA margin. Coal segment performance was ahead of expectations while results from the copper and iron ore segments were slightly below expectations.  The company announced a larger-than-expected dividend payout and a higher capex plan for 2023. RBA minutes due to be released this morning Earlier in the month, the Reserve Bank of Australia (RBA) raised the cash rate by 50bps to 1.85% and the accompanying Statement on Monetary Policy emphasized an uncertain and data-dependent outlook. The RBA releases its minutes from the July meeting today, and the market focus will be on the range of options discussed for the August hike and any hint of future interest rate path.  US retailer earnings eyed After disappointing results last quarter, focus is on Walmart and Home Depot earnings later today. These will put the focus entirely on the US consumer after the jobs data this month highlighted a still-tight labor market while the inflation picture saw price pressures may have peaked. It would also be interesting to look at the inventory situation at these retailers, and any updated reports on the status of the global supply chains.     For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: APAC Daily Digest: What is happening in markets and what to consider next – August 16, 2022

Summary:  Weak data out of China overnight, together with a surprise rate cut from the PBOC and collapsing energy prices later on Monday saw the Japanese yen surging higher across the board. Indeed, the two key factors behind its descent to multi-decade lows earlier this year, rising yields and surging energy prices, have eased considerably since mid-June with only modest reaction from the yen thus far. Is that about to change? FX Trading focus: JPY finding sudden support on new disinflation narrative Weaker than expected Chinese data overnight brought a surprise rate cut from the Chinese central bank and seems to have sparked a broadening sell-off in commodities, which was boosted later by a crude oil drop of some five dollars per barrel on the news that Iran will decide by midnight tonight on whether to accept a new draft on the nuclear deal forward by the Euro zone. In response, the Chinese yuan has weakened toward the highs for the cycle in USDCNH, trading 6.78+ as of this writing and  (there was a spike high to 6.381 back in May but the exchange rate has been capped by 6.80 since then), but the Japanese yen is stealing the volatility and strength crown, surging sharply across the board and following up on the move lower inspired by the soft US CPI data point. US long yields easing considerably lower after an odd spike last Thursday are a further wind at the JPY’s back here. In the bigger picture, it has been rather remarkable that the firm retreat in global long-date yields since the mid-June peak and the oil price backing down a full 25% and more from the cycle highs didn’t do more to support the yen from the yield-spread angle (Bank of Japan’s YCC policy less toxic as yields fall) and from the current account angle for Japan. Interestingly, while the JPY has surged and taken USDJPY down several notches, the US dollar is rather firm elsewhere, with the focus more on selling pro-cyclical and commodity currencies on the possible implication that China may be content to export deflation by weakening its currency now that commodity prices have come down rather than on selling the US dollar due to any marking down of Fed expectations. Still, while the USD may remain a safe haven should JPY volatility be set to run amok across markets, the focus is far more on the latter as long as USDJPY is falling Chart: EURJPY As the JPY surges here, EURJPY is falling sharply again, largely tracking the trajectory of longer European sovereign yields, which never really rose much from their recent lows from a couple of weeks back, making it tough to understand the solid rally back above 138.00 of late. After peaking above 1.90% briefly in June, the German 10-year Bund, for example, is trading about 100 basis points lower and is not far from the cycle low daily close at 77 basis points. The EURJPY chart features a rather significant pivot area at 133.50, a prior major high back in late 2021 and the recent low and 200-day moving average back at the beginning of the month. After a brief JPY volatility scare in late July and into early August that faded, are we set for a second and bigger round here that takes USDJPY down through 130.00 and EURJPY likewise? A more significant rally in long US treasuries might be required to bring about a real JPY rampage. Source: Saxo Group The focus on weak Chinese data and key commodity prices like copper suddenly losing altitude after their recent rally has the Aussie shifting to the defensive just after it was showing strength late last week in sympathy with strong risk sentiment and those higher commodity prices. Is the AUDUSD break above 0.7000-25 set for a high octane reversal here? AUDJPY is worth a look as well after it managed to surge all the way back toward the top of the range before. The idea that a weak Chine might export deflation from here might be unsettling for Aussie bulls. The US macro data focus for the week is on today’s NAHB homebuilder’s survey, which plunged to a low since 2015 in June (not including the chaotic early 2020 pandemic breakout months), the July Housing Starts and Building Permits and then the July Retail Sales and FOMC minutes on Wednesday. With a massive relief in gasoline prices from the July spike high, it will be interesting to see whether the August US data picks up again on the services side. The preliminary August University of Michigan sentiment survey release on Friday showed expectations rising sharply by over 7 points from the lowest since-1980 lows of June, while the Present Situation measure dropped a few points back toward the cycle (and record) lows from May. Table: FX Board of G10 and CNH trend evolution and strength. The JPY is the real story today, but as our trending measures employ some averaging/smoothing, the move will need to stick what it has achieved today to show more. Watch out for a big shift in the commodity currencies in coming days as well if today’s move is the start of something. Elsewhere, the JPY comeback is merely taking CHF from strength to strength, although even the might franc has dropped against the JPY today. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Big momentum shift afoot today and watching whether this holds and the JPY pairs and pairs like AUDUSD and USDCAD to see if we are witnessing a major momentum shift in themes here. Also note NOK pairs like USDNOK and EURNOK here. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Aug. NAHB Housing Market Index 0130 – Australia RBA Meeting Minutes Source: FX Update: JPY jumps on deflating energy prices, fresh retreat in yields.

After two-quarters of contraction, many still do not accept that the US economy is in a recession  Federal Reserve officials have pushed against it, as has Treasury Secretary Yellen. The nearly 530k rise in July nonfarm rolls, more than twice the median forecast in Bloomberg's survey, and a new cyclical low in unemployment (3.5%) lent credibility to their arguments. If Q3 data point to a growing economy, additional support will likely be found.   While the interest rate-sensitive housing sector may still feel the squeeze, we note that activity is at historically strong levels  Housing starts are expected to have fallen for the third consecutive month in July. That would be the longest decline since the last four months of 2018. However, around 1.5 mln annualized pace, starts are still elevated. Permits, which are leading indicators, are holding up even better. They peaked at the end of last year a little below 1.9 mln and may have fallen to around 1.65 mln in July. Since the Great Financial Crisis, they were above 1.5 mln only once (October 2019). before the surge began in mid-2020. Existing home sales have come off a bit more  They are expected to have fallen for the sixth consecutive month in July. It is the worst streak since 2013. Indeed, they are likely to fall below the 5 mln annualized mark for the first time since January 2019. Elevated mortgage rates are the highest since 2008 and have squeezed buyers while rising inventories have sparked some anecdotes about price cuts. The number of houses for sale rose for the first time in three years, around three months at the current pace of sales. Below five months of inventory is regarded as tight by realtors. Of interest, first-time buyers accounted for almost a third of the sales in June. Cash sales accounted for a quarter of all transactions in June. Houses were on the market for an average of two weeks last month, the shortest for more than a decade. Recall that new home sales are recorded on contract signings, while the existing home sales are counted on closes.   While the housing market is softening, consumption and output appear to have begun Q3 on solid footing  Retail sales, which account for around 40% of consumption, are expected to have edged by 0.1%-0.2% after a 1.0% rise in June. The drop in gasoline prices will likely be seen here and weigh on the retail sales, which are reported in nominal terms. Core retail sales, which excludes auto, gasoline, building materials, and food services, are expected to have risen 0.6% after 0.8% in June. More people working and earning a little bit more (on average), i.e., the income effect should help underpin consumption.   Manufacturers added 30k people to their payrolls in July, the most in three months and matching last year's average pace  The US has added more manufacturing jobs through July than it did in the same period a year ago (273k vs. 161k). Manufacturing output has disappointed. It fell by 0.5% in both May and June. The decline in vehicle and parts output may have been partially reversed in July amid a recovery in auto sales. Higher commodity prices encouraged mining output in May and June (1.2% and 1.7%, respectively). It may have slowed as commodity prices fell in July. The scorching summer and demand for air conditioning likely boosted utility output, which had fallen in June (-1.4%).  On a year-over-year basis, industrial output often contracts into a recession but not always before the start of the recession  Through June, it has risen by almost 4.2%. The capacity utilization rate is expected to have above 80.0% for the fourth consecutive month. That would match the last cyclical peak in 2018, the longest since the Great Financial Crisis. Utilization rates fall sharply during a recession. In two of the last three recessions, capacity usage fell before the downturn was dated. In the Financial Crisis, the peak coincided with the start of the recession. The US also reports the capital flow data for June (TIC on August 15) While a favorite of reporters and analysts, it is not a market mover. Through May, net long-term foreign capital inflows have been a little more than $465 bln., which is about an 8.5% increase from a year ago. Finally, the Empire State Survey August 15) and the Philadelphia Fed surveys (August 18), the first look into August aside for the weekly jobs claims and mortgage applications. The market appears to put more weight on some components of the Philly survey.   Three economic releases from Japan will draw attention  Japan reports its first estimate of Q2 GDP to kick off the week. The world's third-largest economy contracted at an annualized rate of  0.5% in Q1 but is expected to have rebounded to 2.7% in Q2. That translates into a 0.7% quarterly expansion (seasonally adjusted) after shrinking by 0.1% in Q1. Consumption and business investment rebounded. Inventories were likely unwound. After rising 0.5% in Q1, the median forecast in Bloomberg's survey looks for a 0.3% decline. The GDP deflator has been negative for the past five quarters. It was at -0.5% in Q1, but economists (Bloomberg survey) project a decline to -0.8%.  Despite the GDP deflator still showing deflation's grip, the July CPI (August 19) is likely to show inflation continues to rise above the BOJ's target  It targets the CPI, excluding fresh food, at 2.0%. It stood at 2.2% in June and is likely to have ticked up a little in July. The Tokyo CPI has already been reported. The core measure rose to 2.3% from 2.1%. Tokyo's headline rate increased to 2.5% from 2.3%, and the measure excluding food and energy crept up to 1.2% from 1.0%.  July trade figures will be reported on August 17 Japan is experiencing a  massive terms-of-trade shock. In the first half of this year, Japan reported a JPY7.94 trillion (~$59 bln) deficit. In H1 21,  it had a trade surplus of about JPY810 bln (~$6 bln). The problem is not with merchandise exports. In June, they were up almost a fifth from last year, when they were by nearly 50% over 2020. Imports have surged with food and energy prices. Merchandise imports had risen 46% above the year-ago level in June, and that is after an increase by a third from June 2020.   The UK and Canada report July retail sales and CPI  The UK also publishes its latest employment report, while Canada updates housing starts and portfolio flows. The data poses headline risk, but the macroeconomic backdrop is unlikely to change significantly. The Bank of England warns that the economy will enter a protracted recession that will carry into 2024. The Bloomberg survey found that the median forecast assessed a 45% probability of a recession over the next 12 months.   UK's labor market is fairly strong, and the unemployment rate is at 3.8%, having bottomed at 3.7% in March, the lowest level since 1974. Inflation is rising, and the base effect underscores the upside risk. Last July, CPI was unchanged on the month.   While wage growth may be strong, it is insufficient to cover the rising cost of living and this squeezing consumption June was the first month since October 2021 that retail sales, excluding gasoline, rose. However, UK retail sales, reported in volume terms, have fallen an average of 0.5% a month over the past 12 months. If there is going to be relief for the UK household, it will have to come from the new government. The Bank of England has one objective. Bring down inflation. The swaps market has discounted almost an 85% chance of another 50 bp increase to 2.25% at the September 15 meeting. It sees a year-end rate of around 2.80%, implying nearly 75 bp hikes in Q4.   Canada's labor market improvement is stalling, and it looks like the economy is too The monthly GDP downshifted from 0.7-0.8% in February and March to 0.3% in April and flat in May. Retail sales have been strong, flattered by rising prices. Through May, they have increased by an average of 1.5% a month. The average in the first five months of 2021 was 0.6. Canadian inflation accelerated to 8.1% in June and may have slowed in July for the first time since June 2021. Underlying core measures are expected to have stayed firm. Last month, the Bank of Canada surprised the market with a 100 bp hike in the overnight lending rate to 2.50%. The swaps market briefly took the possibility of a 75 bp hike at the September 7 meeting very seriously but now has slightly better than a 40% chance.  In Australia, the labor market is in focus  It added 60k full-time positions on average a month in Q2 after a 50.5k average in Q1. The pace is likely to moderate. The participation rate of 66.8% set in June was a record high. The unemployment rate of 3.5% was also a record low. There are some signs that the overall economy may be losing some momentum. Still, with CPI accelerating from 5.1% in Q1 to 6.1% in Q2, the Reserve Bank of Australia is tightening policy. After delivering the first hike in May of 25 bp, it lifted the cash target rate in 50 bp clips in June through August. Speculation of another 50 bp hike at the September 6 meeting is seen as slightly better than even money.  The Reserve Bank of New Zealand meets on August 17  It will most likely deliver the seventh hike in the cycle that began last October. After three quarter-point moves, it delivered three 50 bp hikes. The cash target rate now stands at 2.50%. With Q2 inflation rising faster than expected (7.3% year-over-year), unemployment low (3.3% in Q2; record low set last December at 3.2%), more forceful action is possible. However, the swaps market judges it unlikely and has about a 90% chance of a 50 bp hike reflected in current prices. The New Zealand dollar is strong, at its best level in two months, but maybe too strong. Although it closed firmly ahead for the weekend, it looks stretched from a technical perspective, perhaps signaling a "buy the rumor, sell the fact" type of activity.  Norway's central bank, Norges Bank, meets on August 18  A few hours after Norway reports Q2 GDP, Norges Bank makes its rate announcement. Typically, it prefers to adjust policy when it updates its economic assessment, similar in this regard to the European Central Bank. However, last week's CPI shock heightens the risk it breaks from the pattern. Headline CPI jumped 1.3% in July, lifting the year-over-year rate to 6.8%. The median forecast (Bloomberg's survey) was for an unchanged 6.3% pace. The underlying rate, which excludes energy and adjusts for tax changes, surged by 1.5%, nearly twice as much as expected. As a result, the year-over-year change was boosted to 4.5% from 3.6%.   The deposit rate stands at 1.25%  Norges Bank began the tightening cycle last September but has raised it by a cumulative 125 bp. However, among the high-income countries in Europe, only the UK's policy rate is higher. Sweden's inflation is higher at 8.5% (July from 8.7% in June), and its policy rate is 50 bp less than Norway. Since June 16, the day after the FOMC meeting that results in the first 75 bp rate hike, the Norwegian krone has been the strongest major currency, gaining 3.9% against the US dollar and 6.8% against the euro. Look for the dollar to correct higher, even if a 50 bp hike is delivered.    Disclaimer   Source: Week Ahead: More Evidence US Consumption and Output are Expanding, and RBNZ and Norges Bank to Hike

The bullish dollar narrative was fairly straightforward  Yes, the US main challengers, China and Russia, have been hobbled in different ways by self-inflicted injuries. Still, the driver of the dollar was the expected aggressive tightening by the Federal Reserve. The market accepted that after being a bit slower than ideal (though faster and before many other large central banks), the Fed would move forcefully against inflation, even if it diminished the chances of an economic soft-landing.   However, now the market seems to have a different reaction function  The euro was impressively resilient after the job growth of more than twice expectations. However, the softer than expected US CPI sent the dollar broadly lower, inflicting some apparent technical damage to the charts.  We are reluctant to chase the dollar lower and impressed in a week that the US reported a decline in CPI and PPI that the 10-year bond yield closed a few basis points higher and the first back-to-back weekly increase in two months Technically, it seems that the dollar's pullback, nearly a month-old, move is getting maybe getting stretched. We will try to identify levels that could confirm another leg lower and what would suggest the US dollar may snap back.   Dollar Index:   After reaching almost 107.00 after the stronger than expected jobs data, the Dollar Index fell to almost 104.65 in response to the softer than expected CPI. It was the lowest level since the end of June. The MACD is still falling but oversold. The Slow Stochastic looks poised to turn lower from the middle of the range. Nevertheless, we like it higher in the coming days. We target 106.30 and then 107.00. A move above 107.50 could signal a return to the highs near 109.30 from mid-July. That said, a close below 105.00 would boost the risk of another leg lower.  Euro:  The euro rallied strongly after the softer US CPI, but a key trendline drawn off the February, March, and June highs begins the new week near $1.0375 remains unchallenged. Although the momentum indicators allow for additional gains, we look for the euro to push lower in the coming days. Only a move above the trendline would give it new life. We think the greater likelihood is for the single currency to initially ease toward $1.0180-$1.0200. It may take a break of $1.01 to signal a return to the 20-year low set in mid-July near $0.9950. The US two-year premium over Germany narrowed every day last week for a cumulative 11 bp to near 2.66%. Italy's premium over Germany was trimmed by six basis points. It was the third week of convergence, but at 0.75%, it is still nearly twice what it was in June. Japanese Yen:  The greenback was pushed away from JPY135 by the decline in US rates after the CPI figures. It was sold to about JPY131.75, holding above the month's low set on August 2 near JPY130.40. However, US rates closed firmer on the week despite three softer-than-expected price reports (CPI, PPI, and import/export prices). As a result, the greenback looks poised to test the JPY135.00-50 ceiling. A move above JPY136 would target the JPY137.50 area. We have emphasized the strong correlation between changes in the exchange rate and the US 10-year yield. That correlation is off its highs though still above 0.50, while the correlation with the US two-year yield has risen toward 0.65, the highest in five months.  British Pound:   Sterling rose to $1.2275 in the broad US dollar sell-off in the middle of last week. It stalled in front of the high set on August 2, a little shy of $1.23. This sets up a potential double top formation with a neckline at $1.20. A break would re-target the two-year low set in July near $1.1760. The MACD is set to turn down. The Slow Stochastic is going sideways in the middle of the range after pulling back earlier this month. Sentiment seems poor, and in the week ahead, the UK is expected to report some easing in the labor market, accelerating consumer prices, and another decline in retail sales. Canadian Dollar:   The US dollar fell to near a two-month low last week slightly below CAD1.2730, and slipped through the 200-day moving average on an intraday basis for the first time since June 9. The test of the (61.8%) retracement of this year's rally (early April low ~CAD1.2400 and the mid-July high ~CAD1.3225) found near CAD1.2715 was successful. The US dollar recovered ahead of the weekend back to the CAD1.2800 area. Although the momentum indicators give room for further US dollar losses, we suspect a near-term low is in place and look for an upside correction toward CAD1.2850-CAD1.2900. The Canadian dollar remains sensitive to the immediate risk environment reflected in the change in the S&P 500. The correlation over the past 30 sessions is a little better than 0.60. The correlation reached a two-year high in June near 0.80. The exchange rate's correlation (30 sessions) with oil prices (WTI) set this year's high in early August near 0.60. It is now slightly below 0.50.  Australian Dollar:   Although our bias is for the US dollar to correct higher, the Aussie does not line up quite as well. It broke above the high set at the start of the month near $0.7050 and has held above it. However, its surge stalled slightly above $0.7135, and it consolidated in a narrow range around $0.7100 ahead of the weekend. The momentum indicators are constructive. The main hurdle is the 200-day moving average near $0.7150 and the (50%) retracement of this year's decline (~$0.7660 in early April and ~$6680 in mid-July) found near $0.7170. A break of this area could see a return to the June high by $0.7285.   Mexican Peso:   Latin American currencies had a good week, except for the Argentine peso, which fell by more than 1%, for the dubious honor of being the poorest performer in the emerging markets. Led by Chile (+3.9%) and the Colombian peso (3.8%), Latam currencies accounted for half of the top five performers last week. The peso's 2.7% gain was its best in five months, and the dollar was sold a little through MXN19.85, its lowest level since late June when it reached almost MXN19.82.There seems little to prevent a move toward MXN19.50. Any worries that AMLO's appointments to the central bank would block aggressive tightening of monetary policy must have evaporated as Banxico demonstrated a resolve to hike rates and shadow the US.  Chinese Yuan:   The yuan took a step lower from mid-April until mid-May. Since then, it has been trading within the range more or less seen in the second half of May. That dollar range is roughly CNY6.650 to CNY6.77. For the past month, the dollar has traded between CNY6.72 and CNY6.78, fraying the upper end of the broader range after the greenback surged broadly after the US employment data. Policymakers have signaled concern about inflation and its reluctance to ease monetary policy. It would seem the domestic policy efforts might favor a firm yuan.     Disclaimer   Source: Is the Dollar's Month-Long Pullback Over?

Overview: After retreating most of last week, the US dollar has extended yesterday’s gains today. The Canadian dollar is the most resilient, while the New Zealand dollar is leading the decline with a nearly 0.75% drop ahead of the central bank decision first thing tomorrow. The RBNZ is expected to deliver its fourth consecutive 50 bp hike. Most emerging market currencies are lower as well, led by central Europe. Equities in Asia Pacific and Europe are mostly higher today. Japan and Hong Kong were exceptions, and China was mixed with small gains in Shanghai and Shenzhen composites, but the CSI 300 slipped. Europe’s Stoxx 600 is stretching its advance for the fifth consecutive session. It is at two-month highs. US futures are softer. The US 10-year yield is slightly firmer near 2.80%, while European benchmark yields are mostly 2-4 bp higher, but Italian bonds are under more pressure and the yield is back above the 3% threshold. Gold is softer after being repulsed from the $1800 area to test $1773-$1775. A break could signal a test on the 20-day moving average near $1761. October WTI tested last week’s lows yesterday near $86 a barrel on the back of the poor Chinese data. It is straddling the 200-day moving average (~$87.95). The market is also watching what seems like the final negotiations with Iran, where a deal could also boost supply. US natgas prices are more than recouping the past two days of losses and looks set to challenge the $9 level. Europe’s benchmark leapt 11.7% yesterday and is up another 0.5% today. Iron ore has yet to a base after falling more than 5.5% in the past two sessions. It fell almost 0.65% today. September copper has fallen by almost 2.5% over the past two sessions and is steady today. Lastly, September wheat is slipping back below $8 a bushel and is trading heavily for the third consecutive session. Asia Pacific Japan's 2.2% annualized growth in Q2 does not stand in the way of a new government support package  Prime Minister Kishida has been reportedly planning new measures and has instructed the cabinet to pull it together by early next month. He wants to cushion the blow of higher energy and food prices. An extension of the subsidy to wholesalers to keep down the gasoline and kerosene prices looks likely. Kishida wants to head off a surge in wheat prices. Without a commitment to maintain current import prices of wheat that is sold to millers, the price could jump 20% in October, according to reports. Separately, and more controversially, Kishida is pushing for the re-opening of nine nuclear plants that have passed their safety protocols, which have been shut since the 2011 Fukushima accident.  The minutes from the Reserve Bank of Australia's meeting earlier this month signaled additional rate hikes will be forthcoming  After three half--point hikes, it says that the pace going forward will be determined by inflation expectations and the evolving economic conditions. The minutes noted that consumer spending is an element of uncertainty given the higher inflation and interest rates. Earlier today, the CBA's household spending report shows a 1.1% jump month-over-month in July and a 0.6% increase in June. The RBA wants to bring the cash target rate to neutral (~2.50%). The target rate is currently at 1.85% and the cash rate futures is pricing in about a 40% chance of a 50 bp hike at the next RBA meeting on September 6. It peaked near 60% last week. On Thursday, Australia reports July employment. Australia grew 88.4k jobs in June, of which almost 53k were full-time positions. The median forecast in Bloomberg's survey envisions a 25k increase of jobs in July.  The offshore yuan slumped 1.15% yesterday  It was the biggest drop since August 2019 and was sparked by the unexpected cut in rates after a series of disappointing economic data. The US dollar reached almost CNH6.82 yesterday, its highest level in three months. It has steadied today but remains firm in the CNH6.7925-CNH6.8190 range. China's 10-year yield is still under pressure. It finished last week quietly near 2.74% and yesterday fell to 2.66% and today 2.63%. It is the lowest since May 2020. As we have noted, the dollar-yen exchange rate seems to be more sensitive to the US 2-year yield (more anchored to Fed policy) than the 10-year yield (more about growth and inflation)  The dollar is trading near four-day highs against the yen as the two-year yield trades firmer near 3.20%. Initial resistance has been encountered in Europe near JPY134.00. Above there, the JPY134.60 may offer the next cap. Support now is seen around JPY133.20-40. The Australian dollar extended yesterday's decline and slipped through the $0.7000-level where A$440 mln in options expire today. It also corresponds with a (50%) retracement of the run-up form the mid-July low (~$0.6680). The next area of support is seen in the $0.6970-80 area. The greenback rose 0.45% against the onshore yuan yesterday after gapping higher. Today it gapped higher again and rose to almost CNY6.7975, its highest level since mid-May. It reached a high then near CNY6.8125. The PBOC set the dollar's reference rate at CNY6.7730, slightly less than the median in Bloomberg's survey (CNY6.7736). The takeaway is the central bank did not seem to protest the weakness of the yuan. Europe The euro has been sold to a new seven-year low against the euro near CHF0.9600 The euro has been sold in eight of the nine weeks since the Swiss National Bank hiked its policy rate by 50 bp on June 16. Half of those weekly decline were 1% or larger. The euro has fallen around 7.4% against the franc since the hike. Swiss domestic sight deposit fell for 10 of 11 weeks through the end of July as the SNB did not appear to be intervening. However, in the last two weeks, as the franc continued to strengthen, the Swiss sight deposits have risen, and recorded their first back-to-back increase in four months. This is consistent with modest intervention. The UK added 160k jobs in Q2, almost half of the jobs gain in the three months through May, illustrating the fading momentum  Still, some 73k were added to the payrolls in July, well above expectations. In the three months through July, job vacancies in the UK fell (~19.8k) for the first time in nearly two years. Average weekly earnings, including bonuses, rose 5.1% in Q2. The median forecast was for a 4.5% increase. Yet, real pay, excluding bonuses and adjusted for inflation slid 3% in the April-June period, the most since at least 2001. The ILO measure of unemployment in Q2 was unchanged at 3.8%. The Bank of England warns it will rise to over 6%. The market still favors a 50 bp hike next month. The swaps market has it at a little better than an 80% probability. The euro is extending its retreat  It peaked last week, near $1.0365 and tested this month's low near $1.0125 in the European morning. The intraday momentum indicators are stretched, and that market does not appear to have the drive to challenge the 1.2 bln euros in options struck at $1.0075 that expire today. With yesterday's loss, the euro met the (50%) retracement objective of the bounce off the mid-July 22-year low (~$0.9950). The next retracement objective (61.8%) is near $1.0110. Nearby resistance may be met near $1.0160-70. Sterling has been sold for the fourth consecutive session. It approached the $1.20-level, which may be the neckline of a double top. If violated it could signal a return to the low seen in mid-July around $1.1760. Sterling is holding in better than the euro now. The cross peaked before the weekend in front of GBP0.8500 and is approaching GBP0.8400 today. A break would look ominous and could spur a return to the GBP0.8340 area. America The Empire State manufacturing survey and the manufacturing PMI line up well  Both bottomed in April 2020 and peaked in July 2021. The outsized decline in the August Empire State survey points to the downside risks of next week's preliminary August manufacturing PMI. Recall that the July manufacturing PMI fell to 52.2, its third consecutive decline and the lowest reading since July 2020. There was little good in the Empire survey. Orders and shipments fell dramatically. Employment was also soft. Prices paid softened to the lowest this year, but prices received edged higher. The US reports housing start and permits and industrial output today The housing market continues to slow from elevated levels. Housing starts are expected to have fallen 2% in July, matching the June decline. It would be the third consecutive decline, and the longest declining streak since 2018. Still, in terms of the absolute level of activity, anything above 1.5 mln units must still be regarded as strong. They stood at almost 1.56 mln in June. Permits fell by 10% in April-May before stabilizing in June. The median forecast in Bloomberg's survey projects a 3.3% decline. Permits were running at 1.685 mln in June. From April 2007 through September 2019, permits held below 1.5 mln. The industrial production report may attract more attention Output fell in June (-0.2%) for the first time this year, and even with it, industrial product has risen on average by 0.4% a month in H1 22, slightly above the pace seen in H1 21. Helped by manufacturing and utility output, industrial production is expected to rise by around 0.3%. In the last cycle, capacity use spent four months (August-November 2018) above 80%. It had not been above 80% since the run-up to the Great Financial Crisis when it spent December 2006 through March 2008 above the threshold and peaked slightly above 81.0%. Last month was likely the fourth month in this cycle above the 80% capacity use rate. Note that the Atlanta Fed's GDPNow tracker will be updated later today. The update from August 10 put Q3 GDP at 2.5%. Housing starts in Canada likely slow last month, which would be the first back-to-back decline this year  The median forecast (Bloomberg's survey) calls for a 3.6% decline after an 8.4% fall in June. Still, the expected pace of 264k is still 10% higher since the end of last year. On Monday, Canada reported that July existing home sales fell by 5.3%, the fifth consecutive decline. They have fallen by more than a third since February. Canada also reports its monthly portfolios. Through May, Canada has experienced C$98.5 bln net portfolio inflows, almost double the pace seen in the first five months last year. However, the most important report today is the July CPI. A 0.1% increase, which is the median forecast in Bloomberg's survey would be the smallest of the year and the year-over-year pace to eased to 7.6% from 8.1%. If so, it is the first decline since June 2021. Similar with what the US reported, the core measures are likely to prove sticky. After the employment data on August 5, the swaps market was still leaning in favor a 75 bp hike at the September 7 meeting (64%). However, since the US CPI report, it has been hovering around a 40% chance. While the US S&P 500 rose reached almost four-month highs yesterday, the Canadian dollar found little consolation  It held in better than the other dollar-bloc currencies and Scandis, but it still suffered its biggest decline in about a month yesterday. The greenback reached almost CAD1.2935 yesterday and is consolidating in a narrow range today above CAD1.2890. The next important chart point is near CAD1.2975-85 and the CAD1.3050. After testing the MXN20.00 level yesterday, the US dollar was sold marginally through last week's low (~MXN19.8150). It is consolidating today and has not been above MXN19.8850. It has come a long way from the month's high set on August 3 near MXN20.8335. The greenback's downside momentum seems to have eased as it stalls in front of MXN19.81 for the third consecutive session.     Disclaimer   Source: Greenback Remains Firm

Summary:  Equities traded higher still yesterday as treasury yields fell further back into the recent range and on hopes that an Iran nuclear deal will cement yesterday’s steep drop in oil prices. The latest data out of the US was certainly nothing to celebrate as the July US Homebuilder survey showed a further sharp drop in new housing interest and a collapse in the first regional US manufacturing survey for August, the New York Fed’s Empire Manufacturing.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures extended their gains yesterday getting closer to the 200-day moving average sitting around the 4,322 level. The US 10-year yield seems well anchored below 3% and financial conditions indicate that S&P 500 futures could in theory trade around 4,350. The news flow is light but earnings from Walmart later today could impact US equities should the largest US retailer lower their outlook for the US consumer. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hong Kong and mainland Chinese equities were mixed. CSI300 was flat, with electric equipment, wind power, solar and auto names gained. Hang Seng Index declined 0.5%. Energy stocks fell on lower oil price. Technology names were weak overall, Hang Seng TECH Index (HSTECH.I) declined 0.9%. Sunny Optical (02382:xhkg) reported worse than expected 1H22 results, revenues -14.4% YoY, net profits -49.5%, citing weakening component demand from the smartphone industry globally. The company’s gross margin plunged to 20.8% from 24.9%. Li Auto’s (02015:xhkg/LI:xnas) Q2 results were in line with expectations but Q3 guidance disappointed. The launch L9 seems cannibalizing Li ONE sales. USD: strength despite weak US data and falling treasury yields and strong risk sentiment Yesterday, the JPY tried to make hay on China cutting rates and as global yields eased back lower, with crude oil marked several dollars lower on hopes for an Iran nuclear deal. But the move didn’t stick well in USDJPY, which shrugged off these developments as the USD firmed further across the board, despite treasury yields easing lower, weak data and still strong risk sentiment/easy financial conditions. A strong US dollar is in and of itself is a tightening of financial conditions, however, and yesterday’s action has cemented a bullish reversal in some pairs, especially EURUSD and GBPUSD, where the next important levels pointing to a test of the cycle lows are 1.0100 and 1.2000, respectively. Elsewhere, USDJPY remains in limbo (strong surge above 135.00 needed to suggest upside threat), USDCAD has posted a bullish reversal but needs 1.3000 for confirmation, and AUDUSD is teetering, but needs a close back below 0.7000 to suggest a resurgent US dollar and perhaps widening concerns that a Chinese recession will temper interest in the Aussie. Crude oil Crude oil (CLU2 & LCOV2) trades lower following Monday’s sharp drop that was driven by a combination softer economic data from China and the US, the world’s top consumers of oil, and after Iran signaled a nuclear deal could be reached soon, raising the prospect of more Iranian crude reaching the market. The latest developments potentially reducing demand while adding supply forced recently established longs to bail and short sellers are once again in control. Brent needs to hold support at $93 in order to avoid further weakness towards $90. Focus on Iran news. Copper Copper (COPPERUSSEP22) led the metals pack lower, without breaking any key technical levels to the downside, after China’s domestic activity weakened in July. Meanwhile, supply side issues in Europe also cannot be ignored with surging power prices putting economic pressure on smelters, and many of them running at a loss. HG copper jumped 19% during the past month and yesterday’s setback did not challenge any key support level with the first being around $3.50/lb. BHP, the world’s top miner meanwhile hit record profits while saying that China is likely to offer a “tail wind” to global growth (see below). EU power prices hit record high on continued surge in gas prices ... threatening a deeper plunge into recession. The latest surge being driven by low water levels on Europe’s rivers obstructing the normal passage for diesel, coal, and other fuel products, thereby forcing utilities to use more gas European Dutch TTF benchmark gas futures (TTFMU2) has opened 5% higher at €231/MWh, around 15 times higher than the long-term average, suggesting more pain ahead for European utility companies. Next-year electricity rates in Germany (DEBYF3) closed 3.7% higher to 477.50 euros ($487) a megawatt-hour on the European Energy Exchange AG. That is almost six times as much as this time last year, with the price doubling in the past two months alone. UK power prices were also seen touching record highs. US Treasuries (IEF, TLT) see long-end yields surging. Yields dipped back lower on weak US economic data, including a very weak Empire Manufacturing Survey (more below) and another sharp plunge in the NAHB survey of US home builders, suggesting a rapid slowdown in the housing market. The survey has historically proven a leading indicator on prices as well. The 10-year benchmark dipped back further into the range after threatening to break up higher last week. The choppy range extends down to 2.50% before a drop in yields becomes a more notable development, but tomorrow’s US Retail Sales and FOMC minutes offer the next test of sentiment. What is going on? Weak Empire State manufacturing survey and NAHB Index Although a niche and volatile measure, the United States NY Empire State Manufacturing Index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic. New orders and shipments plunged, and unfilled orders also declined, albeit less sharply. Other key areas of concern were the rise in inventories and a decline in average hours worked. This further weighed on the sentiment after weak China data had already cast concerns of a global growth slowdown earlier. Meanwhile, the US NAHB housing market index also saw its eighth consecutive monthly decline as it slid 6 points to 49 in August. July housing starts and building permits are scheduled to be reported later today, and these will likely continue to signal a cooling demand amid the rising mortgage rates as well as overbuilding. China's CATL plans to build its second battery factory in Europe CATL unveiled plans to build a renewable energy-powered factory for car battery cells and modules in Hungary. It will invest EUR 7.34 billion (USD 7.5bn) on the 100-GWh facility, which will be its second one in Europe. To power the facility CATL will use electricity from renewable energy source, such as solar power. At present, CATL is in the process of commissioning its German battery production plant, which is expected to roll out its first cells and modules by the end of 2022. Disney (DIS) shares rise on activist investor interest Daniel Loeb of Third Point announced a significant new stake in Disney yesterday, helping to send the shares some 2.2% higher in yesterday’s session. The activist investor recommended that the company spin off its ESPN business to reduce debt and take full ownership of the Hulu streaming service, among other moves. Elliott exits SoftBank Group The US activist fund sold its stake in SoftBank earlier this year in a sign that large investors are scaling back on their investments in technology growth companies with long time to break-even. In a recent comment, SoftBank’s founder Masayoshi Son used more cautious words regarding the investment company’s future investments in growth companies. BHP reports its highest ever profit, bolstered by coal BHP posted a record profit of $21.3bn supported by considerable gains in coal, nickel and copper prices during the fiscal year ending 30 June 2022. Profits jumped 26% compared to last year’s result. The biggest driver was a 271% jump in the thermal coal price, and a 43% spike in the nickel price. The world’s biggest miner sees commodity demand improving in 2023, while it also sees China emerging as a source of stable commodity demand in the year ahead. BHP sees supply covering demand in the near-term for copper and nickel. According to the company iron ore will likely remain in surplus through 2023. In an interview Chief Executive Officer Mike Henry said: Long-term outlook for copper, nickel and potash is really strong because of “unstoppable global trends: decarbonization, electrification, population growth, increasing standards of living,” What are we watching next? Australia Q2 Wage Index tonight to determine future RBA rate hike size? The RBA Minutes out overnight showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, tonight sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35 bps move. RBNZ set to decelerate its guidance after another 50 basis point move tonight? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 44 bps for the October meeting after tonight’s 50 bps hike and another 36 bps for the November meeting. US retailer earnings eyed After disappointing results last quarter, focus is on Walmart and Home Depot earnings later today. These will put the focus entirely on the US consumer after the jobs data this month highlighted a still-tight labor market while the inflation picture saw price pressures may have peaked. It would also be interesting to look at the inventory situation at these retailers, and any updated reports on the status of the global supply chains.   Earnings to watch Today’s US earnings focus is Walmart and Home Depot with analysts expecting Walmart to report 7% revenue growth y/y and 8% decline y/y in EPS as the US retailer is facing difficulties passing on rising input costs. Home Depot is expected to report 6% growth y/y in revenue and 10% growth y/y in EPS as the US housing market is still robust driving demand for home improvement products. Sea Ltd, the fast-growing e-commerce and gaming company, is expected to report revenue growth of 30% y/y in Q2 but worsening EBITDA margin at -16.2%. The previous winning company is facing headwinds in its gaming division and cash flow from operations have gone from positive $318mn in Q1 2021 to negative $724mn in Q1 2022. Today: China Telecom, Walmart, Agilent Technologies, Home Depot, Sea Ltd Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0900 – Germany Aug. ZEW Survey 0900 – Eurozone Jun. Trade Balance 1200 – Poland Jul. Core CPI 1215 – Canada Jul. Housing Starts 1230 – US Jul. Housing Starts and Building Permits 1230 – Canada Jul. CPI 2030 – API Weekly Report on US Oil Inventories 2350 – Japan Jul. Trade Balance 0130 – Australia Q2 Wage Index 0200 – New Zealand RBNZ Official Cash Rate announcement 0300 – New Zealand RBNZ Governor Orr Press Conference  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – August 16, 2022

Summary:  Today we look at a confusing market backdrop as the US dollar rose across the board despite weak US data and US treasury yields easing lower again. While measures of risk sentiment and financial conditions look very strong here, we need to remember that the US dollar is a financial condition unto itself and one of the most import exchange rates, the USDCNH rate should be on every trader's radar. As well, the US S&P 500 index is pushing up against a major resistance level. Crude oil, copper, earnings reports ahead and more on today pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast  Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: The US dollar is a financial condition, too

The price of WTI crude oil remained below $90 per barrel at the beginning of the week, the level before Russia's attack on Ukraine. Oil today is the cheapest in six months. It seems that the topic of a global economic slowdown or recession and how long it may last may be important for the oil market. Chinese and U.S. economic data seem to show a weaker condition in both economies and thus could affect the decline in oil demand. This, in turn, could put downward pressure on prices. According to published data, factory activity in China declined enough in July to force the central bank to cut lending rates to keep demand from collapsing. In the United States, on the other hand, the market may have been taken by surprise by the second-largest drop in the history of the New York Empire State Manufacturing Index. The above indicators may affect the market from the demand side, but this is only one part of the puzzle. On the supply side, long-awaited changes may be brewing. Once the embargo is lifted, oil from Iran may start flowing into the market again. Iran has responded to the European Union's proposal. It may seek to re-implement the 2015 nuclear agreement. The EU is also calling on the US to show more flexibility in implementing the agreement. Saudi Arabia may also be preparing to increase its oil supply. The chairman of Saudi Aramco, the state-owned oil giant, stated over the weekend that his company is ready to increase production to 12 million barrels per day, the company's current production capacity limit. Only a decision by the Saudi Arabian government is needed to increase production. According to the EIA agency's forecast, the United States can also increase its production. US oil production in the August forecast averages 11.9 million barrels per day (b/d) in 2022. It could rise to 12.7 million b/d in 2023. If this forecast comes true, the US could set a production record next year. The current one is 12.3 million b/d and was set in 2019.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: Oil near six-month lows

Overview: Equities were mostly higher in the Asia Pacific region, though Chinese and Hong Kong markets eased, and South Korea and India were closed for national holidays. Despite new Chinese exercises off the coast of Taiwan following another US congressional visit, Taiwan’s Taiex gained almost 0.85%. Europe’s Stoxx 600 is advancing for the fourth consecutive session, while US futures are paring the pre-weekend rally. Following disappointing data and a surprise cut in the one-year medium-term lending facility, China’s 10-year yield fell to 2.66%, its lowest in two years. The US 10-year is soft near 2.83%, while European yields are mostly 2-4 bp lower. Italian bonds are bucking the trend and the 10-year yield is a little higher. The Antipodeans and Norwegian krone are off more than 1%, but all the major currencies are weaker against the greenback, but the Japanese yen, which is practically flat. Most emerging market currencies are lower too. The Hong Kong Dollar, which has been supported by the HKMA, strengthened before the weekend, and is consolidating those gains today. Gold tested the $1800 level again but has been sold in the wake of the stronger dollar and is at a five-day low near $1778. The poor data from China raises questions about demand, and September WTI is off 3.6% after falling 2.4% before the weekend. It is near $88.60, while last week’s five-month lows were set near $87.00. US natgas is almost 2% lower, while Europe’s benchmark is up 2.7% to easily recoup the slippage of the past two sessions. China’s disappointment is weighing on industrial metal prices. Iron ore tumbled 4% and September copper is off nearly 3%. September wheat snapped a four-day advance before the weekend and is off 2.3% today.  Asia Pacific With a set of disappointing of data, China surprised with a 10-bp reduction in the benchmark one-year lending facility rate to 2.75%  It is the first cut since January. It also cut the yield on the seven-day repo rate to 2.0% from 2.1%. The string of poor news began before the weekend with a larger-than-expect in July lending figures. However, those lending figures probably need to be put in the context of the surge seen in June as lenders scramble to meet quota. Today's July data was simply weak. Industrial output and retail sales slowed sequentially year-over-year, whereas economists had projected modest increases. New home prices eased by 0.11%, and residential property sales fell 31.4% year-over-year after 31.8% decline in June. Property investment fell 6.4% year-over-year, year-to-date measures following a 5.4% drop in June. Fix asset investment also slowed. The one exception to the string of disappointment was small slippage in the surveyed unemployment rate to 5.4% from 5.5%. Incongruous, though on the other hand, the jobless rate for 16–24-year-olds rose to a record 19.9%. Japan reported a Q2 GDP that missed estimates, but the revisions lifted Q1 GDP out of contraction  The world's second-largest economy grew by 2.2% at an annualized pace in Q2. While this was a bit disappointing, Q1 was revised from a 0.5% fall in output to a 0.1% expansion. Consumption (1.1%) rebounded (Q1 revised to 0.3% from 0.1%) as did business spending (1.4% vs. -0.3% in Q1, which was originally reported as -0.7%). Net exports were flat after taking 0.5% off Q1 GDP. Inventories, as expected, were unwound. After contributing 0.5% to Q1 GDP, they took 0.4% off Q2 growth. Deflationary forces were ironically still evident. The GDP deflator fell 0.4% year-over-year, almost the same as in Q1 (-0.5%). Separately, Japan reported industrial surged by 9.2% in June, up from the preliminary estimate of 8.9%. It follows a two-month slide (-7.5% in May and -1.5% in April) that seemed to reflect the delayed impact of the lockdowns in China. The US dollar is little changed against the Japanese yen and is trading within the pre-weekend range (~JPY132.90-JPY133.90). It finished last week slightly above JPY133.40 and a higher closer today would be the third gain in a row, the longest advance in over a month. The weakness of Chinese data seemed to take a toll on the Australian dollar, which has been sold to three-day lows in the European morning near $0.7045. It stalled last week near $0.7140 and in front of the 200-day moving average (~$0.7150). A break of $0.7035 could signal a return to $0.7000, and possibly $0.6970. The greenback gapped higher against the Chinese yuan and reached almost CNY6.7690, nearly a two-week high. The pre-weekend high was about CNY6.7465 and today's low is around CNY6.7495. The PBOC set the dollar's reference rate at CNY6.7410, a little above the Bloomberg survey median of CNY6.7399. Note that a new US congressional delegation is visiting Taiwan and China has renewed drills around the island. The Taiwan dollar softened a little and traded at a three-day low. Europe Turkey's sovereign debt rating was cut a notch by Moody's to B3 from B2  That is equivalent to B-, a step below Fitch (B) and two below S&P (B+). Moody's did change its outlook to stable from negative. The rating agency cited the deterioration of the current account, which it now sees around 6% of GDP, three times larger than projected before Russia invaded Ukraine. The Turkish lira is the worst performing currency this year, with a 27.5% decline after last year's 45% depreciation. Turkey's two-year yield fell below 20% today for the first time in nine months, helped ostensibly by Russia's recent cash transfer. The dollar is firm against the lira, bumping against TRY17.97. The water level at an important junction on the Rhine River has fallen below the key 30-centimeter threshold (~12 inches) and could remain low through most of the week, according to reports of the latest German government estimate  Separately, Germany announced that its gas storage facility is 75% full, two weeks ahead of plan. The next target is 85% by October 1 and 95% on November 1. Reports from France show its nuclear reactors were operating at 48% of capacity, down from 50% before the weekend. A couple of reactors were shut down for scheduled maintenance on Saturday.  Ahead of Norway' rate decision on Thursday, the government reported a record trade surplus last month  The NOK229 bln (~$23.8 bln). The volume of natural gas exports surged more than four-times from a year earlier. Mainland exports, led by fish and electricity, rose by more than 20%. The value of Norway's electricity exports increased three-fold from a year ago. With rising price pressures (headline CPI rose to 6.8% in July and the underlying rate stands at 4.5%) and strong demand, the central bank is expected to hike the deposit rate by 50 bp to 1.75%. The euro stalled near $1.0370 last week after the softer than expected US CPI  It was pushed through the lows set that day in the European morning to trade below $1.02 for the first time since last Tuesday. There appears to be little support ahead of $1.0160. However, the retreat has extended the intraday momentum indicators. The $1.0220 area may now offer initial resistance. Sterling peaked last week near $1.2275 and eased for the past two sessions before breaking down to $1.2050 today. The intraday momentum indicators are stretched here too. The $1.2100 area may offer a sufficient cap on a bounce. A break of $1.20 could confirm a double top that would project back to the lows. America The Congressional Budget Office estimates that the Inflation Reduction Act reduces the budget deficit but will have a negligible effect on inflation  Yet, starting with the ISM gauge of prices paid for services, followed by the CPI, PPI, and import/export prices, the last string of data points came in consistently softer than expected. In addition, anecdotal reports suggest the Big Box stores are cutting prices to reduce inventories. Energy is important for the medium-term trajectory of measured inflation, but the core rate will prove sticky unless shelter cost increases begin to slow. While the Democrats scored two legislative victories with the approval of the Chips and Science Act and the Inflation Reduction Act, the impact on the poll ahead of the November midterm election seems minor at best. Even before the search-and-seizure of documents still in former President Trump's residence, PredictIt.Org "wagers" had turned to favor the Democratic Party holding the Senate but losing the House of Representatives. In terms of the Republican nomination for 2024, it has been back-and-forth over the last few months, and recently Florida Governor DeSantis narrowly pulled ahead of Trump. The two new laws may face international pushback aside from the domestic impact  The EU warned last week that the domestic content requirement to earn subsidies for electric vehicles appears to discriminate against European producers. The Inflation Reduction Act offers $7500 for the purchases of electric cars if the battery is built in North America or if the minerals are mined or recycled there. The EU electric vehicle subsidies are available for domestic and foreign producers alike. On the other hand, the Chips and Science Act offers billions of dollars to attract chip production and design to the US. However, it requires that companies drawing the subsidies could help upgrade China's capacity for a decade. Japan and Taiwan will likely go along. It fits into their domestic political agenda. However, South Korea may be a different kettle of fish. Hong Kong and China together accounted for around 60% of South Korea's chip exports last year. Samsung has one overseas memory chip facility. It is in China and produces about 40% of the Galaxy phones' NAND flash output. Pelosi's apparent farewell trip to Asia, including Taiwan, was not well received in South Korea. President Yoon Suk Yeol did not interrupt his staycation in Seoul to meet the US Speaker. Nor was the foreign minister sent. This is not to cast aspersions on South Korea's commitment to regional security, simply that it is not without limits. Today's economic calendar features the August Empire State manufacturing survey  A small decline is expected. The June TIC data is out as the markets close today. Today is also the anniversary of the US ending Bretton Woods by severing the last links between gold and the dollar in 1971. Canada reports manufacturing sales and wholesale trade, but the most market-sensitive data point may be the existing home sales, which are expected to have declined for the fifth consecutive month. Canada reports July CPI tomorrow (Bloomberg survey median forecast sees headline CPI slowing to 7.6% from 8.1% in June).  The Canadian dollar is under pressure  The US dollar has jumped above CAD1.2900 in Europe after finishing last week near CAD1.2780. Last week's high was set near CAD1.2950, where a $655 mln option is set to expire today. A move above CAD1.2920 could target CAD1.2975-CAD1.3000 over the next day or day. A combination of weaker equities, thin markets, and a short-term market leaning the wrong way after the likely drivers today. The greenback posted its lowest close in two months against the Mexican peso before the weekend near MXN19.85. However, it is rebounding today and testing the MXN20.00 area Initial resistance may be encountered around MXN20.05, but we are looking for a move toward MXN20.20 in the coming days. Mexico's economic calendar is light this week, and the highlight is the June retail sales report at the end of the week.    Disclaimer Source: China Disappoints and Surprises with Rate Cut

Summary:  S&P500 index broke above the key 4,300 resistance level while the NASDAQ pushed lower amid mixed economic data and better-than-feared earnings from Walmart and Home Depot. US housing data continues to worsen, but the focus now turns to FOMC minutes due later today, as well as the US retail sales which will be next test of the strength of the US consumer. Asia session may have trouble finding a clear direction, but Australia’s wage price index and RBNZ’s rate hike may help to provide some bounce. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. equities were mixed. Tech names had an initial pullback, followed by short-coverings that narrowed the loss of the Nasdaq 100 to 0.23% at the close. S&P500 edged up 0.19% to 4,305 on better-than-feared results from retailers, moving towards its 200-day moving average (4,326). Walmart (WMT:xnys) and Home Depot (HD:xnys) reported Q2 results beating analyst estimates. Walmart gained 5% on strong same-store sales growth and a deceleration in inventory growth. Home Depot climbed 4% after reporting better than expected EPS and same-store sales but with an acceleration in inventory buildup. The declines in housing starts and building permits released on Monday and the downbeat comments about the U.S. housing market from the management of Compass (COMP:xnys), an online real estate brokerage, highlighted the challenges faced in the housing sector.  Short-end U.S. treasury yields rose as the long-end little changed The bigger than expected increases in July industrial production (+0.6% MoM), manufacturing production (+0.7% MoM), and business equipment production (+0.6%) triggered some selling in the short-end of U.S. treasury curve, pushing the 2-year yield 8 bps higher to 3.25% as 10-year yield edged up 1bp.  Hong Kong’s Hang Seng (HSIQ2) and China’s CSI300 (03188:xhkg) China internet stocks were sold off on Tuesday afternoon after Reuters ran a story suggesting that Tencent (00700:xhkg) plans to divest its 17% stake (USD24 billion) in Meituan (03690:xhkg).  The shares of Meituan collapsed 9% while Tencent gained 0.9%.  After the close of the Hong Kong market, Chinese media, citing sources “close to the matter” suggested that the divesture story is not true. However, the ADRs of Meituan managed to recover only 1.7% in New York trading. The newswire story also triggered selling on Kuaishou (01024:xhkg), -4.4%, which has Tencent as a major investor. The decline in internet stocks dragged the Hang Seng Index 1% lower. On the other hand, Chinese developers soared on another newswire report that state-owned China Bond Insurance is going to provide guarantees to new onshore debts issued by several “high quality” developers, including Country Garden (02007:xhkg) +9%, Longfor (00960:xhkg) +12%, CIFI (00884:xhkg) +12.9%, and Seazen (01030:xhkg) +7.6%.  Shares of Chinese property management services also surged higher.  GBPUSD bounced off the 1.2000 support, NZD eyeing RBNZ A mixed overnight session for FX as the US yields wobbled. Risk sentiment held up with the mixed US data accompanied by a less bad outcome in the US retailer earnings than what was expected. This made the safe-haven yen a clear underperformer, and USDJPY rose back above 134. But a clear trend in the pair is still missing and a break above 135 is needed to reverse the downtrend. Cable got lower to remain in close sight of the 1.2000 big figure, but rose above 1.2100 subsequently. UK CPI report due today may confirm the need for further BOE action after labor data showed wage pressures. NZDUSD remains near lows of 0.6320 but may see a knee-jerk higher if RBNZ surprises on the hawkish side. Crude oil prices (CLU2 & LCOV2) Crude oil prices remain under pressure due to the prospect of Iran nuclear deal, and printed fresh lows since the Ukraine invasion. Some respite was seen in early Asian session, and WTI futures were last seen at $87/barrel and Brent is below $93. The EU submitted a final proposal to salvage the Iran nuclear deal, and prospects of more energy supply are dampening the price momentum. It has been reported that Iran’s response was constructive, and they are now consulting with the US on a way ahead for the protracted talks. The API reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels. Government data is due later Wednesday. European Dutch TTF benchmark gas futures (TTFMU2) touched €250/MWh, but has cooled off slightly recently, but still signals the heavy price that Europe is paying for the dependence on Russian gas. Copper holding up well despite China slowdown concerns Despite reports of weaker financing and activity data from China earlier this week, Copper remains well supported and registered only modest declines. BHP’s results provided some offset, as did the supply side issues in Europe. Only a break below the key 350 support will turn the focus lower. Meanwhile, zinc rallied amid concerns of smelter closures in Europe. What to consider? US housing scare broadens, industrial production upbeat Housing starts fell 9.6% in July to 1.446 mn, well beneath the prior 1.599 mn and the expected 1.537 mn. Housing starts are now down for five consecutive months, and suggest a cooling housing market in the wake of higher borrowing costs and higher inflation. Meanwhile, building permits declined 1.3% in July to 1.674 mn from 1.696 mn, but printed above the expected 1.65 mn. There will be potentially more scaling back in construction activity as demand weakens and inventory levels rise. On the other hand, industrial production was better than expected at 0.6% m/m (prev: -0.2%) possibly underpinned by holiday demand but the outlook is still murky amid persistent inflation and supply chain issues. US retailer earnings come in better than feared Walmart (WMT:xnys) and Home Depot (HD:xnys) reported better-than-feared results on Tuesday. Walmart’s Q2 revenues came in at USD152.9 billion (+8.4% YoY, consensus USD150.5bn). Same-store sales increased 8.4% YoY (vs consensus +6.0% YoY).  EPS of USD1.77, down 0.8% from a year ago quarter but better than the consensus estimate of USD1.63. While inventories increased 25.5% in Q2, the rate of increase has moderated from the prior quarter’s +32.0%. The company cited falls in gas prices, market share gain in grocery, and back-to-school shopping key reasons behind the strength in sales.  Home Depot reported Q2 revenues of USD43.9 billion (vs consensus USD43.4bn), +6.5% YoY.  Same-store sales grew 5.8%, beating analyst estimates (+4.9%).  EPS rose 11.5% to $5.05, ahead of analyst estimates (USD4.95). However, inventories grew 38% YoY in Q2, which was an acceleration from the prior quarter. The management cited inflation and pulling forward inventory purchases given supply chain challenges as reasons for the larger inventory build-up. Target (TGT:xnys) is scheduled to report on Wednesday. Eyes on US retail sales US retail sales will be next test of the US consumer after less bad retailer earnings last night. Retail sales should have been more resilient given the lower prices at pump improved the spending power of the average American household, and Amazon Prime Day in the month possibly attracted bargain hunters as well. However, consensus expectations are modest at 0.1% m/m compared to last month’s 1.0%. A cooling labor market in the UK UK labor market showed signs of cooling as job vacancies fell for the first time since August 2020 and real wages dropped at the fastest pace in history. Unemployment rate was steady at 3.8%, and the number of people in employment grew by 160,000 in the April-June period as against 256,000 expected. There was also a sprinkle of good news, with the number of employees on payrolls rising 73,000 in July, almost triple the pace expected. Also, wage growth was strong at 4.7% in the June quarter from 4.4% in the three months to May, which may be key for the BOE amid persistent wage pressures. Australia Q2 Wage Index to determine future RBA rate hike size? The RBA Minutes out on Tuesday showed a central bank that is trying to navigate a “narrow path” for keeping the Australian economy on an “even keel”. The RBA has often singled out wages as an important risk for whether inflation risks becoming more embedded and on that note, today sees the release of the Q2 Wage Index, expected to come in at 2.7% year-on-year after 2.4% in Q1. A softer data point may have the market pulling back expectations for another 50 basis point rate hike at the next RBA meeting after the three consecutive moves of that size. The market is about 50-50 on the size of the RBA hike in September, pricing a 35bps move. RBNZ set to decelerate its guidance after another 50 basis point move today? The Reserve Bank of New Zealand is expected to hike its official cash rate another 50 basis points tonight, taking the policy rate to 3.00%. With business and consumer sentiment surveys in the dumps in New Zealand and oil prices retreating sharply the RBNZ, one of the earliest among developed economies to tighten monetary policy starting late last year, may be set for more cautious forward guidance and a wait and see attitude, although wages did rise in Q2 at their second fastest pace (+2.3% QoQ) in decades. The market is uncertain on the future course of RBNZ policy, pricing 45bps for the October meeting after today’s 50bps hike and another 37bps for the November meeting. FOMC minutes to be parsed for hints on future Fed moves The Federal Reserve had lifted rates by 75bps to bring the Fed Funds rate at the level that they consider is neutral at the July meeting, but stayed away from providing any forward guidance. Meeting minutes will be out today, and member comments will be watched closely for any hints on the expectation for September rate hike or the terminal Fed rate. The hot jobs report and the cooling inflation number has further confused the markets since the Fed meeting, even as Fed speakers continue to push against any expectations of rate cuts at least in ‘early’ 2023. We only have Kansas City Fed President Esther George (voter in 2022) and Minneapolis Fed President Kashkari (non-voter in 2022) speaking this week at separate events on Thursday, so the bigger focus will remain on Jackson Hole next week for any updated Fed views.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: APAC Daily Digest: What is happening in markets and what to consider next – August 17, 2022

A rebound in manufacturing and industrial output, coupled with a decent performance from the consumer sector and net trade and inventories being less of a drag support our view of 3%+ GDP growth in 3Q. However, the housing market, a weaker external environment, higher rates and deteriorating business surveys suggest tougher times ahead US industrial production for July exceeded consensus Industrial output bounces back on strong manufacturing The US July industrial production report has posted a very respectable 0.6% month-on-month gain versus the 0.3% consensus. Manufacturing led the way with a 0.7% increase as auto output jumped 6.6%, but even excluding this key component output was up 0.3%. Mining also rose 0.7% with oil and gas output jumping 3.3% MoM as high prices spurred drilling activity. Meanwhile utilities were a surprise drag, falling 0.8% MoM. US industrial output levels Source: Macrobond, ING Strong 3Q, but outlook for 4Q looks tougher This report provides more evidence that 3Q GDP should be good. We strongly suspect that consumer spending will be lifted by the cash flow boost caused by the plunge in gasoline prices and decent employment gains, trade will be supportive too, inventories less of a drag and now we know that manufacturing is rebounding. Putting this altogether we think 3% annualised growth is firmly on the cards. The worry is what happens in 4Q. Yesterday’s NY Empire manufacturing survey was awful and points to much weaker orders and activity later in the year.  We will be closely looking to see if this is replicated in the Philly Fed (Thursday), Richmond Fed (August 23rd) and others later in the month. Even if it is seen as an aberration there are plenty of reasons to expect weaker activity towards year end. A China slowdown and recession in Europe will weigh heavily while ongoing increases in interest rates and a deteriorating outlook for the housing market will also act as a major headwind. Residential construction worries mount... In that regard, today’s other main macro report, US housing starts, fell 9.6% MoM in July to 1,446k annualised versus the 1,527k consensus. This is the weakest reading since February 2021 with yesterday's plunge in NAHB home builder confidence suggesting further falls in construction activity is likely. Housing starts and home builder sentiment Source: Macrobond, ING   We will get existing and new home sales numbers over the next seven days with further weakness expected in both due to high prices and a doubling of mortgage rates hurting affordability and crushing demand. We also expect supply to continue increasing, which will put downward pressure on prices at a time when home builders continue to struggle to find workers and the legacy of high material costs. Direct residential construction will provide a major headwind for economic growth over the next 6-12 months, but it will also have knock-on effects for key retail sectors such as furniture, furnishings and building supplies given the strong correlation with housing transactions. Read this article on THINK TagsUS Recession Manufacturing Housing 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

Home Depot (HD) and Walmart (WMT) are among the largest US retailers whose results seem to show the attitude of the average American consumer towards spending money. HD is a chain of large-format home improvement shops, very similar to Europe's Leroy Merlin. WMT, on the other hand, is the largest US retail chain. Last month, Walmart spooked markets by lowering its profit forecasts and warned of a rapid decline in demand. However, the results announced today said sales were up more than 8% year-on-year to $152.9 billion against expectations of $150.8 billion. Online sales alone rose by as much as 12%. The company is struggling with a gigantic inventory problem (worth $61 billion at the end of Q1), prominent among the backlog of products is apparel, for example. To deal with this, discounts have been introduced on many products, thereby boosting sales by stimulating demand. At present, the value of stock amounts to USD 59.9 billion. However, the increased sales do not translate directly into profits. "The actions we’ve taken to improve inventory levels in the US, along with a heavier mix of sales in grocery, put pressure on the profit margin for Q2 and our outlook for the year," - CEO Doug McMillon said. Walmart's second-quarter net income rose to $5.15bn, or $1.77 per share (EPS) against Wall Street analysts' estimates of $1.62. In the same period a year ago, net income was $4.28bn, or $1.52 per share (EPS). Walmart maintained its forecast for the second half of the year. It expects US shop sales to grow by about 3% (excluding fuel), in the second half of the year, or about 4 per cent for the full year. It expects adjusted earnings per share to decline 9% for the year. Home Depot also announced a 5.8% increase in sales, to 43.8 billion against expectations of $43.36 billion. Net sales were up 6.5% year-over-year, marking the highest quarterly sales in the company's history. "Our team has done a fantastic job serving our customers while continuing to navigate a challenging and dynamic environment," - CEO Ted Decker said, commenting on the company's results. Net income increased to $5.17 billion, up 7.6% year-over-year. EPS was $5.05 against analysts' forecasts of $4.94. Walmart and Home Depot gain 4.7% and 1.9%, respectively, on the market open. The retailers' results show that, despite the looming recession, consumers are spending money and the situation could be not that bad in the short term. However, at the same time, the figures for financing this spending are alarming. A large proportion of Americans are covering higher prices with credit cards, which must eventually be repaid, according to data published by Bloomberg. The worsening outlook for economic health, alarming PMI levels and the bond yield curve all translate into possible future deterioration in consumer health.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.  Source: Retailers announce strong results - shares rise

The Reserve Bank of New Zealand today raised its main interest rate by 0.5 percentage points, to 3 percent, a level last seen seven years ago. It was the fourth 50-basis point hike in the current cycle, which may make the RBNZ one of the stronger monetary tightening central banks to bring down inflation.   Today's hike was in line with market expectations. Some policymakers believe that inflation may soon begin to stabilize or even start to decline through lower fuel prices and transportation prices. However, inflation may not return to the New Zealand central bank's target until mid-2024. Thus, further monetary tightening may be required, with its end expected in the first quarter of 2023 - according to a statement issued to today's decision. As a result, the RBNZ may raise the main interest rate by about 3.75 percentage points throughout the cycle, to 4 percent, from the record low of 0.25 percent that occurred in 2021. Inflation in New Zealand rose to 7.3 percent y/y in the second quarter of 2022, up from 6.9 percent in the previous period. This was the highest figure since the second quarter of 1990.   The NZD/USD exchange rate seemed to react relatively calmly to the above decision, as it was in line with the market consensus. At 07:30 GMT+3 on the Conotoxia MT5 platform, the NZD/USD exchange rate rose by 0.25 percent, to 0.6360. As a result, at this hour, of the major currencies against the US dollar, it is the NZD that seems to have gained the most. Since the beginning of the month, the NZD has gained 1.10 percent to the USD, which may make New Zealand's currency the strongest of the world's major currencies.   Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Bank of New Zealand with another rate hike

  Summary:  The US equity market rally extended modestly yesterday, but turned tail upon the cash S&P 500 Index touching the key 200-day moving average at 4,325. Market today will eye the latest US Retail Sales report from July, which saw peak gasoline prices in the US mid-month, while the FOMC Minutes may prove a bit stale, given they were created before three weeks of the market rallying sharply and financial conditions easing aggressively, likely not the Fed’s intention.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures broke above the 200-day moving average yesterday and then got rejected. Momentum in US equities got a bit more fuel from two good earnings releases from Home Depot and Walmart rising 4% and 5% respectively. S&P 500 futures are pushing higher again this morning and will likely attempt once more to break above the 200-day moving average. Long-term US interest rates are still well-behaved trading around the 2.8% level and the VIX Index has stabilised just below the 20 level. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index rallied 1% today, reversing yesterday’s loss. Meituan (03690:xhkg) bounced nearly 5% after its 9% drop yesterday due to a Reuters story suggesting that Tencent (00700:xhkg) plans to divest its 17% stake (USD24 billion) in Meituan.  Tencent denied such a divesture plan last night.  Power drills and floor care equipment maker and a supplier to Home Depot (HD:xnys), Techtronic Industries (00669:xhkg) jumped more than 7% after better-than-expected results from Home Depot overnight.  On Tuesday, China’s Premier Li Keqiang held a video conference with provincial chiefs from Jiangsu, Zhejiang, Shandong, Henan, and Sichuan to reiterate the central government’s push for full use of policies to stabilize the economy.  CSI300 gained 0.6%. USD pairs, including GBPUSD, which bounced strongly off 1.2000 support  A mixed overnight session for FX as the US yields wobbled. Risk sentiment held up with the mixed US data accompanied by a less bad outcome in the US retailer earnings than expected. This made the safe-haven yen a clear underperformer, and USDJPY rose back above 134. But a clear trend in the pair is still missing and a break above 135 is needed to reverse the downtrend. Cable teased key psychological support at 1.2000 yesterday before rising later in the day above 1.2100 ahead of today’s UK CPI report, which may confirm the need for further BOE action after labor data showed wage pressures. EURUSD bounced from session lows at 1.0123 but has posted a recent bearish reversal that keeps the focus lower, particularly on any breakdown through 1.0100, the multi-week range low. USD traders will focus on today’s US Retail Sales and FOMC minutes. USDCNH – there was a brief spike higher in USDCNH earlier this week as China moved to stimulate with a small 10-basis point rate cut of the key lending rate – no drama yet, but traders should keep an eye on this very important exchange rate for larger volatility and significant break above 6.80, as Chines exchange rate policy shifts can provoke significant moves across markets. Crude oil (CLU2 & LCOV2) touched a fresh six-month low on Tuesday with Brent trading lower, in anticipation of the Iran nuclear deal being revived, before bouncing in response to the API reporting a draw in crude oil and especially gasoline stocks. While a deal with Iran could see it raise production by around one million barrels per day, Goldmans talks about a mutually beneficial stalemate for both sides with Iran wanting to avoid sanctions while the US wants to avoid higher oil prices but also the political backlash from a potential deal. EIA’s weekly crude and fuel stocks report on tap later with the market also focusing on gasoline demand and the levels of exports. Over in Europe meanwhile the Dutch TTF benchmark gas trades near an eye-popping $400 per barrel crude oil equivalent, a level that will continue to attract demand for oil-based products due to switching. Copper (COPPERUSSEP22) continues to trade within its established upward trending range after China’s Premier Li Keqiang asked local officials from six provinces to bolster pro-growth measures after weaker financing and activity data were reported earlier this week. In addition, copper is also enjoying some tailwind from rising zinc and aluminum prices after Europe's largest smelters said it would halt production and after producers in China were told to curb production in order to preserve electricity supply during the current heatwave. HG copper’s trading range has narrowed to between $3.585, the uptrend from the July low and $3.663 the 50-day moving average.   What is going on?   US housing scare broadens, industrial production upbeat US Housing starts fell 9.6% in July to an annualized 1,446k, well beneath the prior 1,599 and the expected 1,537k. Housing starts are now down for five consecutive months, and suggest a cooling housing market in the wake of higher borrowing costs and higher inflation. Meanwhile, building permits declined 1.3% in July to 1,674k from 1,696, but printed above the expected 1,650k. There will be potentially more scaling back in construction activity as demand weakens and inventory levels rise. On the other hand, industrial production was better than expected at 0.6% m/m (prev: -0.2%) in July, possibly underpinned by holiday demand but the outlook is still murky amid persistent inflation and supply chain issues. UK headline inflation hits 10.1% The highest in decades and above the 9.8% expected and for the month-on-month reading of +0.6%, higher than the +0.4% expected. Core inflation hit 6.2% vs. 5.9% expected and 5.8% in Jun. That matched the cycle high from back in April. Retail inflation rose +0.9% MoM and +12.3% YoY vs. +0.6%/+12.0% expected, respectively. The Bank of England has forecast that inflation will peak out this fall at above 13%. Reserve Bank of New Zealand hikes 50 basis points to 3.00%, forecasts 4% policy rate peak The RBNZ both increased and brought forward its peak rate forecast to 4.00%, a move that was actually interpreted rather neutrally – more hawkish for now, but suggesting that the RBNZ would like to pause after achieveing 4.00%. 2-year NZ rates were unchanged later in the session after a brife poke higher. RBNZ Governor warned in a press conference that New Zealand home prices will continue to fall. This is actually a desired outcome after a huge spike in housing speculation and prices due to low rates from the pandemic response and massive pressure from a Labor-led government that had promised lower housing costs were behind the RBNZ’s quick pivot and more aggressive hiking cycle in 2021. Walmart shares rally on improved outlook The largest US retailer surprised on both revenue and earnings in its Q2 report with most of the revenue growth coming from higher prices and not volume. The retailer now sees an EPS decline of 9-11% this fiscal year compared to previously 11-13% suggesting input cost pressures are easing somewhat. Walmart is seeing more middle and high-income customers and the retailer has also cancelled orders for billions of dollars to lower inventory levels suggesting global supply chains are improving. Walmart shares were up 5%. Home Depot still sees robust market The largest US home improvement retailer beat on revenue and earnings yesterday in its Q2 results with Q2 comparative sales up 5.8% vs est. 4.6% highlighting that volumes are falling as revenue growth is below inflation rates. The US housing market figures on housing starts and permits cemented that the US housing market is slowing down due to the recent rally in mortgage rates. Home Depot is taking a conservative approach to guidance, but the market nevertheless pushed shares 4% higher. Apple supplier Foxconn suspends its factory in Chengdu due to a power crunch Foxconn’s Chengdu factory is suspending operations for six days from August 15 to 20 due to a regional power shortage. The suspension is affecting Foxconn’s supply of iPad to Apple. The company says the impact “has been limited at the moment” but it may affect shipments if the power outage persists. The Chengdu government is imposing power curbs on industrial users to ensure electricity supply for the city’s residents. At the same time, Foxconn has started test production of the Apple watch in its factories in Vietnam. With the passage of CHIPS and Science Act earlier this month in the U.S., there have been speculations that Taiwanese and Korean chipmakers and their customers may be accelerating the building up of production capacity away from China. Big European aluminium plant to halt production Norsk Hydro’s aluminium plant in Slovakia is halting primary production by end of September due adverse conditions such as elevated electricity prices. The aluminium company would incur significant financial losses should it continue its operations.   What are we watching next?   Eyes on US retail sales today  US retail sales will be next test of the US consumer after less bad retailer earnings last night. Retail sales should have been more resilient given the lower prices at pump improved the spending power of the average American household, and Amazon Prime Day in the month possibly attracted bargain hunters as well. However, consensus expectations are modest at 0.1% m/m compared to last month’s 1.0%. FOMC minutes to be parsed for hints on future Fed moves The Federal Reserve had lifted rates by 75bps at the late July meeting to bring the Fed Funds rate to a level they have previously considered neutral, but stayed away from providing any forward guidance. The minutes of that July meeting are to be released later today, and member comments will be watched closely for any hints on the expectation for September rate hike or the terminal Fed rate. The hot July US jobs report and the cooling July inflation number, as well as a blistering three week rally in equity markets have further confused the markets since the Fed meeting, even as Fed speakers continue to push against any expectations of rate cuts as soon as ‘early’ 2023. The next chief focus for Fed guidance will remain on the Fed’s Jackson Hole, Wyoming symposium next week. Earnings to watch Today’s European earnings focus is Carlsberg and Coloplast with the former reporting strong first-half organic growth of 20.7% vs est. 15.5% suggesting breweries are seeing healthy volume and price gains. Tencent is the key focus in Asia and especially given the recent developments in China on anti-monopoly laws and its decision to divest its $24bn stake in Meituan. In the US the focus will be on Cisco which saw its growth grinding to a halt in the previous quarter. Wednesday: Tencent, Hong Kong Exchanges & Clearing, Analog Devices, Cisco Systems, Synopsys, Lowe’s, CSL, Target, TJX, Coloplast, Carlsberg, Wolfspeed Thursday: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0900 – Eurozone Q2 GDP Estimate 1230 – US Jul. Retail Sales 1430 – US Weekly Crude Oil and Product Inventories 1800 – US FOMC Minutes 1820 – US Fed’s Bowman (Voter) to speak 2110 – New Zealand RBNZ Governor Orr before parliamentary committee 0130 – Australia Jul. Employment Change (Unemployment Rate)   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Has The Best Main Interest Rate In 7 Years

Summary:  Today we look at the US equity market rolling over a bit after hitting a key resistance point in the form of the S&P 500's 200-day moving average. We continue to note the resilient US dollar and the risk of USDCNH suddenly commanding the market's attention again if China moves to devalue its currency. We also zero in on weak Antipodean currencies as AUDUSD struggles and NZD can't get a boost from the RBNZ overnight. Crude oil, industrial metals, the latest on the dire power emergency in the EU, danger of meme stocks, earnings ahead and more on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Watching for signs of altitude sickness

Overview: The biggest development today in the capital markets is the jump in benchmark interest rates.  The US 10-year yield is up five basis points to 2.86%, which is about 10 bp above Monday’s low.  European yields are up 9-10 bp.  The 10-year German Bund yield was near 0.88% on Monday and is now near 1.07%.  Italy’s premium over German is near 2.18%, the most in nearly three weeks.  Although Asia Pacific equities rallied, led by Japan’s 1.2% gain, but did not include South Korea, European equities are lower as are US futures.  The Stoxx 600 is struggled to extend a five-day rally.  The Antipodeans are the weakest of the majors, but most of the major currencies are softer. The euro and sterling are straddling unchanged levels near midday in Europe.  Gold is soft in yesterday’s range, near its lowest level since August 5.  While $1750 offers support, ahead of it there may be bids around $1765. October WTI is pinned near its lows around $85.50-$86.00.  The drop in Chinese demand is a major weight, while the market is closely monitoring developments with the Iranian negotiations.  US natgas is edging higher after yesterday 6.9% surge to approach last month’s peak.  Europe’s benchmark is 4.5% stronger today after yesterday’s 2.7% pullback.  Iron ore fell (3.9%) for the fourth consecutive decline. The September contract that trades in Singapore is at its lowest level since July 22.  September copper is a little heavier but is still inside Monday’s range.  September wheat is extending its pullback for the fourth consecutive session.  It had risen in the first four sessions last week. It is moving sideways in the trough carved over the past month.    Asia Pacific   The Reserve Bank of New Zealand delivered the anticipated 50 bp rate hike and signaled it would continue to tighten policy    It did not help the New Zealand dollar, which is posting an outside day by trading on both sides of yesterday's range.  The close is the key and below yesterday's low (~$0.6315) would be a bearish technical development that could spur another cent decline.  It is the RBNZ's fourth consecutive half-point hike, which followed three quarter-point moves.  The cash target rate is at 3.0%.  Inflation (Q2) was stronger than expected rising 7.3% year-over-year.  The central bank does not meet again until October 5, and the swaps market has a little more than a 90% chance of another 50 bp discounted.    Japan's July trade balance deteriorated more than expected    The shortfall of JPY1.44 trillion (~$10.7 bln) form JPY1.40 trillion in June.  Exports slowed to a still impressive 19% year-over-year from 19.3% previously, while imports rose 47.2% from 46.1% in June.  The terms-of-trade shock is significant in both Japan and Europe.  Japan's ran an average monthly trade deficit of about JPY1.32 trillion in H1 22 compared with an average monthly surplus of JPY130 bln in H1 21.  The eurozone reported an average shortfall of 23.4 bln euros in H1 22 compared with a 16.8 bln average monthly surplus in H1 21.  The two US rivals, China, and Russia, have been hobbled by their own actions, while the two main US economic competitors, the eurozone and Japan are experiencing a dramatic deterioration of their external balance,     The 11 bp rise in the US two-year yield between yesterday and today has helped lift the US dollar to almost JPY135.00, a five-day high   It has met the (50%) retracement target of the downtrend since the multiyear peak in mid-July near JPY139.40.  The next target is the high from earlier this month around JPY135.60.  and then JPY136.00.  Initial support now is seen near JPY134.40.  After recovering a bit in the North American session yesterday, the Australian dollar has come under renewed selling pressure and is trading at five-day lows below the 20-day moving average (~$0.6990).  It has broken support in the $0.6970-80 area to test the trendline off the mid-July low found near $0.6965.  A break could signal a move toward $0.6900-10.  The gap created by yesterday's high US dollar opening against the Chinese yuan was closed today as yuan recovered for the first day in three sessions.  Monday's high was CNY6.775 and yesterday's low was CNY6.7825.  Today's low is about CNY6.7690.  For the second consecutive session, the PBOC set the dollar's reference rate a little lower than the market (median in Bloomberg's survey) expected (CNY6.7863 vs. CNY6.7877).  The dollar has risen to almost CNH6.82 in the past two sessions and still trading a little above CNH6.80 today but was sold to nearly CNH6.7755 where is has found new bids.      Europe   The UK's headline CPI accelerated to 10.1% last month from 9.4% in June    It was above market expectations and the Bank of England's forecast for a 9.9% increase.  Although the rise in food prices (2.3% on the month and 12.7% year-over-year) lifted the headline, the core rate, which excludes food, energy, alcohol, and tobacco rose to 6.2% from 5.8% and was also above expectations (median forecast in Bloomberg's survey was for 5.9%).  Producer input prices slowed, posting a 0.1% gain last month for a 22.6% year-over-year pace (24.1% in June).  However, output prices jumped 1.6% after a 1.4% gain in June.  This puts the year-over-year pace at 17.1%, up from 16.4% previously.  The bottom line is that although the UK economy contracted in Q2 and the BOE sees a sustained contraction beginning soon, the market recognize that the monetary policy will continue to tighten.  The market swaps market is fully pricing in a 50 bp hike at the mid-September meeting and is toying with the idea of a larger move (53 bp of tightening is discounted).    What a year of reversals for Germany    After years of pressure from the United States and some allies in Europe, Germany finally nixed the Nord Stream 2 pipeline with Russia.  Putin also got Germany to do something that several American presidents failed to achieve and that is boost is defense sending in line with NATO commitments. The energy crunch manufactured by Russia is forcing Germany to abandon is previous strategy of reducing coal and closing down its nuclear plants.  Ironically, the Greens ae in the coalition government and recognize little choice.  A formal decision on three nuclear plants that were to be shuttered before the end of the year has yet to be made, but reports confirm it is being discussed at the highest levels.     Germany's one-year forward electricity rose by 11% to 530.50 euros a megawatt-hour in the futures market years, a gain of more than 500%     France, whose nuclear plants are key to the regional power grid, is set to be the lowest in decades, according to reports.  France has become a net importer of electricity, while the extreme weather has cut hydropower output and wind generation is below seasonal norms.  The low level of the Rhine also disrupts this important conduit for barges of coal and oil. Starting in October, German households will have a new gas tax (2.4-euro cents per kilowatt hour for natural gas) until 1 April 2024. Economic Minister Habeck estimated that for the average single household the gas tax could be almost 100 euros a month, while a couple would pay around 195 euros.  Also, starting in October, utilities will be able to through to consumers the higher costs associated with the reduction of gas supply from Russia.  This poses upside risk to German inflation.     The euro held technical support near $1.0110 yesterday and is trading quietly today in a narrow (~$1.0150-$1.0185) range today    Yesterday was the first session since July 15 that the euro did not trade above $1.02.  The decline since peaking last week a little shy of $1.0370 has seen the five- and 20-day moving averages converge and could cross today or tomorrow for the first time since late July. We note that the US 2-year premium over German is testing the 2.60% area.  It has not closed below there since July 22.  Sterling held key support at $1.20 yesterday and traded to almost $1.2145 today, which met the (50%) retracement objective of the fall from last week's $1.2275 high.  The next retracement (61.8%) is closer to $1.2175.  The UK reported employment yesterday, CPI today, and retail sales ahead of the weekend.  Retail sales, excluding gasoline have fallen consistently since last July with the exception of October 2021 and June 2022.  Retail sales are expected to have slipped by around 0.3% last month.     America   The Empire State manufacturing August survey on Monday and yesterday's July housing starts pick up a thread first picked up in the July composite PMI, which fell from 52.3 to 47.7 of some abrupt slowing of economic activity  The Empire State survey imploded from 11.1 to -31.3.  Housing starts fell 9.6%, more than four-times the pace expected (median Bloomberg survey -2.1%).  It was small comfort that the June series was revised up 2.4% from initially a 2.0% decline.  The 1.45 mln unit pace is the weakest since February 2021 and is about 9% lower than July 2021.  However, offsetting this has been the strong July jobs report and yesterday' industrial production figures.  The 0.6% was twice the median forecast (Bloomberg's survey) and the June decline (-0.2%) was revised away. The auto sector continues to recover from supply chain disruptions, and this may be distorting typically seasonal patterns.  Sales are rose in June and July, the first back-to-back gain in over a year. To some extent, supply is limiting sales, which would seem to encourage production.  Outside of autos, output slowed (year-over-year) for the third consecutive month in July.     Today's highlights include July retail sales and the FOMC minutes     Retail sales are reported in nominal terms, which means that the 13% drop in the average retail price of gasoline will weigh on the broadest of measures.  However, excluding auto, gasoline, building materials, and food services, the core retail sales will likely rise by around 0.6% after a 0.8% gain in June.  The most important thing than many want to know from the FOMC minutes is where the is bar to another 75 bp rate hike.  The Fed funds futures market has it nearly 50/50.     Canada's July CPI was spot on forecasts for a 0.1% month-over-month increase and a 7.6% year-over-year pace (down from 8.1%)     However, the core rates were firm than average increased.  The market quickly concluded that this increases the likelihood that the central bank that surprised the market with a 100 bp hike last month will lift the target rate by another 75 bp when it meets on September 7.  In fact, the swaps market sees it as a an almost 65% probability, the most since July 20.  Canada reports June retail sales at the end of the week.  The median forecast in Bloomberg's survey is for a 0.4% gain, but even if it is weaker, it is unlikely to offset the firm core inflation readings.     The dollar-bloc currencies are under pressure today, but the Canadian dollar is faring best, off about 0.25% in late morning trading in Europe     The Aussie is off closer to 0.75% and the Kiwi is down around 0.5%.  US equities are softer. The greenback found support near CAD1.2830 and is near CAD1.2880.  Monday and Tuesday's highs were in the CAD1.2930-5 area and a break above there would target CAD1.2985-CAD1.3000.  However, the intraday momentum indicators are overextended, and initial support is seen in the CAD1.2840-60 area. The greenback has forged a shelf near MXN19.81 in recent days.  It has been sold from the MXN20.83 area seen earlier this month.  It has not been above MXN20.05 for the past five sessions.  A move above there, initially targets around MXN20.20.  The JP Morgan Emerging Market Currency Index is off for the third consecutive session. If sustained, it would be the longest losing streak since July 20-22.     Disclaimer   Source: Markets Look for Direction

Dutch TTF Gas is resuming uptrend taking out July peak testing the 0.618 Fibonacci retracement at around €242.75.RSI has broken its falling trend and is likely to trade out/cancel the divergence since mid-July. If Dutch gas closes above the 0.618 retracement the 0.764 retracement at around 281.82 is next level likely to be reached. The upper rising trend line is likely to be reached and possibly broken in a gas price that seems to accelerate.To reverse the uptrend a close below 187.50 is needed.However, a correction over the next couple of days is not unlikely given the Spinning Top Candle formed yesterday. IT is often a top and reversal indicator but needs to be confirmed by a bearish candle the following day. IF Dutch Gas closes above its peak the potential top and reversal is demolished. Source: Saxo Group Henry Hub Gas has taken out resistance at the 0.618 retracement at around $8.90 and now also 0.764 retracement indicating previous highs at $9.66-9.75 are likely to be tested. If Henry Hub Gas closes above previous highs new price targets Source: Saxo Group Brent Crude oil continue its downtrend closing in on support at around $90. RSI is testing previous lows. There is divergence indicating a weakening of the downtrend but if RSI makes a new low the $90 support could be broken. Next support would be at around the 0.764 retracement at 85.76To set the downtrend on pause a close above 100.38. That will most likely not reverse the trend but merely just put it on pause. Source: Saxo Group WTI Crude oil was rejected at the short-term falling trendline and is now back below the 0.618 retracement. Next support at 81.90. There is divergence on RSI indication the downtrend is weakening. However, if RSI closes below If WTI closes back above the 200 SMA i.e. above $95 thereby also breaking above the short-term falling trendline, a larger correction to around 105-110 is likely. Source: Saxo Group Carbon Emissions broke its falling trendline last week and has now also broken above resistance at 92.75 closing in on its all-time high just below €100. RSI is entering over-bought territory but there is no divergence indicating higher levels (above 100) is likely. However, do expect a correction from just below previous highs.            Source: Saxo Group   Source: Technical Update - Natural Gas powers higher. Oil downtrend weakening, close to and end? Carbon Emission close to all-time highs

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

Summary:  US equities traded a bit lower yesterday after the S&P 500 challenged the 200-day moving average from below the prior day for the first time since April in the steep comeback from the June lows. Sentiment was not buoyed by the FOMC minutes of the July meeting suggesting the Fed would like to slow the pace of tightening at some point. Crude oil rose from a six-month low on bullish news from the US and OPEC.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rolled over yesterday wiping out the gains from the two previous sessions and the index futures are continuing lower this morning trading around the 4,270 level. US retail sales for July were weak and added to worries of the economic slowdown in real terms in the US. The 10-year yield is slowing crawling back towards the 3% level sitting at 2.87% this morning. A move to 3% and potentially beyond would be negative for equities. The next levels to watch on the downside in S&P 500 futures are 4,249 and then 4,200 Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Shares in the Hong Kong and mainland China markets declined. China internet stocks were weak across the board with Tencent (00700:xhkg) +2.7% and Meituan (03690:xhkg) +1%, being the positive outliers. Tencent reported a revenue decline of 3% y/y in Q2, weak, but in line with market expectations. Non-GAAP operating profit was down 14% y/y to RMB 36.7bn, and EPS fell 17% y/y to RMB 2.90 but beating analyst estimates. Revenues from advertising at -18% y/y were better than expected. In the game segment, weaker mobile game revenues were offset by stronger PC game revenues. Beer makers outperformed China Resources Beer (00291:xhkg) +3.8%, Tsingtao Brewery (00168:xhkg) +1.7%. COSCO Shipping Energy Transportation (01138:xhkg) made a new high at the open on strong crude oil tanker freight rates before giving back some gains. USD pairs as the USD rally intensifies The US dollar rally broadened out yesterday, as USDJPY retook the 135.00 area, but needs to follow through above 135.50-136.00 to take the momentum back higher. Elsewhere, AUDUSD has broken down again on the move down through 0.7000 and USDCAD has posted a bullish reversal, needing 1.3000 for more upside confirmation. The GBPUSD pair looks heavy despite a massive reset higher in UK rates in the wake of recent UK inflation data, with a close below 1.2000 indicating a possible run on the sub-1.1800 lows, while EURUSD is rather stuck tactically, as price has remained bottled up above the 1.0100 range low. USDCNH, as discussed below, may be a key pair for whether the USD rally broadens out even more aggressively, and long US treasury yields and risk sentiment are other factors in the mix that could support the greenback, should the 10-year US treasury benchmark move higher toward 3.00% again or sentiment roll over for whatever reason. Certainly, tightening USD liquidity could prove a concern for sentiment as the Fed turns up the pace of quantitative tightening – something it seems behind schedule in doing if we look at the latest weekly Fed balance sheet data.  USDCNH The exchange rate edged higher again to above 6.80 overnight after a brief spike higher earlier this week as China’s PBOC moved to stimulate with a small 10-basis point rate cut of the key lending rate. There is no real drama in the exchange rate yet after the significant rally this spring from below 6.40 to 6.80+, but traders should keep an eye on this very important exchange rate for larger volatility and significant break above 6.83, as China’s exchange rate policy shifts can provoke significant volatility across markets. Crude oil Crude oil (CLU2 & LCOV2) bounced from a six-month low on Wednesday in response to a bullish US inventory report that saw big declines in gasoline and crude oil stocks as demand from US motorist climbed to the highest this year while crude exports reached a record $5 million barrels per day. The prospect for an Iran nuclear deal continues to weigh while OPEC’s new Secretary-General said spare capacity was becoming scarce. US strategic reserves are now at the lowest level since 1985 and the government has by now sold around 90% of what was initially offered in order to bring down prices. While demand concerns remain a key driver for macroeconomic focused funds selling crude oil as a hedge we notice a renewed surge in refinery margins, especially diesel, supported by increased demand from gas-to-fuel switching Gold and silver Gold has so far managed to find support at $1759, the 38.2% retracement of the July to August bounce, after trading weaker in response to a stronger dollar and rising yields. Silver (XAGUSD) meanwhile has almost retraced half of its recent strong gains with focus now on support at $19.50. The latest driver being the FOMC minutes which signaled ongoing interest-rate hikes and eventually at a slower pace than the current. The short-term direction has been driven by speculators reducing bullish bets following a two-week buying spree in the weeks to August 9 which lifted the net by 63k lots, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication investor, for now, trusts the FOMC’s ability to bring down inflation within a relatively short timeframe   What is going on? Financial conditions are tightening, if modestly. Recent days have brough a rise in short US treasury yields, but more importantly it looks as though some of the risk indicators like corporate credit spreads may have bottomed out here after a sharp retreat from early July highs – one Bloomberg high yield credit spreads to US treasuries peaked out above 5.75% and was as low as 4.08% earlier this week before rising to 4.19% yesterday, with high yield bond ETFs like HYG and JNK suffering a sharp mark-down yesterday of over a percent. Factors that could further aggravate financial conditions include a significant CNH weakening, higher US long treasury yields (10-year yield moving back toward 3.00%, for example) or further USD strength. Adyen sees margin squeeze. One of Europe’s largest payment companies reports first-half revenue of €609mn vs est. €615mn despite processed volume came significantly above estimates at €346bn suggesting the payments industry is experiencing pricing pressures. Cisco outlook surprises. The US manufacturer of networking equipment surprised to the upside on both revenue and earnings in its fiscal Q4 (ending 30 July), but more importantly, the company is guiding revenue growth in the current fiscal quarter of 2-4% vs est. -0.2% and revenue growth for the current fiscal year of 4-6% vs est. 3.3%. Cisco said that supply constraints are beginning to ease and that customer cancellations are running below pre-pandemic levels, and that the company’s growth will be a function of availability. Stale FOMC minutes hint at sustained restrictive policy, but caution on pace of tightening. Fed’s meeting minutes from the July meeting were released last night, and officials agreed to move to restrictive policy, with some noting that restrictive rates will have to be maintained for some time to bring inflation back to the 2% target. Still, there was also talk of slowing the pace of rate hikes ‘at some point’, despite pushing back against easing expectations for next year. The minutes were broadly in-line with the market’s thinking, and lacked fresh impetus needed to bring up the pricing of Fed’s rate hikes. Chairman Powell’s speech at the Jackson Hole Symposium next week will be keenly watched for further inputs. US retail sales were a mixed bag. July US retail sales were a little softer at the headline level than the market expected (0% growth versus the +0.1% consensus) but the ex-auto came in stronger at 0.4% (vs. -0.1% expected). June’s growth was revised down to 0.8% from 1%. The mixed data confirmed that the US consumers are feeling the pinch from higher prices, but have remained resilient so far and that could give the Fed more room to continue with its aggressive rate hikes. Lower pump prices and further improvements in supply chain could further lift up retail spending in August. The iron ore miners are resilient despite price pressures Despite China planning more fiscal stimulus to fund infrastructure investment, the iron ore (SCOA, SCOU2) price paired back 8% this week, retreating to its lowest equal level in five weeks at $101.65, a level the iron ore price was last at in December 2021. Since March, the iron ore price has retreated 37%, with the most recent pull back being fueled by concerns China’s Covid cases are surging again with cases at a three-month high, as the outbreak worsens in the tropical Hainan province. Despite iron ore pulling back, shares in iron ore majors like BHP, remain elevated, up off their lows, with BHP’s shares trading 14% up of its July low, and moving further above its 200-day moving average, on hopes of commodity demand picking up. What are we watching next? Norway’s central bank guidance on further tightening. The Norges Bank is expected to hike 50 basis points today to take the policy rate to 1.75% despite an indication from the bank in June that the bank would prefer to shift back to hiking rates by 25 basis points, as a tight labour market and soaring inflation weigh. The path of tightening for the central bank has been an odd one, as it was the first G10 bank to actually hike rates in 2021, but finds itself with a far lower policy rate than the US, for example, which started much later with a faster pace of hikes. But NOK may react more to the direction in risk sentiment rather than guidance from the Norges Bank from here, assuming no major surprises. The EURNOK downtrend has slowed of late – focusing on 10.00 if the price action continues to back up. Japan’s inflation will surge further. Japan’s nationwide CPI for July is due on Friday. July producer prices came in slightly above expectations at 8.6% y/y (vs. estimates of 8.4% y/y) while the m/m figure was as expected at 0.4%. The continued surge reflects that Japanese businesses are grappling with high input price pressures, and these are likely to get passed on to the consumers, suggesting further increases in CPI remain likely. More government relief measures are likely to be announced, while signs of any Bank of Japan pivot away from its low rates and yield-curve-control policy are lacking. Bloomberg consensus estimates are calling for Japan’s CPI to accelerate to 2.6% y/y from 2.4% previously, with the ex-fresh food number seen at 2.4% y/y vs. 2.2% earlier.   Earnings to watch In Europe this morning, the key earnings focus is Adyen which has already reported (see review above) and Estee Lauder which is deliver a significant slowdown in figures and increased margin pressure due to rising input costs. Today’s US earnings to watch are Applied Materials and NetEase, with the former potentially delivering an upside surprise like Cisco yesterday on improved supply chains. NetEase, one of China’s largest gaming companies, is expected to deliver Q2 revenue growth of 12% y/y as growth continues to slow down for companies in China. Today: Applied Materials, Estee Lauder, NetEase, Adyen, Nibe Industrier, Geberit Friday: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 0800 – Norway Deposit Rates 0900 – Eurozone Final Jul. CPI 1100 – Turkey Rate Announcement 1230 – US Weekly Initial Jobless Claims 1230 – Canada Jul. Teranet/National Bank Home Price Index 1230 – US Philadelphia Fed Survey 1400 – US Jul. Existing Home Sales 1430 – EIAs Weekly Natural Gas Storage Change 1720 – US Fed’s George (Voter) to speak 1745 – US Fed’s Kashkari (Non-voter) to speak 2301 – UK Aug. GfK Consumer Confidence 2330 – Japan Jul. National CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 18, 2022

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

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

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

Summary:  Today we note the strengthening headwinds against the melt-up in financial conditions as the US dollar continues to rise, having now broken higher against the Euro, sterling and yen, and as a new surge in US 10-year yields threatens. Elsewhere, US Natural Gas prices ease despite a weak storage build yesterday and wheat prices are retreating rapidly. In equities, focus on Applied Materials after their earning report, Canadian Solar and a look ahead at Deere. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: USD and treasury yields pushing back against the melt-up

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

Summary:  Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. Overall, however, we do not alter our long-term views about commodities and their ability to move higher over time, with some of the main reasons being underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Commodities traded with a softer bias this week as the focus continued to rest on global macro-economic developments, in some cases reducing the impact of otherwise supportive micro developments, such as the fall in inventories seen across several individual commodities. The dollar found renewed strength and bond yields rose while the month-long bear-market bounce across US stocks showed signs of running out of steam.The trigger being comments from Federal Reserve officials reiterating their resolve to continue hiking rates until inflation eases back to their yet-to-be revised higher long-term target of around 2%. Those comments put to rest expectations that a string of recent weak economic data would encourage the Fed to reduce the projected pace of future rate hikes.The result of these developments being an elevated risk of a global economic slowdown gathering pace as the battle against inflation remains far from won, not least considering the risk of persistent high energy prices, from gasoline and diesel to coal and especially gas. A clear sign that the battle between macro and micro developments continues, the result of which is likely to be a prolonged period of uncertainty with regards to the short- and medium-term outlook.Overall, however, these developments do not alter our long-term views about commodities and their ability to move higher over time. In my quarterly webinar, held earlier this week, I highlighted some of the reasons why we see the so-called old economy, or tangible assets, performing well over the coming years, driven by underinvestment, urbanization, green transformation, sanctions on Russia and deglobalization. Returning to this past week’s performance, we find the 2.3% drop in the Bloomberg Commodity Index, seen above, being in line with the rise in the dollar where gains were recorded against all the ten currencies, including the Chinese renminbi, represented in the index. It is worth noting that EU TTF gas and power prices, which jumped around 23% and 20% respectively, and Paris Milling wheat, which slumped, are not members of the mentioned commodity index.Overall gains in energy led by the refined products of diesel and US natural gas were more than offset by losses across the other sectors, most notably grains led by the slump in global wheat prices and precious metals which took a hit from the mentioned dollar and yield rise. Combating inflation and its impact on growth remains top of mind Apart from China’s slowing growth outlook due to its zero-Covid policy and housing market crisis hitting industrial metals, the most important driver for commodities recently has been the macro-economic outlook currently being dictated by the way in which central banks around the world have been stepping up efforts to curb runaway inflation by forcing down economic activity through aggressively tightening monetary conditions. This process is ongoing and the longer the process takes to succeed, the bigger the risk of an economic fallout. US inflation expectations in a year have already seen a dramatic slump but despite this the medium- and long-term expectations remain anchored around 3%, still well above the Fed’s 2% target.Even reaching the 3% level at this point looks challenging, not least considering elevated input costs from energy. Failure to achieve the target remains the biggest short-term risk to commodity prices with higher rates killing growth, while eroding risk appetite as stock markets resume their decline. These developments, however, remain one of the reasons why we find gold and eventually also silver attractive as hedges against a so-called policy mistake. Global wheat prices tumble The prospect for a record Russian crop and continued flows of Ukrainian grain together with the stronger dollar helped push prices lower in Paris and Chicago. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace, it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat futures contract touched a January low after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. With most of the uncertainties driving panic buying back in March now removed, calmer conditions should return with the biggest unknown still the war in Ukraine and with that the country’s ability to produce and export key food commodities from corn and wheat to sunflower oil. EU gas reaches $73/MMBtu or $415 per barrel of oil equivalent Natural gas in Europe headed for the longest run of weekly gains this year, intensifying the pain for industries and households, while at the same time increasingly threatening to push economies across the region into recession. The recent jump on top of already elevated prices of gas and power, due to low supplies from Russia, has been driven by an August heatwave raising demand while lowering water levels on the river Rhine. This development has increasingly prevented the safe passage of barges transporting coal, diesel and other essentials, while refineries such as Shell’s Rhineland oil refinery in Germany have been forced to cut production. In addition, half of Europe’s zinc and aluminum smelting capacity has been shut, thereby adding support to these metals at a time the market is worried about the demand outlook.An abundance of rain and lower temperatures may in the short term remove some of the recent price strength but overall, the coming winter months remain a major worry from a supply perspective. Not least considering the risk of increased competition from Asia for LNG shipments. Refinery margin jump lends fresh support to crude oil Crude oil, in a downtrend since June, is showing signs of selling fatigue with the technical outlook turning more price friendly while fresh fundamental developments are adding some support as well. Worries about an economic slowdown driven by China’s troubled handling of Covid outbreaks and its property sector problems as well as rapidly rising interest rates were the main drivers behind the selling since March across other commodity sectors before eventually also catching up with crude oil around the middle of June. Since then, the price of Brent has gone through a $28 dollar top to bottom correction. While the macro-economic outlook is still challenged, recent developments within the oil market, so-called micro developments, have raised the risk of a rebound. The mentioned energy crisis in Europe continues to strengthen, the result being surging gas prices making fuel-based products increasingly attractive. This gas-to-fuel switch was specifically mentioned by the IEA in their latest update as the reason for raising their 2022 global oil demand growth forecast by 380k barrels per day to 2.1 million barrels per day. Since the report was published, the incentive to switch has increased even more, adding more upward pressure on refinery margins. While pockets of demand weakness have emerged in recent months, we do not expect these to materially impact on our overall price-supportive outlook. Supply-side uncertainties remain too elevated to ignore, not least considering the soon-to-expire releases of crude oil from US Strategic Reserves and the EU embargo of Russian oil fast approaching. In addition, the previously mentioned increased demand for fuel-based products to replace expensive gas. With this in mind, we maintain our $95 to $115 range forecast for the third quarter. Gold and silver struggle amid rising dollar and yields Both metals, especially silver, were heading for a weekly loss after hawkish sounding comments from several FOMC members helped boost the dollar while sending US ten-year bond yields higher towards 3%. It was the lull in both that helped trigger the recovery in recent weeks, and with stock markets having rallied as well during the same time, the demand for gold has mostly been driven by momentum following speculators in the futures market. The turnaround this past week has, as a result of speculators' positioning, been driven by the need to reduce bullish bets following a two-week buying spree which lifted the net futures long by 63k lots or 6.3 million ounces, the strongest pace of buying in six months. ETF holdings meanwhile have slumped to a six-month low, an indication that investors, for now, trust the FOMC’s ability to bring down inflation within a relatively short timeframe. An investor having doubts about this should maintain a long position as a hedge against a policy mistake. Some investors may feel hard done by gold’s negative year-to-date performance in dollars, but taking into account it had to deal with the biggest jump in real yields since 2013 and a surging dollar, its performance, especially for non-dollar investors relative to the losses in bonds and stocks, remains acceptable. In other words, a hedge in gold against a policy mistake or other unforeseen geopolitical events has so far been almost cost free.   Source: WCU: Bearish macro, bullish micro regime persists

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

Summary:  Equities closed last week on the defensive as a rising US dollar and especially US treasuries weighed. The US 10-year yield is threatening the 3.00% level for the first time in a month ahead of the important US July PCE inflation data and Fed Chair Powell’s speech on Friday. How forcefully will Powell push back against the virtual melt-up in financial conditions after the market felt the Fed pivoted to less tightening at the July meeting?   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are still rolling over as the US 10-year yield zoomed to 3% on Friday with the index futures trading just above the 4,200 level this morning. The next levels on the downside sit around the 4,100 to 4,170 range, but in the longer term the 4,000 level is the big level to watch. Energy markets are still sending inflationary signals which is key to watch for sentiment this week. In terms of earnings, Palo Alto Networks and Zoom Video will report earnings. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index and CSI300 were moderately higher, +0.2% and +0.8% respectively. Chinese developers gained on today’s larger-than-expected cut in the 5-year loan prime rate and last Friday’s report that the PBoC, jointly with the Housing Ministry and the Ministry of Finance to roll out a program to make special loans through policy banks to support the delivery of stalled residential housing projects. Great Wall Motor (02333:xhkg) soared 11%. In A-shares, auto names were among stocks that outperformed. Xiaomi (01810:xhkg) dropped 3% after reporting Q2 revenues -20% YoY and net profit -67% YoY, largely in line with expectations.  US dollar dominates focus in forex this week The US dollar rally picked up speed last week, with key levels falling in a number of USD pairs last week that now serve as resistance, including 1.0100 in EURUSD and 1.2000 in GBPUSD, both of which now serve as resistance/USD support. A significant break of EURUSD parity will likely add further psychological impact, and more practically, an upside break in yields at the longer end of the US yield curve is playing a supportive roll, one that will intensify its driving roll if the benchmark 10-year US Treasury yield follows through higher above the 3.00% level it touched in trading overnight. A complete sweep of USD strength also threatens on any significant follow through higher in USDCNH as it threatens an upside break here (more below). The next key event risk for the US dollar arrives with this Friday’s Jackson Hole symposium speech from Fed Chair Powell (preview below). USDCNH Broad USD strength is helping to drive a move to new cycle highs above 6.84 as the week gets underway, but CNH is not weak in other pairings with G10 currencies, quite the contrary. Still, a move in this critical exchange rate will remain a focus, and the contrast between an easing PBOC (moving once again overnight) and tightening central banks nearly everywhere else is stark. The USDCNH moving higher will receive considerable additional focus if the 7.00 level. Crude oil prices (CLU2 & LCOV2) Crude oil turned lower in the Asian overnight after modest gains last week as the focus continues to alter between demand destruction fears and persistent supply shortages. Fears of an economic slowdown reducing demand remains invisible in the physical market but it has nevertheless seen crude oil give up all the post Russia invasion gains while speculators or hedge funds have cut bullish bets on WTI and Brent to the lowest since April 2020. WTI futures trades back below $90/barrel while Brent futures dipped below $96. Still, the gas-to-fuel switch led by record gas prices in Europe has seen refinery margins strengthen again lately and it now adds to the fundamental price-supportive factors. Focus may turn back to Iranian supply early in the week though, with reports that a deal is ‘imminent’. Cryptocurrencies The crypto market took a major hit on Friday with the total crypto market cap diving by more than 9 %, but prices have stabilized over the weekend. The total market cap is now close to the psychological $1 trillion level. US Treasuries (TLT, IEF) Rising US Treasury yields are pushing back against the strong improvement in financial conditions of recent weeks after the US 10-year Treasury yield benchmark jumped to new highs on Friday, well clear of the prior range after a few teases higher earlier in the week and bumping up against the psychologically key 3.00% level. Any follow through higher toward the 3.50% area highs of the cycle would likely add further pressure to financial conditions and risk sentiment more broadly. What is going on? German PPI shocks on the upside Germany’s July PPI smashed expectations to come in at 5.3% MoM, the biggest single gain since the Federal Republic started compiling its data in 1949 and above the consensus estimate of 0.7%. The data suggests potentially a lot more room on the upside to Eurozone inflation, and a lot more pain for German industries. European PMIs due this week will gather attention, as will Germany’s IFO numbers. Berkshire Hathaway wins approval to acquire Occidental Petroleum Warren Buffett’s industrial conglomerate that recently increased its stake in Occidental Petroleum to over 20% following the US Climate & Tax bill which adds more runway for oil and gas companies has now won regulatory approval for acquiring more than 50% the oil and gas company. This means that Berkshire Hathaway is warming up to its biggest acquisition since its Burlington acquisition. The power shortage in China China is currently being hit by a heatwave with a large part of the country experiencing -degree Celsius temperatures since the beginning of August. The surge in air conditioning caused electricity consumption to soar. To make things worse, drought has reduced hydropower output.  Some provinces and municipalities, especially Sichuan, are curbing electricity supply to industrial users in order to ensure electricity supply for residential use. This has caused disruptions to manufacturing production and added to the headwinds faced by the Chinese economy. China cut its 5-year loan prime rate loan prime more than expected China’s National Interbank Fund Center, based on quotes from banks and under the supervision of the PBoC, fixed the 1-year loan prime rate (“LPR”) 5 bps lower at 3.60% and the 5-year loan prime rates (“LPR”) 15 basis points lower at 4.30%. The larger-than-expected reduction in the 5-year LPR, which is the benchmark against which mortgage loan rates in China are set at a spread, may signal stronger support from the PBoC to the housing market.  The Chinese authorities are coming to the developers’ aid in delivering pre-sold homes Last Friday the Housing Ministry, the Ministry of Finance, and the PBoC, according to Xinhua News, jointly rolled out a program to make special loans through policy banks to support the delivery of presold residential housing projects which are facing difficulties in completion due to lack of funding.  Investors will monitor closely this week to gauge if there is additional information about the size of the program and if the PBoC will print money to fund it.  The resurgence of Covid cases in China Daily locally transmitted new cases of Covid-19 in China persistently stated above 2,000 since August 12, 2022, with Hainan, Tibet, and Xinjiang being the regions most impacted. The constituent companies of the Hang Seng Index will increase to 73 from 69 Hang Seng Indexes Company announced last Friday to add China Shenhua Energy (01088:xhkg), Chow Tai Fook Jewellery (01929:xhkg), Hansoh Pharmaceutical (03693:xhkg), and Baidu (09888:xhkg) to the Hang Seng Index, bringing the latter’s number of constituent companies to 73 from 69. The changes will take effect on September 5, 2022. In addition, SenseTime (00020:xhkg) will replace China Pacific Insurance (02601:xhkg) as a constituent company of the Hang Seng China Enterprises Index.  Australian share market at a pivotal point After rising for five straight weeks including last week's 1.2% lift, many market participants hold their breath this rally will continue. However, standing in the way are profit results from a quarter of the ASX200 companies to be released this week. For the final week of profit results, we hear from Qantas (Australia's largest airline), Whitehaven Coal (Australia's largest coal company), as well as other stocks that are typically held in Australian superannuation funds; including Coles, Woolworths, Wesfarmers, Endeavour. And lastly about 20 companies trade ex-dividend this week, however they are not expected to move the market's needle. Money managers increased their commodity exposure for a third week to August 16 The Commitment of Traders (COT) Report covering positions and changes made by money managers in commodities to the week ending August 16 showed a third week of net buying with funds adding 123k lots to 988k lots, a seven-week high. The buying was broad led by natural gas, sugar, cattle and grains with most of the selling concentrated in crude oil and gold. More in our weekly update out later. Prior to the latest recovery in price and positions hedge funds had been net sellers for months after holding 2.6 million lots at the start of the year. What are we watching next? USD and US Treasury yields as Jackson Hole Fed conference is the macro event risk of the week Friday The US dollar strengthened sharply, with EURUSD challenging near parity, USDCNH breaking higher today after another PBOC rate cut, and USDJPY not far from cycle highs. US Treasury yields have supported the move with the entire curve lifting over the last couple of weeks and longer yields pulling to new local highs last week. The Fed has pushed back consistently against the market’s pricing of a Fed turnaround to easing rates next year with partial success, as expectations for rate cuts have shifted farther out the curve and from higher levels. This week, the key test for markets is up on Friday as the US reports the Fed’s preferred measure of inflation, the July PCE inflation data, while Fed Chair Powell will also speak on Friday, offering the most important guidance on how the Fed feels about how it feels the market understands its intentions.   Earnings to watch Plenty of important earnings releases this week with the largest ones listed below. Today’s key focus is Palo Alto Networks, Zoom Video, and XPeng. Cyber security stocks have done reasonably well over the past year despite valuations coming down as demand is still red hot, Analysts expect Palo Alto Networks to report revenue growth of 27% y/y. Zoom Video, which was the pandemic superstar, is also reporting today with estimates looking for 9% revenue growth, down considerably from 54% y/y growth just a year ago. Monday: Palo Alto Networks, Zoom Video, XPeng Tuesday: CATL, Intuit, Medtronic, JD.com Wednesday: LONGi Green Energy, Royal Bank of Canada, PetroChina, Ping An Insurance Group, Nongfu Spring, Mowi, Nvidia, Salesforce, Pinduoduo, Snowflake, Autodesk Thursday: South32, Toronto-Dominion Bank, Fortum, Delivery Hero, AIA Group, China Life Insurance, CNOOC, CRH, Dollar General, Vmware, Marvell Technology, Workday, Dollar Tree, Dell Technologies, NIO Friday: Meituan, China Shenhua Energy, China Petroleum & Chemical Economic calendar highlights for today (times GMT) 0800 – Switzerland SNB weekly sight deposits 1230 – US Jul. Chicago Fed National Activity Index 2300 – Australia Aug. Flash Manufacturing/Services PMI 0030 – Japan Aug. Flash Manufacturing/Services PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 22, 2022

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

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 16. A week that potentially saw a cycle peak in US stocks and where the dollar and treasury yields both traded calmly before pushing higher. Commodities meanwhile continued their recent recovery with funds being net buyers of most contracts, the major exceptions being gold and crude oil Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 16. A week that potentially saw a cycle peak in US stocks with the S&P 500 reversing lower after reaching a four-month high, and where the dollar and treasury yields both traded calm before pushing higher. Commodities meanwhile continued their recent recovery with all sectors, except precious metals and grains recording gains. Commodities Hedge funds were net buyers for a third week with the total net long across the 24 major commodity futures tracked in this update rising by 14% to reach a seven week high at 988k lots. Some 56% below the recent peak reached in late February before Russia’s attack on Ukraine drove an across-the-board volatility spike which forced funds to reduce their exposure. Since then and up until early July, worries about a global economic slowdown, caused by a succession of rapid rate hikes in order to kill inflation, was one of the key reasons for the slump in speculative length.Returning to last week, the 123k lot increase was split equally between new longs being added and short positions being scaled back, and overall the net increase was broad led by natural gas, sugar, cattle and grains with most of the selling being concentrated in crude oil and gold. Energy: Weeks of crude oil selling continued with the combined net long in WTI and Brent falling by 26k lots to 278k lots, the lowest belief in rising prices since April 2020. Back then the market had only just began recovering the Covid related energy shock which briefly sent prices spiraling lower. While funds continued to sell crude oil in anticipation of an economic slowdown the refined product market was sending another signal with refinery margins on the rise again, partly due surging gas prices making refined alternatives, such as diesel, look cheap. As a result, the net long in ICE gas oil was lifted by 24% to 62k lots while RBOB gasoline and to a lesser extent ULSD also saw net buying. The net short in Henry Hub natural gas futures was cut by 55% as the price jumped by 19%. Metals: Renewed weakness across investment metals triggered a mixed response from traders with gold seeing a small reduction in recently established longs while continued short covering reduced bearish bets in silver, platinum and palladium. With gold resuming its down move after failing to find support above $1800, the metal has been left exposed to long liquidation from funds which in the previous two weeks had bought 63.3k lots. Copper’s small 1% gain on the week supported some additional short covering, but overall the net short has stayed relatively stable around 16k lots for the past six weeks. Agriculture: Speculators were net buyers of grains despite continued price weakness following the latest supply and demand report from the US Department of Agriculture on August 12, and after shipments of grains from Ukraine continued to pick up speed. From a near record high above 800k lots on April 19, the net long across six major crop futures went on to slump by 64% before buyers began dipping their toes back in to the market some three weeks ago. Buying was concentrated in bean oil and corn while the wheat sector remained challenged with the net long in Kansas wheat falling to a 2-year low. The four major softs contract saw strong buying led by sugar after funds flipped their position back to a 13.4k lots net long. The cocoa short was reduced by 10% while the coffee long received a 25% boost. Cotton’s 18% surge during the week helped lift the long by 35% to 44.7k lots.     Forex A mixed week in forex left the speculative dollar long close to unchanged against ten IMM futures and the DXY. Selling of euro saw the net short reach a fresh 2-1/2-year high at 42.8k lots or €5.3 billion equivalent while renewed selling of JPY, despite trading higher during the reporting week, made up most of the increase in dollar length. Against these we saw short covering reduce CHF, GBP and MXN short while CAD net long reached a 14-month high.    What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Source: COT: Gold and oil left out as funds return to commodities

Overview: The euro traded below parity for the second time this year and sterling extended last week’s 2.5% slide. While the dollar is higher against nearly all the emerging market currencies, it is more mixed against the majors. The European currencies have suffered the most, except the Norwegian krone. The dollar-bloc and yen are also slightly firmer. The week has begun off with a risk-off bias. Nearly all the large Asia Pacific equity markets were sold. Chinese indices were a notable exception following a cut in the loan prime rates. Europe’s Stoxx 600 is off by around 1.20%, the most in a month. US futures are more than 1% lower. The Asia Pacific yield rose partly in catch-up to the pre-weekend advance in US yields, while today, US and European benchmark 10-year yields are slightly lower. The UK Gilt stands out with a small gain. Gold is being sold for the sixth consecutive session and has approached the (61.8%) retracement of the rally from last month’s low (~$1680) that is found near $1730. October WTI is soft below $90, but still inside the previous session’s range. US natgas is up 2.4% to build on the 1.6% gain seen before the weekend. It could set a new closing high for the year. Gazprom’s announcement of another shutdown of its Nord Stream 1 for maintenance sent the European benchmark up over 15% today. It rose almost 20.3% last week. Iron ore rose for the first time in six sessions, while September copper is giving back most of the gains scored over the past two sessions. September wheat rallied almost 3% before the weekend and is off almost 1% now.  Asia Pacific Following the 10 bp reduction in benchmark one-year Medium-Term Lending Facility Rate at the start of last week, most observers expected Chinese banks to follow-up with a cut in the loan prime rates today  They delivered but in a way that was still surprising. The one-year loan prime rate was shaved by five basis points to 3.65%, not even matching the MLF reduction. On the other hand, the five-year loan prime rate was cut 15 bp to 4.30%. This seems to signal the emphasis on the property market, as mortgages are tied to the five-year rate, while short-term corporate loans are linked to the shorter tenor. The five-year rate was last cut in May and also by 15 bp. Still, these are small moves, and given continued pressures on the property sector, further action is likely, even if not immediately. In addition to the challenges from the property market and the ongoing zero-Covid policy, the extreme weather is a new headwind to the economy. The focus is on Sichuan, one of the most populous provinces and a key hub for manufacturing, especially EV batteries and solar panels. It appears that the aluminum smelters (one million tons of capacity) have been completed halted. The drought is exacerbating a local power shortage. Rainfall along the Yangtze River is nearly half of what is normally expected. Hydropower accounts for a little more than 80% of Sichuan power generation and the output has been halved. Officials have extended the power cuts that were to have ended on August 20 to August 25. Factories in Jiangsu and Chongqing are also facing outages. According to reports, Shanghai's Bund District turned off its light along the waterfront. Japan's Prime Minister Kishida tested positive for Covid over the weekend  He will stay in quarantine until the end of the month. In addition to his physical health, Kishida's political health may become an issue. Support for his government has plunged around 16 percentage points from a month ago to slightly more than 35% according to a Mainchi newspaper poll conducted over the weekend. The drag appears not to be coming from the economy but from the LDP's ties with the Unification Church. Meanwhile, Covid cases remain near record-highs in Japan, with almost 24.8k case found in Tokyo alone yesterday. Others are also wrestling with a surge in Covid cases. Hong Kong's infections reached a new five-month high, for example. The dollar reached nearly JPY137.45 in Tokyo before pulling back to JPY136.70 in early European turnover  It is the fifth session of higher highs and lows for the greenback. The upper Bollinger Band (two standard deviations above the 20-day moving average) is near JPY137.55 today. We suspect the dollar can re-challenge the session high in North America today. The Australian dollar is proving resilient today after plunging 3.45% last week. It is inside the pre-weekend range (~$0.6860-$0.6920). Still, we like it lower. Initial support is now seen around $0.6880, and a break could spur another test on the lows. That pre-weekend low coincides with the (61.8%) retracement of the rally from last month's low (~$0.6680) to the high on August 11 (~$0.7135). The Chinese yuan slumped to new lows for the year today. For the second consecutive session, the dollar gapped higher and pushed through CNY6.84. The PBOC set the dollar's reference rate at CNY6.8198. While this was lower than the CNY6.8213, it is not seen as much as a protest as an at attempt to keep the adjustment orderly. Europe Gazprom gave notice at the end of last week that gas shipments through the Nord Stream 1 pipeline would be stopped for three days (August 31-September 2) for maintenance  The European benchmark rose nearly 20.3% last week and 27% this month. It rose 35.2% last month and 65.5% in June. The year-to-date surge has been almost 380%. The energy shock seems sure to drive Europe into a recession. The flash August PMI out tomorrow is expected to see the composite falling further below the 50 boom/bust level. Bundesbank President Nagel, who will be attending the Jackson Hole symposium at the end of this week recognized the risk of recession but still argued for the ECB rate increases to anchor inflation expectations. The record from last month's ECB meeting will be published on Thursday. There are two keys here. First, is the color than can be gleaned from the threshold for using the new Transmission Protection Instrument. Second, the ECB lifted its forward guidance, which we argue is itself a type of forward guidance. Is there any insight into how it is leaning? The swaps market prices in another 50 bp hike, but a slight chance of a 75 bp move. The German 10-year breakeven (difference between the yield of the inflation linked bond and the conventional security) has been rising since last July and approached 2.50% last week  It has peaked in early May near 3% before dropping to almost 2% by the end of June. It is notable that Italy's 10-year breakeven, which has begun rising again since the third week of July, is almost 25 bp less than Germany. Several European countries, including Germany and Italy, have offered subsidies or VAT tax cut on gasoline that have offset some of the inflation pressures. Nagel, like Fed Chair Powell, BOE Governor Bailey, and BOJ Governor Kuroda place much emphasis on lowering wages to bring inflation down. Yet wages are rising less than inflation, and the cost-of-living squeeze is serious. They take for granted that business are simply passing on rising input costs, including labor costs, but if that were true, corporate earnings would not be rising, which they have. Costs are being passed through. Later this week, the UK regulator will announce the new gas cap for three months starting in October  Some reports warn of as much as an 80% increase. It is behind the Bank of England's warning that CPI could hit 13% then. The UK's wholesale benchmark has soared 47.5% this month after an 83.7% surge last month. Gas prices in the UK have nearly tripled this year. The UK's 10-year breakeven rose by 38 bp last week to 4.29%, a new three-month high. Although the UK economy shrank slightly in Q2 (0.1%), the BOE warned earlier this month that a five-quarter recession will likely begin in the fourth quarter. Unlike the eurozone, the UK's composite PMI has held above the 50 boom/bust level. Still, it is expected to have slowed for the fourth month in the past five when the August preliminary figures are presented tomorrow. The euro and sterling extended their pre-weekend declines  The euro slipped below parity to $0.9990. The multiyear low set last month was near $0.9950. The break of parity came in the early European turnover. Only a recovery of the $1.0050-60 area helps stabilizes the tone. Speculators in the futures market extended their next short euro position in the week through August 16 to a new two-year extreme and this was before the euro's breakdown in the second half of last week. The eurozone's preliminary August composite PMI due tomorrow is expected to show the contraction in output deepened while the market is expecting the Fed's Powell to reinforce a hawkish message on US rates. After falling to almost $1.1790 before the weekend, sterling made a marginal new low today, closer to $1.1780. The two-year low set last month was near $1.1760. The $1.1850-60 area offers an initial cap. Strike activity that hobbled the trains and underground spread to the UK's largest container port, Felixstowe, which handles about half of the country's containers. An eight-day strike began yesterday. Industrial activity is poised to spread, and this is prompting Truss and Sunak who are locked in a leadership challenge, to toughen their rhetoric against labor. America This is a busy week for the US  First, there is supply. Today features $96 bln in bills. Tomorrow sees a $60 bln three-week cash management bill and $44 bln 2-year notes. On Wednesday, the government sell another $22 bln of an existing two-year floating rate note, and $45 bln five-year note. Thursdays sale includes four- and eight-week bills and $37 bln seven-year notes. There are no long maturities being sold until mid-September. The economic data highlights include the preliminary PMI, where the estimate for services is forecast (median in Bloomberg's survey) to recover from the drop below the 50 boom/bust level. In the middle of the week, the preliminary estimate of July durable goods is expected. Shipments, which feed into GDP models is expected to rise by 0.3%. The revision of Q2 GDP the following day tends not to be a `big market movers. Friday is the big day. July merchandise trade and personal income and consumption measures are featured. Like we saw with the CPI, the headline PCE deflator is likely to ease while the core measure proves a bit stickier. Shortly after they are released, Powell addresses the Jackson Hole gathering.  Canada has a light economic diary this week, but Mexico's a bit busier  The highlight for Mexico will be the biweekly CPI on Wednesday. Price pressures are likely to have increased and this will encourage views that Banxico will likely hike by another 75 bp when it meets late next month (September 29). The July trade balance is due at the end of the week. It has been deteriorating sharply since February and likely continued.    The US dollar rose more than 1% against the Canadian dollar over the past three sessions. It edged a little higher today but stopped shy of the CAD1.3035 retracement objective. Initial support is seen near CAD1.2975-80. With sharp opening losses expected for US equities, it may discourage buying of the Canadian dollar in the early North American activity. The greenback is rising against the Mexican peso for the fifth consecutive session. However, it has not taken out the pre-weekend high near MXN20.2670. Still, the next important upside technical target is closer to MXN20.3230, which corresponds to the middle of this month's range. Support is now seen near MXN20.12.    Disclaimer   Source: No Relief for the Euro or Sterling

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

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

The CPI index is especially important for the consumer, especially when we are dealing with high inflation. Also, the possession of barrels of oil by companies is important for the consumer because they affect the overall price of the raw material. The Core CPI in Eurozone Hitting 4,3% And CPI Hitting 9,1%  For a year in the European Union, this indicator has maintained an upward trend, and the last one reached the highest level of 4,3% and is 0.6% higher than the previous one. Published at 11:00 CET. The Core Consumer Price Index (CPI) measures the change in the price of goods and services purchased by consumers, excluding food, energy, alcohol, and tobacco. The data has a relatively mild impact because overall CPI is the European Central Bank's mandated inflation target. Source: investing.com Downward Of French CPI Idex And Consumer Spending In France, the most important developments are data on price changes and consumer spending. The CPI index fell to 0.3%. Compared to the previous month, this is a significant decrease of 0.4%. Consumer spending also decreased to 0.2%. Consumer spending accounts for the majority of economic activity. Published at 8:45 CET. Source: investing.com Source: investing.com The change in unemployment in Germany Compared to the previous period, the number of unemployed fell to 45K, but it is still higher than expected. The German unemployment rate, which measures the proportion of the total workforce that is unemployed and actively seeking work during the survey month, also increased to 5.4%. Published at 9:55 CET. The indicator measures the change in the number of unemployed in the previous month. Source: investing.com Source: investing.com China- view of activity in the manufacturing sector The indicator in July reached the highest level of 51.7, but already in August it fell slightly to the level of 50.4. Published at 3:30 CET. The Chinese HSBC Manufacturing PMI is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as an leading indicator for the whole economy. The Chinese HSBC Manufacturing PMI is concluded from a monthly survey of about 430 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. Source: investing.com Crude Oil Information The latest reading indicates that companies will either increase their oil barrel holdings or reduce their oil deficit to -3,282M. It can be said if a decline in inventories is more than expected (expected -0,275M), the increase in crude is less than expected, it implies greater demand and is bullish for crude prices. Will be published at 16:30 CET. The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation. Source: investing.com Monthly Change in Private Employment in USA There has been a decline since January this year. The biggest drop took place in May and reached the level of 202K. The current reading is even lower than the previous reading (expected 300K) and the achieved level of 128K. Will be published at 14:15 CET. In USA the ADP National Employment Report is a measure of the monthly change in non-farm, private employment, based on the payroll data of approximately 400,000 U.S. business clients. Source: investing.com In addition, the Federal Open Market Committee (FOMC) Member Mester will speak in the USA at 14:00 CET. Canada’s GPD (MoM) After the surge, the trend from 0.2% in March to 0.9% in April, The GPD in Canada continued its downward trend. In August it reached the level of 0%, which is a higher level than the forecast -0.2%. Will be published at 14:30 CET. Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy's health. Canada releases fresh GDP data on a monthly basis Source: investing.com Sources: https://www.investing.com/economic-calendar/

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

Summary:  While the US markets were closed overnight for Labor Day, the futures this morning in Asia are indicating some respite after weeks of red. The US dollar was also softer in early Asian hours, while the focus remains on the European energy crisis and the EU emergency meeting scheduled for Friday. A token cut by OPEC+ and diminishing hope of a revival of the Iran nuclear deal supported oil prices, although China’s tightening restrictions continue to pose demand concerns. Sterling made a sharp recovery after new UK PM Liz Truss announced plans to freeze energy bills, easing some short-term concerns. Consensus expects another 50 basis points rate hike from Reserve Bank of Australia today, and US ISM services will be on the radar later. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)  U.S. stock markets were closed for Labor Day. U.S. treasuries (TLT:xnas, IEF:xnas, SHY:xnas) The treasury market was closed for Labor Day. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng TECH Index (HSTECH.I) plunged 1.9% as a Bloomberg story, citing people familiar with the matter, said that the Biden administration is considering imposing restrictions on US investments in Chinese technology companies, Bilibili (09626:xhkg) -3.2%, JD.COM (09618:xhkg) -3.0%, Tencent (00700:xhkg) -2.9%, Alibaba (09988:xhkg) -2.4%. Hang Seng Index fell 1.2%. Chengdu, the largest city in western China, extended its pandemic control lockdown for another three days. The spread of Covid-19 cases and pandemic control measures fueled risk-off sentiment in the market.  Over the weekend, the U.S. Trade Representative said that it received requests from more than 350 American companies to plead for keeping the “Section 301” tariff on goods imported from China, and the Biden administration will remain in place during the review. BYD (01211:xhkg) fell 5.9%, as exchange filing showed that Berkshire Hathaway continued to off-load its stake in BYD.  Other car makers lost as well, Geely (00175) -7%, NIO -6,9, Li Auto 02.3(August).  Thermal coal prices surged in China, following the news that Russia’s Gazprom suspended the supply of natural gas to Germany on the Nord Stream pipeline.  Share prices of coal miners gained, Yancoal Australia (03668:xhkg) +6.6%, Yankuan (01171:xhkg) +12.2%, China Coal (01898:xhkg) +8.3%.  Caixin China Services PMI came in at 55.0, edging down slightly from 55.5 in July but above market expectations. CSI300 spent the day in range-bound trading.  GBPUSD falls to fresh lows, EUR in focus this week The USD lost some ground early in Asia on Tuesday with GBPUSD making the most gains to rise towards 1.1600 as the appointment of new Prime Minister and her plan to freeze energy bills spelled some short-term relief. EURUSD saw a brief drop to 20-year lows below 0.99 yesterday but rose back to 0.9960+ levels in early Asian trading. EURGBP seen sliding slower to 0.8600 but downside may be limited if ECB decides to go for a 75bps rate hike today. But the energy situation and the EU summit on Friday certainly garners more attention with some tough decision ahead. USDJPY retreated from Friday’s 24-year highs of 140.80 to 140.30-levels with Japan’s household spending underperforming expectations at 3.4% y/y vs. expectations of 4.6% y/y. Wage pressures, which remain a key focus for Bank of Japan, also eased with labor cash earnings up 1.8% y/y from last month’s 2.0% y/y. Crude oil prices (CLU2 & LCOV2) Crude oil prices rose on Monday as OPEC+ announced an output cut of 100k bpd in October (more details below). The intention appears to be to keep Brent prices capped at $100/barrels. WTI futures rose to $89/barrel while Brent was above $95/barrel. Price action was also supported by a diminishing hope of a revival of the Iran nuclear deal. US and Iranian positions have diverged in recent days, and it is now expected that the negotiations could stretch beyond the US midterm elections in November. Still, it is key to watch the demand concerns picking up as well, particularly as China lockdowns were extended and will likely remain strict ahead of the CCP meeting on October 16. What to consider? OPEC+ announced a production cut by 100k bpd A token cut by OPEC+ last night of 100k barrels per day just reverses the output increase agreed to last month. The decision was ‘symbolic’, with the new quotas taking effect for October. The amount is significantly small compared to a 100 million bpd market but it shows that OPEC+ wants to set a floor near $100/barrel in Brent. Saudi Arabian oil minister Prince Abdulaziz bin Salman had warned last week that a cut was a possibility given what he said was a disconnect between financial and physical oil markets. The RBA meets today, and is expected to raise rates to 2.35% regardless of the property market struggling Consensus expects the RBA to hike rates by 0.5% which will take Australia’s official interest rate to 2.35%. That will be the highest rate since 2015. However, interest rates futures are pricing in a smaller hike, of just 0.4%. The RBA will likely then proceed to rise rates over the rest of 2022 and then continue to rise rates into the 2023, in a bid to stave off inflation. The issue is, the RBA only has one tool to fight inflation, which is rising rates. But the property market is already struggling to absorb the 1.75% in hikes from May, with property prices falling at their quickest pace since the 80s and construction seeing its biggest decline since 2016. This has seen banks margins (profits) be squeezed, and they face a further squeeze. Why? Australia has one of the highest debt levels in the world (Debt to GPD is 126%). So if the RBA keeps rising rates to slow inflation, it could cause a credit issue and debt to income levels are at risk of hitting GFC highs. RBA outcomes for investors, traders and the macro landscape We highlighted sectors to watch and why yesterday in the Saxo Spotlight. That's worth a quick read. Today, we will be watching what the RBA estimates inflation to be, at the end of the year, remembering the RBA previously said it expects inflation to peak at under 8%. But consider, we traditionally see peak energy (coal) demand later this year, which is likely to support coal prices higher. As such, we think the RBA will rise its inflation target and may allude to commentary about keeping rates higher. For investors and traders, we will be watching energy stocks, which will likely get extra bids today and see momentum rise (not only because of the energy crisis in Europe), but also because Australian energy prices (coal) remains supported, with Australian energy reserves expected to also run out next year. For traders, the currency pair that we are watching is the AUDEUR for an extension to the upside, on the basis that Europe will need to increase energy imports and its balance of trade will likely continue to worsen, vs the Australian balance of trade, likely to hit another record high, with Australian LNG and coal exports to see a lift in demand.    PBOC cuts FX deposit reserve requirement ratio by 200 bps to restrain yuan weakness The PBoC announced that the central bank is cutting the reserve requirement ratio for foreign exchange deposits (the “FX RRR”) to 6% from 8%, effective September 15.  The cut is expected to release about USD19 billion (2% of the USD954 billion FX deposits outstanding) in FX liquidity for banks to make loans in foreign currencies.   The PBoC last cut the FX RRR to 8% from 9% on May 15, in an attempt to send a signal to the market to put a pause to the depreciation of the USDCNY which had weakened from 6.40 to 6.80 in one month (April 15 to May 13, 2022).  After the surge of the USDCNY from 6.75 to above 6.90 in about half a month since Aug 15, the PBoC apparently wants to send a signal again to the market to slow the speed of the renminbi depreciation against the U.S. dollar. Liz Truss won the contest to become the next UK Prime Minister In the UK, the Conservative party has voted for Liz Truss as the new party leader, making her the UK’s next Prime Minister. Her promises range from quick action on energy security to alleviating the cost-of-living crisis for the hardest hit by price rises, all while cutting corporate and other taxes. She has announced a GBP 130bn plan to freeze energy bills, a recipe for ballooning fiscal deficits, an issue that is already an ingredient in sterling’s steep fall this year, so an even steeper recession is in the wings. This could come either from a drop in real GDP due to soaring inflation aggravated by further sterling declines or as demand is crushed by a steep recession due to the need for the Bank of England to accelerate its pace of rate hikes or more likely a combination of the two. Longer term, investments in fracking shale gas and new North Sea exploration could pay dividends. Russia makes a clear case of weaponizing gas supplies While the Kremlin had earlier said that they were halting gas supplies on Nord Stream 1 for a technical fault, it has now clearly said that gas supplies to Europe via the Nord Stream 1 pipeline will not resume in full until the “collective west” lifts sanctions against Moscow over its invasion of Ukraine. Russia is still supplying gas to Europe via Soviet-era pipelines through Ukraine that have remained open despite the invasion, as well as the South Stream pipeline via Turkey. But supplies along the northern pipeline routes, including Nord Stream 1 and the pipelines through Ukraine, have fallen by more than 90% since September last year. Higher supplies from Norway, the UK, north Africa and increased imports of LNG have helped to an extent offset the loss of Russian supplies. Energy summit in EU on Friday EU leaders will meet this Friday to discuss a cap on energy prices across EU countries to limit the disruptions from soaring and illiquid pricing markets, although given limits on generation capacity, much of them due to Russia’s cutting off of gas supplies - possibly semi-permanently in the case of the Nord Stream 1 pipeline – some sort of rationing plan may be required. See our colleague Christopher Dembik’s piece on at the difficult choices Europe faces on this issue here. US ISM services PMI due today With the services sector of the US economy slowing, there are expectations of a slight retreat in August US ISM services, but it should still remain above the 50-mark which differentiates between expansion and contraction. The S&P services PMI for August had also shown a slight decline to 44.1, with the payroll data hinting at still-strong labor market conditions in the services economy.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-daily-digest-6-sept-2022-06092022

Summary:  Today we look at a sharp sell-off in the US dollar inspired in the wake of the ECB meeting yesterday and especially after Bank of Japan Governor Kuroda comments on JPY volatility overnight. The USD decline has helped to boost sentiment further as the US S&P 500 retakes 4,000, but equity traders should keep a wary eye on treasury yields, which bounced back sharply yesterday on a strong US jobless claims number and the latest firm rhetoric from Chair Powell. The week ahead in earnings and macro and more on today's pod, which features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source:Podcast: USD stumble adds to sentiment boost | Saxo Group (home.saxo)

Summary:  Sentiment had gotten too bearish and equities are now pushing potentially forcing short positions to be covered. The recent sessions seem to driven by technical flows as there has been little new information on the macroeconomy. It seems that the market is positioning itself for a positive surprise in the US August inflation report on Tuesday. The earnings calendar is quite light next week with the key earnings focus being Adobe that is a bellwether in the US technology sector. The software maker is expected to post strong results but a stronger USD and weaker advertising market may cloud the outlook for Adobe. Equities continue to rebound ahead of important CPI print As we indicated yesterday in our equity note without having anything statistical significant to show, the odds were leaning in favour of a rebound in equities as sentiment was historically bad and usually followed by gains. S&P 500 futures closed above the 4,000 level yesterday and are pushing today above the 50-day moving average trading around the 4,039 level. The next big resistance level to watch is the 4,072 level which was the highest exhaustion point in the recent cycle. The past couple of sessions’ price action seems to be driven by technical flows on top of a weaker USD, and maybe the moves are a sign of the equity market positioning itself for a better than expected US August inflation report on Tuesday which is really the key event that will shape expectations in equities in the weeks to come. Can Adobe rise above the dark clouds? The earnings calendar is light these weeks as the market is waiting for Q3 earnings releases to roll in a month from now. Next week earnings calendar of important earnings is listed below with our focus on Adobe. The software maker has surprised negatively in the past four earnings releases due weaker than estimated outlook causing its share price to tumble 44% from its highs. In the past couple of months the share price has stabilised as expectations are no longer deteriorating. Analysts expect Adobe to report revenue growth of 12.6% y/y and expanding operating margin as recent cost cutting is beginning to improve profitability. Adobe is part of the high quality pocket in the equity market with a high market share and double digit organic growth rates expected over the coming years. Key risks to consider for Adobe are the strong USD, corporate spending slowdown on digitalization, and generally weakness in the global advertising industry. Monday: Oracle Tuesday: DiDi Global Wednesday: Inditex Thursday: Polestar Automotive, Adobe   Source: https://www.home.saxo/content/articles/equities/equity-rebound-us-cpi-report-and-adobe-earnings-09092022

In this podcast, ING's Chris Turner, Antoine Bouvet and James Smith discuss this week's US and UK inflation data, the implications of government intervention in energy markets and the outlook for monetary policy        In this podcast, Senior Editor Rebecca Byrne sits down with ING's Global Head of Markets Chris Turner, Senior Rates Strategist Antoine Bouvet and Developed Markets Economist James Smith to discuss the week's biggest market-moving events. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US: Housing Starts rise by 12.2% in August, Building Permits fall by 10% Housing Starts in the US rose sharply in August. US Dollar Index holds in positive territory above 110.00. The monthly data published by the US Census Bureau revealed on Tuesday that Housing Starts rose by 12.2% in August following July's10.9% contraction. Read next: The Global Household Wealth Report, A Hacking Attack And More| FXMAG.COM On a negative note, Building Permits declined by 10% in the same period.  "Single‐family authorizations in August were at a rate of 899,000; this is 3.5% below the revised July figure of 932,000," the publication read. "Authorizations of units in buildings with five units or more were at a rate of 571,000 in August." Market reaction The US Dollar Index preserves its bullish momentum and was last seen rising 0.48% on the day at 110.12.

New York Climate Week acknowledged the challenges the energy crisis has brought but emphasised the importance to roll out clean energy faster under this context. Businesses need to think long-term, target short-term, disclose quality sustainability data, collaborate to decarbonise the value chain, and ensure environmental justice. Lots to chew on New York Climate Week was held from 19-25 September 2022   Lots happened in 2022. Just as the world continued to recover from the pandemic, the invasion of Russia in Ukraine – the former being one of the largest natural gas exporters in the world – sparked an energy crisis, heightened inflation, and added a new wave of supply chain disruptions. These geopolitical events and macroeconomic headwinds have prompted the sustainability community – including corporates, investors, and governments – to rethink the energy transition and sustainable finance within a widened context of energy security. We saw a flavour of this at the New York Climate Week too. In contrast to last year’s events, which spent quite some time on showcasing commitments and efforts, this year’s Climate Week emphasised the importance of keeping up with the decarbonisation efforts during such times of uncertainty. It has become evident that the path to net-zero is not linear. Along the way, there have been and will continue to be disruptions that can temporarily frustrate immediate ambitions, but these disruptions also remind us that walking away from decarbonisation is not an option. Clean energy should be accelerated faster despite the short-term need for fossil fuels The war has reignited discussion on how much fossil fuel the world actually needs – now or in the future, under peaceful or turbulent times. Ahead of winter, participants at the Climate Week acknowledge that governments and companies need to ensure the demand for energy is met, even if that might come from (temporary increases in the use of) fossil fuels, but they also emphasise that the energy crisis should not become an excuse to structurally expand use of fossil fuels and downplay the urgency to decarbonise the fossil fuel industry. Moreover, the war has demonstrated that significant reliance on natural gas from one importer imposes huge risks if that supply is suddenly turned off. The solution is not only to diversify natural gas supply sources, but also to roll out renewable energy more aggressively. The solution, as echoed during New York Climate Week, is not only to diversify natural gas supply sources, but also to roll out renewable energy more aggressively. Germany, a country heavily dependent on Russian gas and at the forefront of gas shortages, saw the share of conventional fuel (including nuclear) in its electricity generation mix during the first half of 2022 decline from 56% to 52%, despite an increase in the use of coal. That decline was driven by less use of gas and nuclear, but the key takeaway here is that renewable energy managed to play an important role in replacing some of the drop in gas and nuclear electricity generation. At least in the short to medium term, the development of renewable energy can slash emissions and boost energy security, which is defined as secured access to reliable fuels (fossil fuels for now). Yet it is worth noting that the notion of energy security will eventually switch to having secure access to and control over the renewable energy supply chain, as a few countries, such as China, produce most of the raw materials for renewable equipment such as solar PVs. What should businesses focus on in their sustainability efforts? Under such a context, the pressure on business leaders to decarbonise will only grow. How can they do it? Climate Week speakers, who were from consultancies, non-governmental organisations (NGOs), and leading companies in managing sustainability, listed a few action points. Here are the key ones: Setting interim goals in addition to the long-term net-zero target: Data shows that more than a third of the Forbes 2000 companies have set net-zero targets by June 2022, up from a fifth at the end of December 2020. However, of those with net-zero targets, two-thirds have not disclosed how they plan to achieve their goals. Having interim targets will help hold companies accountable for their climate commitments, while also providing them with a better guidance to decarbonise.   Establish long-term sustainability strategies as opposed to only short-term progress measurements: Having a forward-looking climate strategy can help companies allocate capital to areas that are more important throughout the path to net-zero. It can also more effectively mobilise natural and human resources toward achieving sustainability targets. And this can lead to long-run radical changes. As captured by a nice turn of phrase; this decade needs to be ‘the decade of delivery’, not the just the ‘decade of disclosure’. Green supply chains in partnership with other players in the business ecosystem: Companies need to more actively engage with suppliers to decarbonise their entire value chain (Scope 3 emissions). This can help suppliers develop decarbonisation know-how, and advance product innovation that can not only cut emissions but also expand revenue growth drivers. Better manage climate risks: In addition to reducing emissions, another imperative task for companies is to set up a game plan to map the physical and transition climate risks that are likely going to affect their businesses, embed these risks into their cost projections, and improve operations to mitigate these risks. Don’t forget about environmental justice: Climate change is going to increasingly affect the disadvantaged, and the transition to clean energy might also disproportionally burden them. To tackle this, companies can develop support programmes for the local community where they conduct business. For instance, up-skilling and re-skilling the local community can both ensure a just energy transition and accelerate supply chain decarbonisation. Sustainable finance faces tougher scrutiny but remains a crucial tool Global sustainable finance has experienced a special year so far as well. After several years of phenomenal growth, global issuance of green, social, sustainability, and sustainability-linked bonds totaled $561bn between January and August 2022, down from $689bn during the same period last year. However, as pointed out at the Climate Week, if we only look at corporate bond issuance (excluding financial institutions, sovereigns, supernationals, and agencies), the slowdown in Environmental, Social and Governance (ESG) bond issuance is not as deep as vanilla bond issuance. For the first eight months of 2022, ESG corporate bond issuance is estimated to have fallen by 17% compared to the same period in 2021, versus a 31% drop in global corporate bond issuance. This is evidence that corporates have been capable of advancing their sustainability agenda during some quite testing times. Global corporate ESG bond issuance vs. total corporate issuance Source: Bloomberg New Energy Finance, Informa Financial Intelligence, ING Research   In addition to the issuance volumes, we think that this year has prompted the sustainable finance market to think more deeply about green credentials. We have seen several regulators around the world investigating companies’ and asset managers’ ESG-related practices and claims. We have also seen more regulating entities start the process toward mandating climate-related data closure. This will in a way reduce greenwashing, while also providing the sustainable finance market with an achievable pivot from high-speed growth to quality growth. Still, much remains to be done to ensure this pivoting. First, disclosing detailed sustainability data will be key in helping investors better assess an issuer’s progress. Quality reporting is then linked to interim target setting, as the latter can not only lay a solid groundwork for reporting, but also enhance investor confidence on an issuer’s sustainability commitments. Moreover, timely and transparent communication is needed between issuers and investors, especially under fast-changing macroeconomic and geopolitical conditions. It works best when capital is dedicated in a way that can boost the efficiency of the decarbonisation process. Finally, the Climate Week also touched on how sustainable finance can and should help with energy transition. We think that it works best when capital is dedicated in a way that can boost the efficiency of the decarbonisation process – this means investing simultaneously in clean energy deployment, hard-to-abate sector emissions reduction, and the emerging technologies that can achieve the previous two. The US is catching up on climate change and clean energy policy The Climate Week also focused on the enhanced policies of the US to realize its climate targets. At Climate Week 2021, we heard many speakers say that the US was falling behind compared to major economies, whereas this year, companies and investors were euphoric that the US was taking a more meaningful stand, with the signing of the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. And the proposal from the SEC on mandating climate-related data disclosure was noteworthy too. Market players believe and we agree that these measures are putting the US on a level playfield with jurisdictions such as the EU, and in some cases, like carbon capture and hydrogen, the US are set to claim a leading role. Of course, these measures alone will not get the US to net-zero, but they are likely to snowball – the two bills are forecast to be able to together cut US emissions by 31%-44% by 2030. US Senate’s proposed clean energy investment reaffirms climate ambition Biden’s billions – a sustainable shift? Why the US SEC’s proposed climate disclosure rules are a game changer US greenhouse gas emissions (historical and forecast) Source: Rhodium Group, Climate Action Tracker, ING Research   One thing is clear from the point of view of those at Climate Week: there is no way back – both from a climate science point of view and a business/investment point of view – but to work toward deep decarbonisation. Sustainability has not only gone mainstream, but also front and centre when companies think about mitigating risks and growing businesses. Accelerated efforts from all parts of the global economy are needed to deliver commitments this decade – deemed a crucial decade if the catastrophic results of global warming are to be avoided. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Despite a lot of tightening priced into the swaps market, we believe it is unlikely that the Bank of England will hike rates before the scheduled November meeting. In the US, unemployment remains stable at 3.7% and with wage growth staying elevated, we see few signs that the pace of tightening will slow In this article US: Inflation is sticky as unemployment remains low and wage growth remains elevated UK: Intermeeting Bank of England hike looks unlikely despite ongoing turmoil Canada: Hopeful for a stabilisation in the jobs market Eurozone: Expecting declining trend in retail sales Source: Shutterstock US: Inflation is sticky as unemployment remains low and wage growth remains elevated Financial markets are currently favouring the Federal Reserve implementing a fourth consecutive 75bp rate hike on 2 November and we agree. Inflation is sticky while the near-term growth story is looking OK and the economy continues to add jobs in significant numbers. That message should be reinforced by the upcoming labour report with unemployment staying at just 3.7%, payrolls increasing by around 200,000 and wage growth staying elevated. There are also plenty of Federal Reserve officials scheduled to speak and so far there is little sign of any inclination to slow the pace of policy tightening. The ISM business activity report should remain firmly in growth territory as well with the trade balance making further improvements. As such, we are expecting 3Q GDP to come in at close to 2%. UK: Intermeeting Bank of England hike looks unlikely despite ongoing turmoil UK markets remain volatile, and sensitive to further headlines over the coming week. We remain sceptical that the Bank of England will hike rates before its scheduled November meeting, despite a lot of tightening priced into swaps markets. Instead, we’ll be watching for any update on the Bank’s bond strategy. The BoE was forced to start buying long-dated gilts amid concerns about the stability of UK pension funds, but this is for a limited period and the Bank has said it plans to plough on with gilt sales from the end of the month. We think that’s likely to get pushed back, however, given the strains in the gilt market. Markets will also remain hyper-sensitive to any headlines related to the government’s controversial growth plan. In the first instance, press reports suggest the focus will be on spending cuts to offset some of the planned tax cuts, though this could be both practically and politically challenging. The Office for Budget Responsibility is due to provide a first draft of its post-Budget forecasts to the Chancellor privately on Friday. Canada: Hopeful for a stabilisation in the jobs market In Canada, the jobs market has wobbled of late with employment falling for three consecutive months after some very vigorous increases earlier in the year. We are hopeful of stabilisation in Friday’s September report given the economy is still performing relatively well, but if we are wrong and we get a fourth consecutive fall then expectations for Bank of Canada tightening could be scaled back somewhat – especially after some softer than anticipated CPI prints. We are currently forecasting a 50bp rate hike at the October BoC policy meeting with a final 25bp hike in December. Eurozone: Expecting declining trend in retail sales For the eurozone, it’s a pretty light week in terms of data. Retail sales on Thursday catch the eye as we’ll get more information on consumer spending in the eurozone, as purchasing power remains under severe pressure. We’ve seen a declining trend in spending since last November and have little indication that August data will have shown a big turnaround. Continued declines would fuel our view that the eurozone economy could have already tipped into contraction in the third quarter. Key events in developed markets next week Source:  Refinitiv, ING TagsUnited States Eurozone Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  The S&P500 broke below 3600 into the close on Friday as US 10-year yields surged above 3.8%. Risk off seen from multiple forces heading into the new month/quarter as corporate earnings misses continue to raise the threat of an ugly earnings season ahead. Meanwhile, the war could take a turn for the worse if Russia decides to escalates after losing a key city to Ukraine again over the weekend. China heads into the Golden Week holiday and OPEC+ meeting in focus this week with expectations of over 1mn b/d output cut on the table. UK crisis will also take more attention this week along with key US ISM manufacturing data due today and the payrolls data at the end of the week. What is happening in markets? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) had three down quarters in a row U.S. equities continued to sell off on Friday. S&P500 dropped 1.5% for the day and ended the month more than 9% lower. Nasdaq 100 declined 1.7% on Friday, falling nearly 11% in September. 10 of the 11 sectors in the S&P 500 declined, with Utilities, Information Technology, and Consumer Discretionary leading the charge lower. Real Estate was the only sector that gained on Friday.  Big U.S. stock movers   Being another latest signal of weakening U.S. consumer demand, Carnival (CCL:xnys) tumbled more than 23% after the cruise operator reported occupancy for the quarter ending Aug 31 below market expectations. Nike (NKE:xnys) plunged 12.8% on rising inventories and margin misses. For a detailed discussion on last week’s earnings warning signs from Nike, Micron, and H&M’s margin misses, please refer to Peter Garnry’s analysis here. U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) climbed again U.S. treasury yields fell initially during London hours on Friday in tandem with the intraday swings in the U.K. Gilts and then pared the decline in yields in New York hours following the slightly stronger than expected PCE data and Fed Vice-Chair Brainard’s reiteration that the Fed will avoid pulling back from rate hikes prematurely. Yields decisively soared higher in the last hour of trading with 2-year yields rising 9bps to 4.28% and 10-year yields climbing 4bps to 3.83%. September was Hang Seng Index’s (HSIU2) worst month in 11 years Hong Kong and mainland China markets were treading water ahead of the week-long National Day golden week holiday in the mainland, with Hang Seng Index up by 0.3% and CSI 300 Index sliding 0.6%. Despite the lackluster trading last Friday, September was the worst month for the Hang Seng Index, which had fallen 13.7%, over the past 11 years. Chinese developers rallied to recoup some of the recent losses following incremental supporting measures from regulators.  CIFI (00884:xhkg), Country Garden (02007:xhkg), and Guangzhou R&F rebounded 11%, 9%, and 8% respectively. Chinese EV maker, Zhejian Leapmotor (09863:xhkg), tumbled another 22% last Friday after having collapsed 33.5% the day before on its first day of trading.  Other Chinese EV names traded in the Hong Kong bourses plunged from 4% to 7% even after more subsidies and support were announced by the Ministry of Commerce and the Shanghai Municipal Government. Chinese restaurant operator Jiumaojiu (09922:xhkg) plunged by 20.4% following its announcement to pay RMB1 billion for a 26% equity stake in the Guangzhou IFC Mall project which will give the company 30,000 sqm for self-use as headquarter and R&D centre.  GBP ends a volatile week strongest against the USD Sterling ended the week strongest in the G10 pack against the USD despite a flash crash last week and risks of a pension fund crisis in the UK on top of the current energy crisis and the runaway inflation issues at hand. Rising Russia tensions mean that the energy situation could get a leg up this week, but focus for the sterling will remain on any possible rollback of the loose fiscal policy. The political pressure is certainly mounting after the latest YouGov poll showed Labour with a 33-point lead in the polls, the widest margin since the 1990’s. GBPUSD is testing a break above 1.1235, but that for now seems to be underpinned by a softer USD and lower US yields, and it remains to be seen if that story will continue this week as we get past the rebalancing flows. Crude oil (CLX2 & LCOX2) prices waiting for a large OPEC+ production cut Crude oil ended last week mixed but mostly lower on Friday after some gains initially on expectations of an OPEC+ production cut coming this week. It is being reported that OPEC+ is mulling a possible reduction of 0.5-1mn barrels/day, after the September output rose 210k barrels/day from August. Some delegates said over the weekend that output cut could exceed 1 million barrels/day, and this has helped crude oil see a 3% jump at the Asia open. Given that the meeting is in-person for the first time since March 2020 also raises expectations of a large cut. WTI futures were seen above $82/barrel while Brent futures rose towards $88. Still, demand worries especially with China’s lockdowns and rapid global tightening pace will continue to put downside pressure on oil prices. Wheat futures (ZWZ2) higher on supply concerns On Friday, the USDA published its Quarterly Stocks and wheat production reports. Corn stocks were lower and soybeans higher than expected. December wheat (ZWZ2) jumped 2.8% with stocks in line but production in all categories falling short of expectations. Meanwhile, geopolitical concerns are on the rise with Russia threatening use of low-yield nuclear weapons as its military advantage starts to diminish. This has again raised concerns over the fate of the Black Sea export corridor and the supply situation in agri commodities may continue to be challenged. What to consider? Hot US PCE paves the way for another CPI surprise this month US PCE data came in stronger-than-expected, with the headline up 6.2% YoY from 6.3% YoY prior and 6.0% YoY expected. The core measure was at 4.9% YoY, coming in both higher than last month’s 4.6% YoY and the expected 4.7% YoY. This will likely push up the pricing of another 75bps rate hike from the Fed at the November meeting, as the CPI report out this month is generally likely to follow the same trend of remining close to its highs. Meanwhile, the final estimate of University of Michigan survey was revised lower to 58.6 from preliminary print of 59.5 due to the slide in expectations to 58 from 59.9, even as the current conditions fared better at 59.7 from 58.9 previously. The inflation metrics also diverged with 1yr consumer inflation expectations edging higher to 4.7% (prev. 4.6%), although the longer term 5yr slightly fell to 2.7% (prev. 2.8%). Stronger Q3 Atlanta Fed GDP and more calls for restrictive Fed policy The economic momentum in the US is still strong, as hinted by the big upward revision in Atlanta Fed’s Q3 GDP estimate to 2.4% from 0.3% earlier with higher contribution expected from private domestic investment and net exports. The advance Q3 GDP report is due on October 27, so that will likely give more ammunition to the Fed to raise rates aggressively at the November meeting. Meanwhile, more Fed speakers were on the wires on Friday continuing to push for interest rates to move towards or above the median of the dot plot. Fed Vice-Chair Brainard noted policy will need to be restrictive for some time, while Mary Daly (2024 voter) was more specific to say that she  expects to hold rates steady for at least all of 2023 after rate hikes. Barkin (2024 voter) echoed the Saxo view that Fed has decided that they’d rather be wrong by tightening too much rather than tightening too little. He said it would be a good news story if the Fed did a bit too much and inflation came down. Eurozone inflation remains painfully high The September eurozone consumer price index (CPI) reached double-digits at 10% year-over-year versus prior 9.1% and expected 9.7%. The core CPI (excluding volatile components) is up to 4.8% year-over-year versus expected 4.7% too. What is clearly worrying is there is an acceleration in price pressures beyond energy and food prices. This is a signal that inflation is now broad-based. In France, the EU-harmonized CPI was out at 6.2% year-over-year in September. This is much lower than what the consensus expected (6.7%). It stood at 6.8% in July and 6.6% in August. On the downside, the producer price index (PPI) for August reached a new high at 29.5% year-over-year against expected 27.6%. This matters. The PPI usually represents the pipeline in inflation which will be passed on to consumers, at least partially. This means that the peak in inflation is likely ahead of us in France and in all the other eurozone countries. Expect to reach it in the first quarter of next year, at best.  China’s PMIs were mixed in September China’s September official NBS Manufacturing PMI came in at 50.1, stronger than expectations (consensus 49.7, Aug 49.4), and returned to the expansionary territory.  The strength was found in the output sub-index which rebounded to 51.5 in September from 49.8 in August, which was largely due to the receding heatwave and pent-up demand.  The other major sub-indices in manufacturing remained below 50.  Exports were weak as the new export orders sub-index fell to 47 in September from 48.1 in August.  The Caixin Manufacturing PMI, which has a larger weight in coastal cities in the eastern region, fell to 48.1 (consensus 49.5, Aug 49.5), echoing the weakness in the exports element in the official PMI.  The NBS Non-manufacturing PMI came in at 50.6, below expectations (consensus 52.4, Aug 52.6).  Among non-manufacturing activities, the construction sub-index rose to 60.2 from 56.5, supported by infrastructure construction, while the service sub-index fell into the contractionary territory, coming in at 48.9, down from August’s 51.9. Retail, air travel, lodging, catering, and other services requiring close contact contracted in the midst of Covid restrictions. Ukraine’s recapture of key city raises the nuclear threat Ukrainian troops recaptured the city of Lyman over the weekend in occupied eastern Ukraine, less than a day after Russia announced the annexation of the area and vowed to defend it with all military means. Ukraine's successes have infuriated Putin allies such as Ramzan Kadyrov, the leader of Russia's southern Chechnya region who called on Putin to retaliate by escalating even further against Ukraine, including declaring martial law in the border regions and using low-yield nuclear weapons. China relaxes mortgage rates’ lower bound for first-time homebuyers and provides tax rebates to homebuyers plus telling banks to lend to the property sector The People’s Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC) announced last Friday to lower or even remove the lower bounds imposed on first-time homebuyers in cities that experienced three consecutive months (from June to August 2022) declines in new home prices both sequentially and year-on-year.  The currently lower bound is the 5-year Loan Prime Rate minus 20bps.  The new policy will benefit first-time homebuyers in lower-tier cities while tier-1 cities do not meet the above price decline criterion. Among the top-70 cities, eight Tier-2 cities and 15 Tier-3 cities are eligible. The PBoC and the CBIRC also reportedly told the largest banks in the country to extend at least RMB600 billion in net new financing to the housing sector for the rest of the year. In addition, the State Administration of Taxation announced that from Oct 1, 2022, to Dec 31, 2023, homebuyers will be rebated the tax they paid for the sale of their previous home if the sale was within one year from the purchase of the new home.  Tesla reveals a prototype of its humanoid robot On last Friday’s AI Day, Tesla (TSLA:xnas) showcased a prototype of the EV maker’s first humanoid robot, dubbed Optimus, and reveals the latest updates to the company’s assistant deriving system. Tesla’s humanoid robots are still a long way from commercialization and it plans to deploy them first at Tesla factories.  Intel goes ahead to list its self-driving-car unit Intel’s self-driving-car unit, Mobileye said on Friday that the company filed with the Securities and Exchange Commission for IPO.  Mobileye did not provide information about the expected size and price range for its IPO. Intel acquired Mobileye, an Israeli company that develops driver-assistance systems for USD15.3 billion in 2017. Mobileye said it had agreements in hand to supply 266 million vehicles with the company’s driver-assistance systems by 2030.  US ISM manufacturing on watch today Due later today, ISM manufacturing is unlikely to dent the optimism around the US economy that has been building up further with positive economic indicators released over the last few weeks. While the Bloomberg consensus estimates show some signs of a slowdown to 52.1 in September from 52.8 in August – that should likely be underpinned by improving supply chains, while new orders should remain upbeat. On Tuesday, Japan’s Tokyo CPI will see impact of reopening Japan’s inflationary pressures are likely to continue to reign amid higher global prices of food, electricity as well as a weak yen propping up import prices. Bloomberg consensus estimates point to a slightly softer headline print of 2.7% YoY from 2.9% YoY previously, but the core is pinned higher at 2.8% YoY from 2.6% YoY previously. Further, the reopening of the economic from the pandemic curbs likely means demand side pressures are also broadening, and services inflation will potentially pick up as well.   For a week-ahead look at markets – tune into our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-3-oct-2022-03102022

Summary:  30 years is a long time. Looking at the main headlines three decades ago - in 1992, you realise just how long it is. 30 years ago, the company which is known today as Saxo came to life. While three decades may not seem like a long time, you might be baffled about how the world looked in 1992 and what we were talking about then. And when you realise that the act of dreaming about what the world may look like 30 years from now – in 2052 – becomes an unwritten fairy tale. And the investment opportunities become mouth-watering.If you want to learn more about the financial history of the past 30 years and get our experts’ views on what they believe some of those future opportunities could be, take a look here. Mobile telephones become mainstream typewriters While the history of mobile telephones really begins in the mid 80’s, 1992 was a decisive year for the technology, which now seems to have taken over most of modern society. US sales topped 10 million units this year, whereas the global sale of mobile phones in 2021 is estimated to be just below 1.5 billion(!), showcasing the incredible journey the device has been on over the past 30 years. In 1992, two mobile telephones helped shaped this future: the Motorola International 3200, which was the first digital hand-sized mobile telephone and the Nokia 1011, the world’s first mass-produced mobile phone. But that wasn’t the only evolution, because the 1011 was also the world’s first phone capable of sending and receiving SMS messages – a technology many of us take for granted today.If you want to browse through some more modern day technology stocks, have a look here. This should only be viewed as inspiration, not as advice.   No more tape salad In 1992, people around the world were falling over themselves in excitement of the new, hip music-playing device: the Compact Disc, or the CD. While vinyl was on the way out, for the first time, CDs were sold in larger quantities than cassette tapes. Music today is digital only, but what a path it’s been to get here. MP3 players, mini-discs, iPods and CDs have all come and gone in the time Saxo Bank has been a thing. While there’s a bit of discussion about whether it happened in 1991 or 1992, this was the tipping point for CDs as they overtook the otherwise high-tech cassette tapes. No more using your pencil to save those tunes from tape salad! It only took the CD 10 years in commercial production to side-line both vinyl and cassettes. “The Visitors” by ABBA is widely viewed as the first commercial CD produced. “Mr. Gorbachev, tear down this wall” While the legendary words were said in June 1987 by US President Ronald Reagan to Mikhail Gorbachev, the last Soviet leader, the official end to the Cold War was announced by two other presidents on 2 February 1992. Here, US President George Bush Senior and Russian President Boris Yeltsin proclaimed a “new era of friendship and partnership” and formally ended seven decades of rivalry, according to the New York Times. The two met in Munich in July the same year. Steamboat Willie docks in Europe On April 12, 1992, European and especially French traffic services held their breath as Mickey, Minnie, Donald, Daisy and all their friends travelled to Europe to open Disneyland Paris. With an estimated half-million people who would attempt to visit the park, traffic was expected to be a massive chaos. However, the beginning was anything but a fairy tale. The park experienced far fewer visitors than expected, followed by mass resignations and restructuring dialogues with banks, which could have ended in bankruptcy. But since the mid-1990’s, the theme park has grown into a massive success. According to the last financial report from 2016 (since Euro Disney S.C.A. was delisted in 2017) it is referred to as the leading European vacation destination, estimated to have had more than 300 million visitors since the opening in 1992. Los Angeles is set ablaze – not from wildfire While wildfires in California seem to have become an annual occurrence, you may recall that 1992’s wild Californian fire took place in downtown Los Angeles in the event which is commonly known as the Los Angeles riots. After four white policemen were acquitted of using excess violence in the arrest of Rodney King, a black man driving under the influence, on 29 April, civil unrest escalated into riots, looting, assaults, arson, vandalism and shootouts. The riots went on for six days ending with 63 dead, almost 2,500 injured and more than 12,000 arrested. The event, which happened due to growing tensions between the white, black and Korean communities of the city, is estimated to have caused over USD 1 billion in property damage. First steps on the road to a sustainable future From 3-14 June, the United Nations Conference on Environment and Development, popularly known as the “Earth Summit” was held in Rio De Janeiro. The conference took place on the 20th anniversary of the first Human Environment Conference in Stockholm in 1972, the first international event focused on the environment after the end of the Cold War. One of the major outcomes of the Earth Summit was the so-called Agenda 21, a non-binding action plan focused on sustainable development. It was one of the first plans leading to what are known today as Sustainable Development Goals. The impact of the Earth Summit has been industry-changing for the financial sector. There’s an increased belief that professional and private investors alike play an important part in creating the sustainable future that was envisioned back in 1992. That’s why asset managers, banks and brokers alike work toward offering solutions that aren’t just good for your savings, but also for the planet. If you want to learn more about this, go check out our pages on ESG or watch our theme about investing in a better future. This should only be seen as inspiration, not advice.   Source: https://www.home.saxo/content/articles/thought-starters/where-were-you-in-92-05102022

Biden’s administration has taken an even more hawkish stance on China compared to what most expected. While economists at Danske Bank do not expect any disruptive measures to be taken by either side in the near-term, the gradual decoupling and Cold War sentiment is set to continue. Tensions to continue but no near-term disruptive measures “In the US the negative view of China is bi-partisan and shared by the population. And to some extent, Democrats and Republicans compete on who is the toughest on China.”  “On the Chinese side, it is unlikely that it will give in to US demands for changes. China believes its’ system is more effective in solving problems and meeting challenges and it comes from a collectivist origin that goes thousands of years back, which China is increasingly proud of.”  “While we don’t expect the Biden administration to take any disruptive measures, such as a new trade war, the path of gradual decoupling measures such as rising tech restrictions on China and self-sufficiency measures in new sectors (such as biotech) is set to continue. Human rights-related sanctions may also increase.” “China will work on decoupling by seeking more self-reliance and investing heavily in tech and increasing energy and food security.”  “Tensions are also likely to stay elevated around Taiwan where a new status quo with a very high level of tension is the new normal.” ◀

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

The jobs market remains tight with 4 million more job vacancies than there are unemployed Americans to fill them. Nonetheless, the 1mn drop in vacancies is an early warning that corporate sentiment is shifting with the uncertain economic outlook prompting fims to instigate hiring freezes. With more pain to come job losses are on the cards for 2023 Job losses are on the cards for 2023 Job vacancies starting to be pulled The US JOLTS (Job Opening and Labour Turnover Statistics) data shows firms are starting to pull vacancies as a deteriorating global growth outlook prompts caution in corporate boardrooms. The number of job openings falling from 11.2mn in July to 10.053mn in August, the biggest drop since April 2020 when the pandemic resulted in the economy grinding to a halt. The consensus had predicted little change – 11.1mn. This data echoes the headlines from this morning’s KPMG CEO survey whereby 39% of top CEOs have reportedly instigated hiring freezes. It also means that the ratio of job vacancies to the number of unemployed Americans falls from 1.97 to 1.67. Nonetheless, we have to remember that even after today’s drop there are still 4mn more job vacancies than there are unemployed American while the job opening/unemployed Americans ratio is still more than double the average 0.6 figure seen over the past 20 years. Hence there are still plenty of jobs out there and people are still prepared to move roles for better pay and conditions, with the quit rate staying at 2.7%. Ratio of job vacancies to the number of unemployed Americans Source: Macrobond, ING Momentum is weakening with job losses a threat for 2023 As such the jobs market is still incredibly tight, but the Fed will take some satisfaction in today’s direction of travel. While business caution is likely to spread, firings are still a way off – note last week's initial and continuing claims remain very low by historical standards. Payrolls are still set to post a decent increase on Friday – the market is looking for 265,000 – but with the ISM employment index back in contraction territory and the vacancy data softening the momentum will weaken further in coming months. The Fed has acknowledged the need for a weaker labour market to get inflation back to target with their median prediction for the unemployment rate rising to 4.4% next year from 3.65% in August in their September update. Assuming labour supply remains unchanged this equates to around 1.2mn people losing their job over the next year – obviously less if labour supply suddenly accelerates. As such with the Fed seeking to tighten financial conditions even further it points to more economic pain ahead and a high chance that the Fed eventually switches to rate cuts in the second half of 2023. Read this article on THINK TagsVacancies US Jobs 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

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

Today, mainly important reports from the United States will appear. The report on inflation and the number of requests for unemployment insurance may significantly affect traders and give a picture of the condition of the US economy. On the old continent, we will mainly focus on the result of the German CPI. German CPI The monthly change and the annual consumer price index met expectations. The monthly change in the German CPI reached 1.9% and rose from 0.3%. Similarly, there was an increase in the annual change of the CPI from the level of 7.9% to the level of 10.0%. Switzerland Producer Price Index There were no forecasts for the Switzerland Producer Price Index. The monthly price of the change in the price of goods sold by manufacturers rose from -0.1% to 0.2%. After weak readings in July and August, this is a positive signal for this sector. On the other hand, the PPI YoY fell by 0.1%, thus reaching the level of 5.4%. BOE Credit Conditions Survey The Bank of England (BoE) will published the results of their Credit Conditions Survey for Q3, 2022. The bank conducts such research every quarter. As part of the Bank of England mission to maintain monetary and financial stability, the bank conducts research to understand credit trends and changes. Today's quarterly survey of construction banks and lenders contributes to this work. The survey covers: Secured and unsecured loans to households. Loans for non-financial corporations, small businesses and non-bank financial companies. Speeches of the day At 8:00 CET the first speech of the day was the speech from Germany. The speaker was President Nagel. He is also voting member of the ECB Governing Council. He's believed to be one of the most influential members of the council. For this reason, his speech may significantly affect the monetary situation of the euro zone. The next speech will be from the Bank of England which is set at 13:00 CET. Dr Catherine L Mann serves as a member of the Monetary Policy Committee (MPC) of the Bank of England. Her public engagements are often used to drop subtle clues regarding future monetary policy. US Core CPI The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The current reading of the indicator is expected to decline by 0.1% to 0.5%. The previous reading was at 0.6% and it was an increase from the July drop (0.3%). On the other hand, the annual change in the index is forecasted at 6.5%. And it may mean an increase from the level of 6.3%. US CPI Today the US inflation report will be published. This report can significantly impact the foreign exchange market. Read more about forecasts for the current level: https://www.fxmag.com/forex/inflation-report-ahead-what-might-it-look-like-in-the-united-states-u-s-cpi US Initial Jobless Claims There will also be a weekly report on the number of unemployment insurance applications today. The previous reading was negative as it rose to a higher level than expected. Current forecasts show a further increase in this number from 219K to 225K. The expected further negative results in a row may translate into deterioration of the economy in this sector. Crude Oil Inventories The weekly report about change in the number of barrels of commercial crude oil held by US firms will be published at 17:00 CET. Forecasts for this period show an increase from -1.356M to 1.750M. The increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices. Summary 8:00 CET German Buba President Nagel Speaks 8:00 CET German CPI (YoY) (Sep) 8:00 CET German CPI (MoM) (Sep) 8:30 CET Switzerland PPI (MoM) (Sep) 10:30 CET BOE Credit Conditions Survey 13:00 CET BoE MPC Member Mann 14:30 CET US Core CPI (MoM) (Sep) 14:30 CET US Core CPI (YoY) (Sep) 14:30 CET US CPI (MoM) (Sep) 14:30 CET US CPI (YoY) (Sep) 14:30 CET US Initial Jobless Claims 17:00 CET Crude Oil Inventories Source: https://www.investing.com/economic-calendar/

Yesterday's WASDE report was largely constructive. For the US market, corn and wheat saw lower 2022/23 ending stocks. However, the market was expecting even more aggressive reductions. As for soybeans, unchanged US ending stocks proved supportive for prices US corn yields revised lower The USDA revised lower its estimate for US corn stocks at the end of 2022/23 to 1.17b bushels compared to an earlier estimate of 1.22b bushels. However, this still left stocks above the roughly 1.13b bushels the market was expecting. The move was largely due to lower beginning stocks which were lowered by around 0.15b bushels. The agency also lowered domestic corn production estimates for this season from 13.94b bushels to 13.89b bushels on account of lower yields. Export estimates were also revised down by 126m bushels to 2.15b bushels. For the global market, the USDA reduced its estimate for global ending stocks from 304.5mt to 301.2mt; again, largely on account of smaller stocks at the start of the season. Global beginning stocks were revised down by around 5.1mt due to lower stocks in the US and Ukraine. The revised numbers are largely in line with market expectations of around 301.9mt. Global corn output was lowered by 3.8mt to 1,168.7mt due to lower supply from the US (-1.2mt) and the EU (-2.6mt). Meanwhile, global demand estimates fell from 1,180.2mt to 1,174.6mt.  While the numbers, particularly for the US were not as bullish as the market was expecting, both the US and the global market continue to tighten, which should provide support to prices. Corn supply/demand balance Source: USDA US soybean output cut The USDA revised lower production estimates for US soybeans by 69m bushels to 4.3b bushels. This was due to a reduction in yield expectations, which were revised down from 50.5 bu/acre to 49.8 bu/acre. Both yields and production came in below market expectations and this has provided a boost to soybean prices. Meanwhile, the agency estimates that lower output and increased competition from South America could impact exports, which were cut from 2.09b bushels to 2.05b bushels. US ending stocks for 2022/23 were left unchanged at 200m bushels; however, this was below the roughly 245m bushels the market was expecting. For the global market, 2022/23 ending stocks were increased from 98.9mt to 100.5mt, largely on account of higher supplies from Brazil. This number was also slightly higher than the 99.7mt the market was expecting. Global soybean production estimates increased by around 1.2mt to 391mt, which was driven by a 3mt increase in Brazilian supply. Global demand numbers were also increased by around 2.5mt to 380.2mt for 2022/23. Soybeans supply/demand balance Source: USDA Wheat balance sheet tightens The USDA lowered US wheat ending stock estimates for 2022/23 from 610m bushels to 576m bushels (lowest since 2007/08); although it was still higher than the roughly 563m bushels expected. The agency lowered production estimates from 1.78b bushels to 1.65b bushels due to falling acreage and yields. The global wheat balance saw few changes in aggregate with 2022/23 ending stock estimates revised down slightly from 268.6mt to 267.5mt, which was in line with market expectations. 2022/23 output was cut from 783.9mt to 781.7mt with key reductions coming from the US (-3.6mt) and Argentina (-1.5mt). Wheat supply/demand balance Source: USDA Read this article on THINK TagsWheat WASDE USDA Soybeans Corn 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

Today the market will be calmer as I do not have very important data that could be confusing. Mainly, the eyes of traders will be focused on the results of the ZEW Economic Sentiment in Germany and in Euroland as well as the statements of bank criminals in these regions. From the American economy, we are only waiting for the report on Industrial Production. The Reserve Bank of Australia (RBA) events As the day started, events from Australia arrived. The first event took place at 2:05 CET, and it was a speech. The speaker was Michele Bullock, who is an Assistant Governor of the Reserve Bank of Australia. Her public engagements are often used to drop subtle clues regarding future monetary policy. The RBA minutes provide a detailed record of the discussions held between the RBA’s board members on monetary policy and economic conditions that influenced their decision on adjusting interest rates and/or bond buys, significantly impacting the Australian Dollar (AUD). ZEW Economic Sentiment German ZEW Economic Sentiment According to the report on the six-month economic outlook, the mood is currently pessimistic. Another decline is projected from -61.9 to -65.7. Since March, the indicator has been below 0, which means negative results. In June it looked like the situation could improve, but the next results quickly showed that it was a temporary change and that the downward trend has been consistently maintained since then. Source: investing.com Eurozone ZEW Economic Sentiment In the euro zone, the outlook is also negative. It is expected to drop from -60.7 to -61.2. Contrary to Germany, the situation in the euro zone deteriorated only in May. The downward trend has continued since then. The higher results than the German index are due to the fact that 19 Member States have an influence on the European one. Source: investing.com Speeches Also today, representatives of the central banks of Europe and Germany will take the floor. The speeches will be held in the evening. The first one at 18:00 CET and the speaker will be a member of the Executive Board of the European Central Bank, Isabel Schnabel. One hour later at 19:00 CET, Joachim Nagel, who is Deutsche Bundesbank President and voting member of the ECB Governing Council, will speak. Canada Housing Starts The annualized number of new residential buildings that began construction during the reported month will published today. It is expected to drop to 263K from 267.4K. At the beginning of the year, the trend was exemplary, with the highest level recorded in May (287.3K). After this reading, the trend changed to a downward trend. The positive fact is that since the April reading the result was higher than expected. Source: investing.com Canada Foreign Securities Purchases The overall value of domestic stocks, bonds, and money-market assets purchased by foreign investors in Canada is expected to increase compared to the previous month. Canada Foreign Securities Purchases is expected to reach 17.32B. Purchase by foreign investors will provide new money to the Canadian economy and will also demonstrate its attractiveness. During the year, the appearance of the indicator varied considerably. At the beginning of the year it was in a downward trend, then the readings for January and February were downward. After these negative results, the highest reading was recorded at 46.94B. This very positive result was followed by a shift to a downward trend. A rebound after a negative reading in June could mean an improvement. US Industrial Production There are no forecasts for the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. Observing the last result, the trend is downward, and the last reading was 0.13% lower than the previous reading (3.81%). We can only expect it to decline slightly. Summary 2:05 CET RBA Assist Gov Bullock Speaks 2:30 CET RBA Meeting Minutes 11:00 CET German ZEW Economic Sentiment (Oct) 11:00 CET ZEW Economic Sentiment (Oct) 14:15 CET Housing Starts (Sep) 14:30 CET Foreign Securities Purchases (Aug) 15:15 CET US Industrial Production 18:00 CET ECB's Schnabel Speaks 19:00 CET German Buba President Nagel Speaks Source: https://www.investing.com/economic-calendar/

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

Global aluminium prices briefly rallied after news that the United States is considering an effective ban on Russian imports of the metal in response to the conflict in Ukraine. This comes at a time when the LME is also discussing the possibility of banning Russian metal from its warehouses US mulls Russian aluminium ban Metals have been mostly spared in the rounds of sanctions imposed on Russia that followed its invasion of Ukraine on 24 February. The news of a potential US ban has revived memories of the chaos in the aluminium market that ensued when the US administration placed sanctions on Russian aluminium producers in April 2018. Back then, LME prices jumped to their highest level in seven years at $2,718/t, before gradually falling in the following weeks and months. Sanctions were then lifted in January 2019. This time around, while we have seen strength on the back of reports of a possible ban, the gains have been more modest given the lack of confirmation from US officials along with the fact there are several forms of action that could be taken. Three potential scenarios for the US The Biden administration is reportedly weighing up three potential measures: a complete ban on Russian aluminium, increasing tariffs to levels that would effectively act as a ban, and sanctioning the company that produces Russian aluminium: Rusal. The scale of the impact will depend on which of the three options the US opts for. The war in Ukraine has had little effect so far on Russian aluminium exports to the US with most customers likely to have entered into long-term contract agreements. US ban or higher import tariffs – limited impact In the scenario that the US imposes a ban or raises tariffs on Russian aluminium, there will likely be a limited impact on the global market. The US is not a significant buyer of Russian aluminium. The US imported about 192,000 mt of primary aluminium from Russia in 2021, accounting for just over 5% of the total 3.64 million mt of primary aluminium imported that year. Russia was the third-largest exporter of primary aluminium to the US in 2021, but imports from the country were far behind the 2.54 million mt and 354,000 mt shipped from Canada and the United Arab Emirates, respectively. In the first half of this year, the US imported about 120,000 mt of primary aluminium from Russia out of 2.12 million mt in total imports. If the US shuns Russian metals, Russia may increase its exports to sanction-neutral countries like China, the world’s biggest aluminium consumer. China would then buy discounted Russian material to use domestically and export its aluminium products to Europe and the US to fill the gap left by the Russian import ban. China imported 230,511 tonnes of primary aluminium from Russia this year through August, accounting for 77% of its total aluminium imports. Unless a US ban is accompanied by an EU or LME ban, any spike in prices that would follow such a move would most likely be short-lived. Sanctions option more of a concern However, if the US decides to sanction Rusal, the impact could be more severe, bearing in mind the market’s reaction to the sanctions in 2018. The move could freeze the Russian producer out of Western markets, depending on the severity of sanctions, which would boost global prices for the metal and distort global aluminium trade flows. Rusal is the largest aluminium producer outside of China and the only primary aluminium producer in Russia. The company produced 3.76 million tonnes of the metal in 2021, accounting for 6% of worldwide production. Rusal is not only a major producer of primary aluminium. It is also deeply embedded in global supply chains needed to make the metal – bauxite and alumina. Rusal’s 2018 sanctions affected operations in Guinea and Jamaica, while smelters in Europe struggled to secure raw material supplies. The Irish government also considered intervention to safeguard jobs at Rusal Aughinish Alumina, Rusal’s largest producer of alumina. If the US sanctions the Russian aluminium producer, it could make other buyers cautious of taking in Russian material, fearing exposure to possible secondary sanctions. Supply tightness and shortages that would likely follow would be most felt in Europe, where the industry is already grappling with low stock supplies and is more reliant on Russian supply. Europe is Rusal’s biggest customer, accounting for 40% of sales revenues. Buyers have been increasingly pushing back as contracts for next year are being negotiated. Some companies, including Novelis and Norsk Hydro, have already rejected Russian material for next year’s supplies.   US sanctions could also encourage the LME to act – the bourse launched a discussion paper earlier this month on a potential ban of Russian metals. Back in 2018, after sanctions were imposed, the LME barred users from delivering any metal made by Rusal into its global warehouses. This would, as a result, make traders and consumers cautious of buying new metal from Rusal, since they wouldn’t be able to deliver it to the LME – the buyer of last resort. LME discussion on Russian metals The LME is considering three options: it could continue to accept Russian metal, set a cap on Russian metal in LME warehouses, or issue an outright ban. Given that Russia accounts for about 5% of global aluminium output, the metal would be one of the most affected if we were to see a ban or limits on Russian deliveries into LME warehouses. Russian aluminium has accounted for as much as three-quarters of LME stockpiles over the past decade, according to the exchange. Clearly, the LME is worried about the risk of Russian metal being dumped into LME warehouses as buyers become less willing to accept Russian metals for next year’s supplies. Russian metals flow into the exchange’s warehouses, in the scenario that the LME doesn’t issue a ban or only limits Russian deliveries, which would cause some issues. Firstly, a strong increase in LME inventories could put further pressure on prices, while there could also be a growing amount of aluminium in LME warehouses, which buyers are not willing to touch. This could potentially lead to a disconnect in prices. There is already speculation that recent LME inventory increases in copper and aluminium are being driven by Russian material. LME on-warrant aluminium stockpiled jumped 63% so far this week and now stands at 527,675 tonnes, according to data from the bourse, with the increase driven by deliveries into Malaysia’s Port Klang warehouses. On-warrant stockpiles have now doubled since the start of October. A full ban on Russian metals would be the most bullish outcome of the LME discussion paper, effectively cutting Russian metals off from the exchange. With LME disappearing as the market of last resort for Russian metals, Russian suppliers would have to look elsewhere for willing buyers. Disruption to trade flows would likely offer an upside to affected metals, including aluminium. Read this article on THINK TagsRussian metals Aluminium 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

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

After both Boris Johnson and Penny Mordaunt pulled out of the British PM race, Rushi Sunak cried victory on Monday afternoon, and markets cried ‘Ready for Rishi’. The new UK Prime Minister The British sovereign bonds posted one of the biggest gains on record, the 10-year gilt yield tanked 8.50%, the 30-year yield dived 8.40%, sterling gained. Investors loved seeing Sunak become the new UK Prime Minister, they, however, hated seeing Xi Jinping confirm a third term. NASDAQ Nasdaq’s Golden Dragon China index lost more than 20% yesterday and closed the session more than 14% down. Direxion’s FTSE China Bear times 3 ETF jumped almost 30% in the session. Macro data On macro, the PMI data revealed yesterday did little good to the mood in Europe. The composite PMI fell to 47.1, which is the lowest level since April 2013. In the US, the services sector saw a sharp, and an unexpected decline to 46.6, from 49.3 printed a month earlier, and 49.6 expected by analysts. Japanese core CPI advanced to 2% versus 1.9% expected by analysts. The dollar-yen trades touch below the 149 mark after the Bank of Japan (BoJ) intervened to slowdown the depreciation in yen. US tech giants In the corporate space, two big US tech giants are due to announce earnings: Alphabet and Microsoft. Their revenues are expected to have slowed in the latest quarter, but how much of the slowdown is already priced in? Walking into the results, it’s important to remember that soft results don’t necessarily mean negative market reaction. If the soft results still beat the market estimates, we could see Google, and Microsoft shares rally. Watch the full episode to find out more! 0:00 Intro 0:39 Markets are ready for Rishi! 2:52 …but not for Xi. 4:32 PMI data disappoint 6:00 Japanese inflation advance 7:25 Google earnings preview 9:07 Microsoft earnings preview 10:20 Option traders bet for Tesla below $200! Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Google #Microsoft #earnings #UK #PM #Rishi #Sunak #GBP #USD #JPY #BoJ #ECB #China #XiJinping #selloff #Tesla #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5  ___  Let's stay connected: LinkedIn: https://swq.ch/cH

A busy week ahead filled with central bank meetings. The Federal Reserve's FOMC meeting is set to result in a 75bp rate hike given that annual rates of core inflation are heading higher. On the other hand, we believe that for the Bank of England, a 50bp rate hike is narrowly more likely than the 75bp most are expecting, due to policy U-turns in recent weeks In this article US: fourth consecutive 75bp hike incoming UK: Bank of England could surprise markets with a smaller rate hike Norway: Norges Bank to deliver one final 50bp rate hike Source: Shutterstock US: fourth consecutive 75bp hike incoming Markets will have a broad range of US data and events to digest over the next couple of weeks. Wednesday’s Federal Reserve FOMC meeting is set to result in the fourth consecutive 75bp rate hike given that annual rates of core inflation are heading higher rather than lower, the economy has returned to growth with a decent third-quarter GDP report, and the labour market remains robust with job vacancies exceeding the number of unemployed Americans by four million. The tone of the press conference and the outcome of next Friday’s jobs report will then help markets firm up expectations for what the Fed may do in December. There have been hints that officials could open the door to a slower pace of rate hikes, and after 375bp of interest rate increases (after next Wednesday) there is a strong argument for taking stock of the situation. Unfortunately, the data hasn’t been moving in the right direction and we would probably need to see a noticeable slowdown in the month-on-month rates of core CPI increases from 0.5/0.6%MoM towards 0.2/0.3% to give the Fed the confidence to moderate the pace meaningfully. At this stage, we just aren’t confident that this will happen in time for the December FOMC meeting so there remains the strong possibility that we get a fifth consecutive 75bp hike versus our current 50bp view. Attention will then switch to the midterm elections that will be held on 8 November. In our preview, we set out different scenarios and potential impacts. The polls seem to be shifting in the direction of a Republican-controlled Congress, which will greatly limit what President Joe Biden can achieve in the second half of his presidential term. This means less government influence on the economy and will put more pressure on the Fed to cut rates in the second half of 2023 to support the economy, as nothing will come from the fiscal side. UK: Bank of England could surprise markets with a smaller rate hike It was unthinkable only a few weeks ago, but we now think a 50bp rate hike is narrowly more likely than the 75bp Bank of England rate hike markets and most economists appear to be expecting. It’s undeniably a close call, and whatever happens, the committee is likely to be heavily divided. But in recent speeches, policymakers have been signalling that markets are overestimating the amount of tightening left to come. Meanwhile, following the various policy U-turns of recent weeks, the expected boost from fiscal policy now looks similar to what was expected before September’s meeting, when it opted against a 75bp move. With the latest data not providing a clear justification for a faster hike, and sterling now stronger than it was before September’s meeting, we think there is a good chance now that the Bank will underdeliver on market/economist expectations. Read our full preview here. Norway: Norges Bank to deliver one final 50bp rate hike Having opted for multiple 50bp rate hikes through the summer, Norway’s central bank hinted it could slow the pace back to 25bp for its final few moves. The question for next week is whether it instead decides to continue to front-load tightening, and we think it will. Higher overseas rate expectations and another massive upside surprise on inflation suggest we should expect another 50bp hike on Thursday. However that would take the central bank close to the end of its hiking cycle, and we are pencilling in one (or perhaps two) more 25bp moves before it pauses. Key events in developed markets next week Source:Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsUS Norway Bank of England   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

As inflation is biting in most of the world, we thought it could be interesting to look at the US 10Y yield as a proxy for the inflation pressure. In the chart above, we can see that the US 10Y yield follows the Copper/Gold ratio (Black line) very closely. Oftentimes, we see the Copper/Gold ratio peak or bottom a few weeks/months ahead of the US 10Y yield. Looking at the Copper/Gold ratio, it peaked back in October 2021 while the US 10Y yield has rallied strongly higher. Therefore, we think that a temporary setback in the US 10Y yield to 3.56 could be seen in the weeks/months ahead before a new swing higher towards 5.00 should be expected.   Relevance up to 07:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/298961

In the first half of the day, attention will be paid to PMI reports in Europe. In the second half of the day, attention will shift to the results of the North American labor market. Retail Sales The first important data for the market came from Australia at the beginning of the day. the published retail sales report for another consecutive reading remains unchanged at 0.6%. This means that the demand for manufactured goods in this country remains unchanged, which may be due to the economic situation. European Services PMI The largest economies of the euro zone today published their reports for Services PMI. The overall picture is positive. Spain was the first country in the European bloc to provide a positive report. Services PMI indices reached the level of 49.7 and it was an increase against the expected 48.3 and against the previous reading of 48.5. In France, the result was also higher than expected (51.3) and reached the level of 51.7. The current reading is much lower than the previous 52.9. In the largest economy of the European Union, i.e. Germany, this indicator also increased from the level of 45.0 to the level of 46.6. These three positive readings significantly influenced the European Services PMI score which reached 48.6 and was only 0.2 from the previous reading. Only in Italy did this indicator drop. The current reading in this country is at 46.4. UK Construction PMI For the UK, the most important event of today is the Construction PMI report. The reading turned out to be really positive. The result for this sector was higher not only than the forecasts but also higher than the previous result. Construction PMI increased from 52.3 to 53.2 ECB President’s speech At the end of the week, an important speech will be from the European Union. At 10:30 CET, the following spoke: European Central Bank (ECB) President Christine Lagarde. Her comments may determine a short-term positive or negative trend. As the most important person in a European bank, he can provide very valuable comments and guidelines regarding future actions within the framework of monetary policy. Nonfarm Payrolls The United States will publish data on the number of people employed outside the agricultural sector. This number is expected to reach 200K. This forecast shows that the downward trend continues. After March, the number dropped significantly and maintained this trend until it broke out in August which was a false sign of a change in the trend. After a positive August, the decline will begin again. It may be a positive fact that he achieved better results than expected. Source: investing.com US Unemployment Rate The unemployment rate is expected to reach 3.6%. If the results met the expectations, it would mean an increase of 0.1% and thus a return to the level obtained between April and July. Canada Employment Change Canada also share the results of its job market. The outlook for the Canadian labor market is not very good. Employment Change is expected will reach the level of 10K over the previous 21.1K. The latest reading was a positive reflection from the negative levels from previous periods, but it may turn out to be one-off. Although expectations are above zero, it is not a good picture of the Canadian economy. The unemployment rate can reflect this as well. The unemployment rate is expected to increase by 10 porcet points to 5.3%. Summary 1:30 CET Australia Retail Sales (MoM) 9:15 CET Spanish Services PMI 9:45 CET Italian Services PMI 9:50 CET French Services PMI 9:55 CET German Services PMI 10:00 CET EU Services PMI (Oct) 10:30 CET UK Construction PMI 10:30 CET ECB President Lagarde Speaks 13:30 CET US Nonfarm Payrolls (Oct) 13:30 CET US Unemployment Rate (Oct) 13:30 CET Canada Employment Change (Oct) Source: https://www.investing.com/economic-calendar/

President Joe Biden is not on the ballot at the 8 November mid-term elections, but the outcome will determine how much he can achieve in the second half of his presidential term and how the government can respond to growing recession risks. It will also be an important barometer for the Republican Party and whether Donald Trump will run against Biden in 2024   The presidency is not up for election until 2024, but the outcome of the mid-terms could determine whether Joe Biden stands again What's happening? All 435 members in the House of Representatives are up for election (currently 220 Democrats, 212 Republicans, three vacant). This is a two-year term. The Senate is comprised of 100 members. Each Senator has a six-year term with approximately a third up for election every two years; 34 Class 3 Senate seats + one seat due to vacancy is up for election on 8 November. Of these 35 Senate seats 21 are currently held by Republicans and 14 are Democrats. The Senate membership is currently 50 Republicans, 48 Democrats, and two independents who vote with the Democrats. Vice President Kamala Harris (Democrat) gets the deciding vote in a tied ballot. Republicans need to win one seat (net) from the Democrats to control the Senate. Should the Democrats lose control of either the House or the Senate (or both) then President Biden’s ability to pass legislation will be severely curtailed. He would likely be limited to using executive powers – a heavily restricted form of lawmaking without tax-changing powers. It will therefore be important in defining what support can be offered to the economy in a likely recession – will the onus be on fiscal policy or monetary policy? The presidency is not up for election until 2024, but the outcome of the mid-terms could determine whether Biden stands again and whether former president Trump will seek the Republican nomination to run. The mid-term elections will also have implications for Biden’s climate agenda. Partial or full Republican control of Congress will add difficulties to the execution of clean energy tax incentives and funding under the Inflation Reduction Act, as well as other climate measures the administration intends to establish before the next presidential election. In all the scenarios of the election outcome, we can expect more measures coming from federal government agencies to regulate emissions. 36 states and three territories also hold gubernatorial elections – a vote to elect a governor to a four-year term, except for New Hampshire and Vermont where the governor serves a two-year term. Of the 36 states up for election, 20 currently have a Republican governor and 16 have a Democrat. Guam (Dem), US Virgin Islands (Dem) and the Northern Mariana Islands (Rep) are the territories holding elections. Numerous state elections for the attorney general, secretary of state, treasurer and state legislative elections are also occurring. This could have major implications in a contested election in 2024. There are also various local referendums, including abortion legislation referendums in six states. What are the key issues? President Biden’s approval rating, while low by historical standards, has increased following recent legislative “wins” surrounding green policies, infrastructure and technology. The Democrat Party’s stance following the Supreme Court’s vote to eliminate the constitutional right to obtain an abortion has also helped lift approval ratings.  Nonetheless, the most important issue according to pollsters is the state of the economy with the rising cost of living, higher interest rates and falling asset prices all causing concern for the electorate. Percentage of Americans mentioning economic issues as the nation's most important problem Source: Gallup   The perception of poor performance in government is the second-most cited negative factor. In the immediate aftermath of the Supreme Court’s vote on abortion, this issue did become the top concern for 8% of respondents, having been at 1% the previous month. It has since slipped back to 4%. Other issues respondents cite as the top concern for the election Source: Gallup The state of play Mid-term elections are typically seen as a referendum on the effectiveness of a president and their party during the first two years of their term. The omens are not good with President Biden’s approval at this stage in his presidency below all other modern presidents, including the rating of Donald Trump ahead of the 2018 mid-terms at which he took heavy losses. High levels of partisanship, the high (and rising) cost of living, a weakening economy and falling asset prices are all hurting President Biden and the Democrats. Presidential approval ratings two weeks before mid-term elections Source: Gallup   The election of House members tends to reflect generic Republican-Democrat polling. FiveThirtyEight collates opinion polls which suggest that Republicans are on around 46% and Democrats are at 45% with 9% of the population undecided. Turnout is therefore key for the Democrats if they are to retain a winning margin in the House. People who want political change tend to vote in greater numbers than those who are content with the status quo. Mid-term election turnout tends to be far lower than for presidential election years. Typically, presidential election years see a turnout of 50-60% with 2020 seeing a 67% turnout. Mid-term elections typically see a turnout of around 40% although 2018 saw a 53% turnout. Hence, the consensus amongst political forecasters is that the Republicans will win a narrow victory thanks to their more motivated base. The Senate and Gubernatorial elections are different to the House elections in that senators and governors tend to be better known and individual personalities play a greater role in the decision-making process for the electorate. One way of looking at it is that California only has one governor and two senators, but 52 house seats. Consequently, the Senate races are less driven by national issues that impact generic Democrat-Republican voting patterns in the House. Most polls show the majority of Senate seats up for election are solid Democrat or solid Republican. There are perhaps only five Senate seats out of the 35 up for contention where there is genuine uncertainty on the outcome. The Cook Political Report lists one Democrat seat in Arizona, one in Georgia and one in Nevada as a “toss-up” while one Republican Senate seat in Pennsylvania and one in Wisconsin are listed similarly. Hence the Senate is a closer call than the House. What history tells us Only three out of the last 22 mid-term elections (going back to Franklin D Roosevelt’s presidency in 1934) have seen the incumbent president’s party make gains in the House of Representatives (nine seats for Roosevelt in 1934, five seats for Clinton in 1998 and eight seats for George W Bush in 2002). The six-seat gain that the Republicans need to win control of the House has been achieved on 17 occasions since 1934 and in each of the last four mid-terms. The median loss of House seats for an incumbent’s party since 1934 has been 28. In the Senate, the incumbent president’s party has gained seats on six occasions and lost seats 15 times with one no-change outcome since 1934. The median change in the past 21 occasions has been a loss of five seats. The Republicans need to pick up just one seat to control the Senate. What history tells us Source: Wikipedia, ING   While the backdrop supports the view that the Republicans have a strong chance to win control of the Senate, individual Republican candidates have run into difficulties. For example, Herschel Walker in Georgia has lost ground following an abortion scandal, while there are independent voter concerns regarding inexperience and extremism in other candidates. Momentum does seem to be behind the Republicans gaining control of both the House and the Senate with betting markets pricing in a much stronger chance of this happening in recent days (see chart below). We probably won't get a final set of results next week. In Georgia, the rules require the winner to get 50% + 1 vote but with Democrat incumbent Raphael Warnock and Republican Herschel Walker both polling around 46%, and a third Libertarian candidate Chase Oliver polling 5%, there may need to be a run-off between the top two on 6 December. Implied probabilities of outcomes based on PredictIt betting odds – spreads mean numbers do not sum to 1 Source: Macrobond The scenarios and what might happen in the next two years Republicans win the House and Democrats retain the Senate: Biden constrained. 40% probability President Biden struggled to pass legislation when he had a Democrat majority in both the House and the Senate. Without a majority in Congress, it is nigh on impossible. Intense partisanship with just two years to go until the next presidential elections means major legislation is unlikely to pass unless there is a national emergency. President Biden’s legislative actions are therefore likely limited to the use of executive orders and actions to circumvent Congress, where allowed. This is a much more limited form of government. Executive orders can only be implemented in areas where the president has constitutional powers, such as trade negotiations. The president cannot use an executive order to change taxes because that power is held by Congress. Executive orders can be an effective way of implementing policy since legislation is often written in broad, general language. Legislation is often set out to achieve certain targets or aims without explicitly saying how this should be done. An executive order can allow the president to specify in more detail the route to achieve those aims. These orders only apply to Federal agencies. Consequently, Biden’s focus may shift towards international relations and trade policy where the president is less constrained by Congress. Given that the fear of recession is rising, the president is going to have less scope to offer fiscal support given the requirement of having Republican legislators on board. This suggests that once inflation is under control the onus is going to be on the Federal Reserve to offer stimulus to the economy. This is our base case for aggressive interest rate cuts from the second half of 2023 onwards. A Senate controlled by the Democrats would still be able to approve the president’s choices for key positions, such as judges. With control of the House, Republicans gain congressional investigative powers, with some on the right already proposing looking into the president’s son, Hunter Biden’s, business dealings. They can also stall or disband other inquiries, including the committee investigation into the 6 January insurrection. Trump’s enlarged power base in the House could also lead to investigations into the FBI search at Mar-a-Lago. From a sustainability perspective, the landmark Inflation Reduction Act is unlikely to be repealed if the Republicans control either the House or the Senate because President Biden has the authority to veto the repeal, or any other passed legislation intended to replace the original law. However, under a divided Congress, it could be tough to execute the planned clean energy spending under the Inflation Reduction Act. Republicans could make it harder for the tax credits and funding to be distributed through stricter procedure inspection. Under this scenario, Biden will also likely embark on more climate initiatives from the executive branch, such as issuing executive orders or directing agencies to roll out more aggressive carbon regulations, although the latter faces challenges from the Supreme Court. The market impact (Republicans win House and Democrats retain Senate) FX: A split Congress and President Biden left to focus on international issues such as trade could end up proving mildly positive for the dollar. The Biden Administration’s stance on Chinese trade has not been as accommodative as many had expected back in 2020 and the recent tightening of restrictions in the semiconductor sector could lay the groundwork for a more hawkish trade path into 2024. Rates: Equity markets tend to prefer political malaise, as there is usually less political meddling to fret about. Any material outperformance in the equity space can act to amplify the upside move in market rates in the month or so after the mid-term outcomes. But the more medium-term prognosis points to a bigger fall in market rates. With congress stuck and unable to provide much fiscal support, it is the rates environment that has more room to react, bolstered by bigger cuts from the Federal Reserve versus other scenarios.    2. Republicans win the House and Senate: A springboard for Trump in 2024? 50% probability A bad performance for the Democrats will prompt questions as to whether Biden is the best person to lead the party into the next election. Senior Democrats could start jockeying for position with potential party infighting, further undermining the president’s ability to deliver policy. However, the lack of a credible alternative still favours Biden standing again and defeating any Democrat challenger. The president’s ability to pass any legislation is curtailed and limited to executive orders as outlined above. A Republican Senate would be able to block Biden’s picks for key positions in the judiciary and elsewhere. The fact that candidates backed by Trump, and importantly that backed him, have won seats in both the House and Senate strengthens his position as the likely Republican nominee to challenge Biden in 2024. The Republicans, buoyed by a convincing victory, are likely to open investigations into Joe Biden's son Hunter and there could even be impeachment charges. Republicans making sweeping gains in the House and the Senate would likely be mirrored by major gains for Republicans in state positions that have influence over election processes and the certification of results. This could make the 2024 election even more contentious. As in the previous scenario, there will be little prospect of any meaningful fiscal support to counter the recession, putting the onus on the Federal Reserve to loosen monetary policy aggressively in the second half of 2023 onwards. On sustainability, like the scenario of a split Congress, while the Inflation Reduction Act is here to stay, the implementation process would be a lot harder. Moreover, a fully Republican-controlled Congress would encourage the party to propose energy legislation that could advance their policy platform. For instance, there will likely be proposals to increase oil and gas activities to cement US energy dominance and seize profits from exports. There might also be attempts to streamline the federal energy project permitting process, which can substantially shorten the permitting time for not only renewable projects but also oil and gas projects. Some clean energy areas that will likely see Republican support include carbon capture and storage (CCS, as it can be applied to hard-to-abate sectors such as oil and gas), clean manufacturing, and key domestic energy supply chain strengthening. Congress would also likely support blue hydrogen produced from natural gas using CCS technologies over the short to medium term, as opposed to a more radical transition toward green hydrogen produced from renewables. Biden will likely be more aggressive (than in scenario 1) in using his executive power to counter resistance from Congress on the climate issue. 22 The market impact (Republicans win the House and Senate) FX: Republican control of both branches of Congress could initially weigh on the dollar via a hamstrung administration unable to deliver fiscal support in a downturn. Closer to 2024, however, the dollar could be making a comeback were Republicans to hold gains in the polls – given the experience with Donald Trump’s Tax Cuts and Jobs Act of 2017. Rates: For markets, this extreme version of political separation between the executive and congressional powers is one that will likely see politics lurch to petty squabbling, removing the risk for big macro-impactful outcomes. As a pre-emptive swing in the direction of a potential Trump administration, a pro-growth tint should result in higher bond yields than would otherwise be the case. Expect an amplification of the risk in yields to the upside, and then a more dramatic fall in market rates to the downside as we progress through 2023.   3. Democrats retain House and Senate: Biden gets a second chance. 10% probability This would be a major surprise given the current state of polling, but it would reinvigorate the Democratic party and Biden’s presidency. Legislation in support of abortion, same-sex marriage and voting rights would be high on the agenda. With recessionary fears intensifying, this outcome would be the one most likely to generate a fiscal response, presumably on spending support for impacted households, e.g. the reintroduction of a federal unemployment benefit. Looser fiscal policy may mean there is less pressure on the Fed to cut interest rates, especially if inflation proves to be stickier than we project. The Republican party’s failure to pick up enough seats would likely weaken the chances of Trump being selected as the Republican candidate to challenge Biden in 2024. The party may look to put momentum behind alternatives such as Ron DeSantis, former vice-president Mike Pence and former UN Ambassador Nikki Haley. Climate and clean energy legislation could be expanded, building on the Inflation Reduction Act (if they gain a Senate seat and remove the need to get backing from Kyrsten Sinema or Joe Manchin). For instance, Congress might propose bills to change excessive emissions from the power sector – a provision that was originally part of the Democrats’ legislative efforts but was removed by Manchin. Congress could even go a step further to pass a new law and give authorisation to the Environmental Protection Agency (EPA) to put caps on power plant emissions. The EPA’s authority to do so was previously rescinded by a recent Supreme Court decision. Finally, the Biden administration could be expected to set up more regulation measures to curb emissions. These include tougher rules to reduce methane emissions, as well as new vehicle emissions and efficiency standards. The market impact (Democrats retain House and Senate) FX: A surprise retention by the Democrats of both the House and the Senate could be seen as a dollar positive for 2023. The administration would have more power to meet a recession with a fiscal response. This would potentially make more difficult the Fed’s objective of bringing inflation back to 2%. Rates: Markets would perceive this as being the lower growth and heightened political meddling outcome, which would tend to present a downside risk for equity markets relative to the baseline. For bonds, one question is how inflation might be impacted, with risks that the elevation of climate-focused measures could result in higher inflation, at least in the short term. This could dominate the perception of a lower growth outlook, resulting in higher bond yields than otherwise would be the case (although they would still fall in 2023 once the cycle has turned). That said, there is also a route for bigger spending from a Democratic-controlled administration, bolstering growth and the supply of bonds. That could in turn ultimately skew the risk towards higher market rates on a more medium-term outlook. Read this article on THINK TagsUS Politics US elections Trump Midterm elections Joe Biden 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

Jonny Hart looks back on the week’s business and markets news with OANDA Senior Market Analyst Ed Moya in New York.  This week they talk about another hot jobs report, the FOMC decision, and crypto resilience.  They also discuss what the week ahead has in store for financial markets. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 394) - MarketPulseMarketPulse

China's re-opening story doesn't seem to be getting much traction outside social media, and US mid-term election expectations may play a bigger role ahead of results expected tomorrow morning Asia time Source: shutterstock Macro outlook Global Markets: There was another day of equity market gains on Monday following on from the almost inexplicable gains made after the stronger-than-expected payrolls number on Friday. Newswires are pinning the latest increases onto a pre-Mid-term election rally, with expected Republican gains being cited as positive for bonds and therefore for equities. Flying in the face of that theory, 2Y US Treasury yields rose 6.3bp, while the 10Y put on 5.5bp, taking it to 4.214%. There was virtually no data of note yesterday to pin market moves on. Chinese stocks were pretty flat on the day, and you might expect them to improve today on the Wall Street Journal’s re-opening story, but equity futures don’t seem to have made much of this (see also below). Against this happy-go-lucky backdrop, the EURUSD has again made it back above parity. Other G-10 currencies also made decent gains yesterday and we might expect some catch-up today from the likes of the CNY, which was weaker yesterday, trading in a range around 7.23.  The KRW and INR made robust gains yesterday. The KRW is now trading just above 1400. G-7 Macro: The US NFIB small firm optimism index is our pick of the day, with its deep mine of activity and price indicators. Recent results have shown price and wage pressures coming off sharply. We’d anticipate more of the same today. We had September consumer credit for the US early this morning, which was quite soft, which will support “pivotists”. Eurozone retail sales may also be worth a look later if you want convincing that the region is already in recession. China:  The WSJ reported that the Chinese government is considering relaxing Covid measures. This could theoretically move the market, though doesn't seem to be having much impact yet. After Beijing’s marathon and Shanghai Expo, China should be better able to gauge how big events stress their healthcare system. But we believe that relaxation from existing measures is more likely after 2022. China re-allocated some of its Local Government Special Bond quotas for 2023, aiming for bond sales in the last two months of 2022. Local governments have to use up funding from this bond sale by 1H23. This should be supportive for the economy via finishing uncompleted home projects and existing infrastructure projects. It also highlights the fiscal stress faced by local governments. Taiwan: Taiwan will release trade data later today. Our forecast is for a year-on-year contraction as demand for semiconductors should be weak from China, the US and Europe What to look out for: US NFIB survey and Fed speakers Australia consumer confidence (8 November) South Korea BoP balance (8 November) Japan leading index (8 November) Taiwan trade and CPI inflation (8 November) US NFIB business optimism (8 November) Fed’s Mester, Barkin and Collins speak (8 November) South Korea unemployment (9 November) Japan trade balance BoP (9 November) China CPI and PPI inflation (9 November) US mortgage application (9 November) Fed’s Williams speaks (9 November) Philippines GDP (10 November) US CPI inflation and initial jobless claims (10 November) Fed’s Barkin, Logan and Waller speak (10 November) Japan PPI inflation (11 November) Malaysia GDP (11 November) US Univ of Michigan sentiment (11 November) Fed’s Mester and George speak (11 November) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Investors are tense and undecided into the US midterm elections today.Joe Biden had a rough time since he is in office: he Covid pandemic, the war in Ukraine, the global energy crisis, the skyrocketing inflation, a pitilessly tighter Federal Reserve (Fed) policy, rising mortgage rates… all these factors will weight on the wrong side of the balance for Democrats at today’s election. The consensus expectation is a divided government between White House and Congress. Republicans are favoured to take the House and have at least 50/50 seats at Senate. What does that mean for the US monetary and fiscal policies, the financial markets, and the dollar? Watch the full episode to find out more! 0:00 Intro 0:20 US midterm elections: what to expect? 2:03 Impact on the Fed policy & USD 5:41 Impact on the fiscal policy & USD 7:34 Impact on stocks Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #midterm #election #2022 #USD #JPY #EUR #Gbp #CHF #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

US stocks rallied as Americans head to the polls in what is expected to be an election that gives Republicans control of the House. ​ It might take longer than election night to get a final conclusion on the Senate. ​ The Senate is up for grabs as there are five races (Georgia, Pennsylvania, Wisconsin, Nevada, and Arizona) that polls suggest are a toss-up. There is a chance that we won’t find out the Senate result for weeks if the Georgia seat requires a runoff election. ​ ​ ​ 43 million Americans voted early and today’s turnout is expected to be strong as a plethora of issues are motivating Americans to cast their ballot. We might not get all the results tonight but it seems Republicans have a very good shot at gaining control of the House and that could be confirmed early tomorrow morning. At the Save America rally in Vandalia, Ohio, former President Trump announced he will be making a “big announcement” on November 15th. â€‹ It is widely expected that he will launch his 2024 presidential campaign. â€‹ A number of prominent Republicans do not support another Trump ticket, with many preferring Florida Governor Ron DeSantis. ​ It is a long time before Republicans have their candidate but regardless if it is Trump or Desantis, it seems they have a good chance in 2024. ​ ​ FX The dollar got crushed today as a short-covering move accelerated as investors embraced risk appetite ahead of the midterm elections and Thursday’s pivotal inflation report. â€‹ ​ The dollar fell to a six-week low as Treasury yields declined. â€‹ Cryptos take a tumble Cryptos are tumbling after a liquidity crunch for FTX led to their sale to a top competitor. ​ Today is a bad day in crypto. ​ Binance had to step in to save Sam Bankman-Fried’s FTX crypto exchange. ​ SBF has been the white night during this crypto winter and a liquidity crunch for him has triggered a wave of uneasiness across the cryptoverse. ​ Binance will buy FTX.com, which is the non-US unit that generates the lion’s share of revenue. ​ Financial terms were not disclosed. ​ This is a major setback for many investors in cryptos who viewed SBF as a white knight and one of the leaders in the space that was supposed to thrive once we got beyond this crypto winter. ​ Many crypto companies will likely be vulnerable to further selling pressure here given the current macro backdrop but that probably won’t deter a lot of the institutional money that is still coming in or is locked into the space. ​ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Election Day, stocks rally, dollar short-covering, cryptos down on Binance rescue of FTX - MarketPulseMarketPulse

It looks as though the Democrats are doing a little better than expected in the US mid-terms. This news looks unlikely to unlock some of the equity gains that had been envisaged and we have yet to see the dollar extending its correction. Expect a day of FX consolidation ahead of US CPI tomorrow. Today's Polish monetary policy decision could weigh on the zloty United States Capitol building silhouette and US flags at sunrise Source: Shutterstock USD: Mid-terms point to a challenging two years of US policy What we have seen so far from the US mid-term results are: i) the Republicans likely taking control of the House, ii) a much closer Senate race than expected with a possibility the Democrats could retain it, and iii) the swing to Republicans not being as large as expected. How the US mid-terms play out in FX markets is rather a loose proposition - suggestions had been that a likely equity rally on the back of Republican control of Congress had been weighing on the dollar this month. In reality, buy-side surveys seem to have been split on what various mid-term outcomes would mean for equities, and hence the link between mid-terms and FX looks tenuous at best. In our US mid-term election preview, we suggested the scenario of a Republican House and a Democrat Senate might be slightly positive for the dollar in that a hamstrung Biden administration might be left to focus on Presidental executive orders including more hawkish policy on China. Additionally, reports suggest a Republican House will use next year's debt ceiling for policy leverage (such as tighter fiscal policy) and also launch a series of House investigations. On the former, a debt-ceiling stand-off in 2H23 could hit investor appetite for US asset markets and weaken the dollar - and our baseline forecasts already assume that the dollar will be turning by that stage. Back to the short term, it looks as though calls for an uninterrupted US equity rally into year-end are built on weak foundations and instead the core story of tighter US financial conditions will continue to dominate. Tomorrow's release of the October US CPI will have an important say here. An outcome in line with the consensus estimate of a 0.5% month-on-month rise in core inflation would likely keep expectations of Fed funds at 5% next year on track and keep the dollar supported. DXY is trading back under 110 again and barring a very soft US inflation release tomorrow, we see very little reason for the correction to extend much further. Favour a 109.50-110.50 range in DXY into tomorrow's CPI. Barring the mid-term results, the US calendar is light today. Fed speakers are Thomas Barkin and John Williams, both seen to the modestly hawkish end of the Fed spectrum.  Chris Turner EUR: Unpacking the EUR/USD correction EUR/USD is now around 5% off its late September lows. What has driven it? Fed communication has been reasonably hawkish and pricing of the Fed cycle is still near its highs - thus we cannot blame the correction on the Fed. What about a hawkish ECB? Two-year EUR:USD swap differentials have narrowed a little (10bp since the start of the month) and the 10-year US Treasury-German Bund spread has also narrowed 10bp this month, too. However, interest rate differentials have not been a big driver of EUR/USD over recent months. What probably is making the difference are equity markets. Since early October, European equity benchmarks are up 11% versus the 5-6% recovery in their US equivalents. Some bottom-fishing in European assets markets (including FX) may be at work here. We would argue that both the Fed and the ECB intend to take real rates even higher to turn the inflation trajectory around - meaning that further equity gains remain challenging. Above 1.0090/1.0100 EUR/USD could briefly see 1.02, but we would be in the camp saying that this correction does not endure and would still favour a return towards 0.95 into year-end as the Fed tightens the monetary knot still further. Chris Turner GBP: Holding pattern UK policymakers will appreciate the fact the UK asset markets have fallen out of the financial headlines for the time being. The UK's 5-year sovereign CDS is flat-lining near 30bp, back where it was in early September, if not early August (sub 20bp). When it comes to expected volatility in FX markets, EUR/GBP 3m volatility is trading around 8.5% - back to early September levels, while 3m GBP/USD volatility is also consolidating just below 13% and way off the near 20% levels seen in late September. So it is fair to say that some calm has returned to sterling FX markets. We continue to favour some sterling underperformance going into year-end, however. A tight UK fiscal budget on 17 November could be the catalyst to wipe a lot more off the expected Bank of England tightening cycle than is to come off the ECB cycle. And our call for a difficult, not benign external environment should see sterling soften again. EUR/GBP dips below 0.87 could provide hedging opportunities for European corporates with GBP revenue exposure. Chris Turner CEE: Difficult decision-making by the National Bank of Poland A heavy calendar continues today in the Central and Eastern Europe region. October inflation will be released in Hungary and we expect another jump from 20.1% to 21.0% year-on-year in line with expectations. The common drivers here will be rising processed food and services prices with some extra pressure coming from durables as well as the forint hitting its weakest level versus all the majors during October. Later today, the National Bank of Poland's decision will dominate CEE markets. We expect a 25bp rate hike to 7.00%, but our economists admit it will be a close call and unchanged rates are also a possibility. Inflation continues to rise, but on the other hand, the Polish zloty has strengthened significantly since the last meeting and the situation in the CEE region has generally calmed down, which should make the MPC more complacent and continue with its dovish rhetoric. Surveys are also expecting a 25bp rate hike and markets seem to be leaning on the hawkish side in our view. Hence, we believe the overall tone of today's NBP meeting and tomorrow's press conference will be dovish regardless of the pace of monetary policy tightening and the meeting will be negative for the Polish zloty, which has strengthened from levels around 4.850 to below 4.70 EUR/PLN in the last three weeks. Hence, we see the zloty vulnerable and furthermore, this is supported by the significant decline in the interest rate differential in recent days and the drop in costs of funding, which make it less expensive to be short the zloty. So as we mentioned earlier, we expect the zloty to trade above 4.750 EUR/PLN. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Risk sentiment took a beating again as the midterms fever faded with a lack of a Republican wave, and focus shifted back to the crypto turmoil and continued surge in Covid cases in China. Tech layoffs also took another step up with Meta slashing 13% of its workforce. USD gained despite lower US yields as it is likely turning more risk-sensitive than yield-sensitive, but focus on US CPI will add to some caution ahead of the release. A hotter-than-expected core print will likely bring the focus back on Fed’s hawkishness. What’s happening in markets? The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) dropped on crypto selloff, earnings disappointment, lower oil prices, and midterm elections S&P 500 plunged 2.1% and Nasdaq fell 2.4%. The sell0ff was board based with all 11 sectors of the S&P 500 in the red. The energy sector was the worst performer, falling 4.9% as crude oil prices down nearly 4% on rising US inventory levels. The collapse in crypto prices deepened, following Binance’s decision to walk away from its short-lived takeover bid for the ailing FTX. Robinhood Markets (HOOD:xnas) fell 13.8% as investors were concerned if FTX’s Sam Bankman-Fried might liquidate his 7.5% stake in Robinhood. Disney (DIS:xnys) plunged 13.2% on disappointing earnings. Meta Platforms (META:xnas) gained 5.2% after the company announced to layoff 13% of its employees to cut costs. US treasury (TLT:xnas, IEF:xnas, SHY:xnas) yields fell in a mixed session U.S. treasuries, in particular, the frontend of the curve were supported by selloff in equities and crypto, dovish comments from Fed Evans, and strong rallies in the European bond markets, seeing 2-year yields down 7bps to 4.58%, and 10-year yields falling 3bps to 4.09%. European bond yields dropped on the news that Russia was withdrawing its troops from Kherson, a Ukrainian regional capital city annexed by Russia less than two months ago. Chicago Fed president Charles Evans, who is retiring, said in an interview that there are “benefits to adjusting the pace as soon as” the Fed can and the Fed should not keep raising rates by a large amount every time on disappointing economic data. The 10-year auction did poorly with weak demand from investors but the market managed to shrug it off and had a strong close. Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) The China reopening trade continued to fade on Wednesday as new domestically transmitted cases surged further to 8,176 the day before. Hang Seng Index retreated 1.2% and CSI 300 slid 0.9%. China’s CPI fell to 2.1% Y/Y and PPI declined 1.3% Y/Y in October, signaling weak domestic demand. Share prices of Chinese developers however surged, following Chinese authorities saying that they were expanding an existing credit support programme by RMB250 billion to help private enterprises, including developers, in raising debts, by providing debt insurance or bond buying. Country Garden (02007:xhkg), up 13.9%, Longfor (00960:xhkg), up 4%, were top performers in the Hang Seng Index. After trading 1% to 4% lower during the Hong Kong session, China Internet names continued to face selling pressure overnight in New York, with ADRs of Alibaba (09988), Tencent  (00700:xhkg) ,and Meituan (03690:xhkug)  each falling around 3% from their Hong Kong closing levels. FX: USD gains return as risk sentiment deteriorates The USD was back on the front foot on Wednesday ahead of the critical US CPI data due today. US midterms still ended in a political gridlock, even though a Republican wave was avoided. However, limited implication on policy means market focus can return to other key events, such as the crypto turmoil and further rise in China’s Covid cases. US 10-year yields dropped below 4.1% but it appears that the USD is not more risk-sensitive rather than being yield-sensitive. Geopolitics turned calmer with Russia retreating from the only Ukrainian regional capital captured, Kherson, but that brings some risk of new escalations as Putin gets desperate. Focus on US CPI however brought some weakness back in the DXY in early Asian hours with USDJPY back below 146.20. GBPUSD bounced back after a brief slide below 1.1350 and the EUR bounced back higher from parity. Crude oil (CLZ2 & LCOF3) WTI futures dipped further below $90/barrel mark, now touching the $85 handle, while Brent moved lower to sub-$93. Oil prices declined as the EIA reported US crude stocks rose by 3.9 million barrels to the highest since July 2021. This was offset by tightness in the fuel product markets. Gasoline inventories fell by 900kbbl, and distillate fuel stockpiles fell by 521kbbl. Meanwhile, sustained rise in Covid cases in China continued to take a hit on the demand outlook. New cases in Beijing jumped to the highest level in more than five months. Of particular concern was the number of infections found outside quarantine, suggesting the virus is still circulating through the community and would likely delay the easing of Zero Covid policies. Wheat (ZWZ2) prices lower, along with Corn, after USDA report The USDA released it’s November World Agricultural Supply and Demand Estimates report, which led to mixed but mostly lower grain prices. While the overall wheat consumption outlook was raised, USDA said demand may drop in some places, including Indonesia and Sri Lanka, due to high prices. Wheat prices plunged 2.5%. The agency also lifted its soybean output and stockpiles outlook, but robust export demand lifted prices. Meanwhile, USDA expects to see the seventh-largest corn crop on record this year, with a new estimate of 13.93 billion bushels.   What to consider? US midterms avoided a Republican wave Even with votes still being counted and runoffs yet to come to determine the US Senate majority, the midterm election didn't bring the red wave that was expected. Republicans are inching towards control of the House, but with a far narrower margin than what was predicted. Meanwhile, Democrats are likely to keep their majority in the Senate but the outcome won’t likely be confirmed for a while as Georgia heads to a runoff on December 6. The end result is still a political gridlock, much as expected, but with far smaller market implications given lack of a firm policy direction. US inflation to test the 8% level, watch core and stickier components Bloomberg consensus expects US October CPI to drop below the 8% mark and come in at 7.9% YoY from 8.2% previously, but still higher at 0.6% MoM from 0.4% in September. The core measure is also expected to ease slightly to 6.5% YoY, 0.5% MoM (prev. 6.6% YoY, 0.6% MoM) but still remain elevated compared to historical levels. Key to watch also will be the drivers of inflation, particularly the stickier shelter and services costs, which if stuck higher could move the December Fed funds future pricing more towards another 75bps rate hike, resulting in another round of selloff in equities and dollar gains. However, there is another CPI report due before the next Fed meeting in December, and we are going into today’s release with a weak risk sentiment following the crypto meltdown seen this week. This suggests that even a print that matches expectations, or is above it, will likely bring another selloff in equities and further support for the dollar. Binance walked away from FTX acquisition, another plunge in Bitcoin The contagion in the crypto and equities we mentioned yesterday is already here, and getting worse as latest developments suggest that Binance backed away from its earlier pledge, tweeting Wednesday afternoon that it would not pursue the acquisition of FTX. It cited due diligence and a reported US investigation into the exchange. Bitcoin plunged below $16,000, , while Ether followed and dipped to its lowest price since July, barely hanging on to the $1,100 level. China is in disinflation China’s PPI declined 1.3% Y/Y in October due to falls in energy and materials prices and weaknesses in metal processing. CPI inflation was also weaker than expected and fell to +2.1% in October from 2.8% in September on weak consumer demand, falling residential costs, and declines in vegetable prices. Meta to layoff 13% of its workforce Meta’s Mark Zuckerberg announced the social platform’s plan to layoff over 11,000 employees, about 13% of its workforce. Zuckerberg also said Meta is cutting discretionary spendings and extending its freeze on hiring through Q1 2023. The company reaffirmed its Q4 revenue guidance of USD30-32.5 billion, in line with expectations. Capex for 2023, according to the Company, will be in the range of USD34-37 billion, at the low end of prior guidance of USD34-39 billion.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-10-nov-2022-10112022

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

Better-than-expected US retail sales didn’t please investors yesterday, as it fueled, again, inflation expectations. Higher inflation expectations fueled the hawkish Federal Reserve (Fed) expectations. And hawkish Fed expectations fueled recession worries – without however Fed being there to disperse cheap money. Stock Market US indices gave back gains yesterday. The S&P500 slid 0.83% and Nasdaq fell 1.54%. Earnings Sour earnings from Target, which highlighted that nice-to-have stuff like clothes and electronics didn’t sell well in the latest quarter, because of rising prices, didn’t help lift the investor mood. US Elsewhere, JP Morgan economists said they expect the US to enter a mild recession next year because of the rising rates and the tightening monetary conditions. Global economy Prospect of slower global economy, along with the de-escalation of geopolitical tensions on news that the rockets that hit Poland this week were from the Ukrainian defense, and probably landed in Poland by accident, pulled oil prices lower yesterday. UK In the UK, the government will announce its much-expected budget today. It won’t be pretty for people, but it should be ok for investors. Crypto In cryptocurrencies, the knock-on effects of FTX collapse continue to be felt but Bitcoin price remains resilient near $16K. Watch the full episode to find out more! 0:00 Intro 0:31 Strong US retail sales dampen mood 1:22 Target disappointed 3:25 JP hinted at mild US recession, oil fell 5:44 UK Budget Day! 7:32 Crypto contagion continues, but Bitcoin resists 8:59 Gold hits long-term trend top Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #UK #Budget #US #retail #sales #Walmart #Target #earnings #USD #GBP #XAU #Bitcoin #FTX #BlockFi #Genesis #Gemini #contagion #selloff #crude #oil #recession #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

Each country shares monthly, weekly and quarterly macroeconomic reports. The USA, as the largest economy in the world, also has individual indicators that are monitored by investors around the world. The most popular because it is published every week is Initial Jobless Claims. We can hear that in a given week the rod has been decreasing or, on the contrary - it has increased, but what does it mean?   Non-farm payrolls (NFP) - an important economic health measure The nonfarm payroll, or simply the NFP, is always an important and influential event in the economic calendar.   The nonfarm payroll (NFP) report is a key economic indicator for the United States and represents the total number of paid workers in the U.S. excluding those employed by farms. The NFP data is normally released on the first Friday of every month.   Private and government entities throughout the United States are surveyed about their wages. BLS publishes non-farm payroll data on a monthly basis through a closely tracked employment report.   NFP releases generally cause large movements in the forex market. This is because traders always monitor the indicators to identify trends in economic growth A higher wage rate is generally good for the US economy as it indicates more jobs and faster economic growth. The expected change in wage data causes mixed reaction in the currency markets.When the nonfarm payroll differs significantly from the forecast, there is usually a reaction in the markets. But how does NFP affect the Forex market specifically? The effects of the NFP tend to be limited to currency pairs which involve the US dollar. If the results come in higher than expected, this tends to have a strengthening effect on the USD whereas, if the result comes in lower than expected, the USD will often weaken. Industrial production (IPI) indicator explained Industrial production refers to the output of industrial establishments and covers sectors such as mining, manufacturing, electricity, gas and steam and air-conditioning. It also measures production capacity, an estimate of production levels that can be sustainably maintained.   Industrial production and capacity levels are expressed as an index level compared to the base year. In other words, they do not express an absolute volume or value of production, but a percentage change in production compared to 2021.   Industry-level data is useful for managers and investors in specific industries. Fluctuations in the industrial sector are responsible for most of the change in overall economic growth.   The difference between GDP and IPI in the field that GDP measures the price paid by the end user, and thus includes the added value in the retail sector, which the IPI ignores.   Capacity utilization is a useful indicator of the strength of demand. Low capacity utilization or overcapacity signals weak demand. Politicians could read this as a signal that a fiscal or monetary stimulus is needed. On the other hand, high capacity utilization may act as a warning of an overheating of the economy, suggesting the risk of rising prices and asset bubbles.   Initial Jobless Claims - how investors use it? Jobless claims measure how many people are out of work at a given time. Initial jobless claims represent new claimants for unemployment benefits. The claim requests a determination of basic eligibility for the Unemployment Insurance program. This report is published weekly.   Domestic unemployment claims are an extremely important indicator of macroeconomic analysis. As such, it is a good indicator of the US labor market. For example, when more people apply for unemployment benefits, it generally means that fewer people have jobs, and vice versa.   Investors can use this report to form an opinion on the country's economic performance. But this is often very volatile data as it is reported weekly. Markets can react strongly to the mid-month unemployment benefit report, especially if it shows a difference to the cumulative data of other recent indicators.   During the economic downturn caused by the spread of the COVID-19 virus, the weekly numbers of unemployed in the US rose to historic levels. We could observe that such a situation significantly influenced investors' decisions and market reaction. Source: investopedia.com, investing.com 

Summary:  Today we look through key markets for the technical lay of the land, from the US and German equity markets to gold, US yields. We also note a very heavy crude oil market, with cycle support possibly coming into play in the days ahead. Elsewhere, we dive into some examples of the enormous rise in options trading and note the background risk this brings to the market, regardless of whether today's massive options expiry in the US on over $2 trillion in underlying assets proves a non-event. Today's pod features Saxo Technical Strategist Kim Cramer Larsson, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: https://www.home.saxo/content/articles/podcast/podcast-nov-18-2022-18112022

The Biden administration’s 100% clean power by 2035 target needs a huge increase in renewable energy use. But challenges around transmission lines, extreme weather events, supply chains and batteries hinder a faster deployment. Federal and state policies are crucial to address these challenges; corporate purchases are also key to speed up the shift As part of its climate ambition, the Biden administration is targeting to transition the US to reach 100% clean electricity generation by 2035. This requires a comprehensive decarbonization process of the US power sector, which includes decreasing the use of coal and especially unabated coal, maintaining an adequate role of nuclear, and albeit not a popular choice today, exploring the use carbon capture and storage to reduce emissions from coal- and gas-fired plants. But the most important driver to decarbonize the power sector is to substantially deploy renewable energy, in particular solar and wind, which is the focus of this article. With continuing cost declines, electricity generation from renewable sources in the US jumped from 430 gigawatthours (GWh) in 2010 to over roughly 880 GWh in 2021. However, the percentage of electricity generation from renewables is at 21-23% today, and there is still a long way to go to help the US realize the 100% clean electricity target. Insufficient transmission lines and storage capacity will add difficulties for deploying renewable electricity; climate change induced severe weather conditions will disrupt grid stability; and the energy transition – such as the development of electric vehicles (EVs) – will add pressure to the grid. As such, federal legislation as well as state-level targets and incentives, will be crucial in improving needed infrastructure, facilitating coordination among grid operators, and preparing the grid for a smoother transition process. Meanwhile, corporate power purchase agreements have become an increasingly important factor to drive up the demand for renewable energy. Electricity generation in the US Source: US Energy Information Administration Insufficient infrastructure and interconnection difficulties hinder a faster development of renewables The cost of renewable energy has plunged over the past decade. Global levelized cost of electricity (LCOE) of solar PV in the US decreased from more than $300/MWh in 2009 to $32-41/MWh in 2021, and the LCOE of wind fell from over $100/MWh to around $38/MWh during the same period. This has put the LCOE of renewable energy on similar levels with those of coal and natural gas.   Yet despite the drop in cost, wind and solar have not seen a rapid-enough deployment rate that many hope to see. So, what are the challenges to deploying renewable energy faster and effectively managing the grid in the US? The first is the insufficient transmission infrastructure. Currently, there is a mismatch between high generation regions (e.g. the Midwest and Southwest) and the regions with denser populations and higher demand (e.g. the Northeast). And because wind and solar plants require large land areas to be built, these plants are in general located far away from cities where demand is. Therefore, a lot more transmission lines will be required to unlock the infrastructure bottleneck. A Princeton University study concludes that the transmission system in the US needs to triple to achieve 100% power sector decarbonization – that is roughly 400,000 miles of new lines. This equals about 30,000 miles of new transmission lines per year if the US is to reach 100% clean electricity by 2035, but in reality, only 1,800 miles were constructed per year in the past decade. A lot more transmission lines will be required to unlock the infrastructure bottleneck. Moreover, the regulatory design of the grid has made it harder for power projects – which are increasingly renewable – to be connected to the grid. When a project applies to be connected, the responsible regional transmission organization needs to study its impact on the grid and will the project owner bear the cost of network upgrades, which can be substantial. The fundamental problems are that first, the permitting process and staffing levels were designed to serve fewer larger developers as opposed to a large number of small renewable developers. Second, the cost for network upgrades can result in marginally profitable projects being shelfed rather than built. Consequently, there has been a backlog of proposed renewable projects in the interconnection queues of regional transmission system operators. It is estimated by Lawrence Berkeley National Lab that there were over 8,100 projects applying to be connected to grid interconnections by the end of 2021. This translates into to 1,443 GW of generation capacity and 462 GW of storage capacity that is waiting for feedback on interconnection feasibility and potential network upgrade costs. The time a proposed project needs to get to commercial operation went up from 2.1 years for 2000-2010 to 3.7 years between 2011-2021, and historically only about 23% of the projects actually get built. These challenges have hampered the construction of renewable projects and are expected to cause substantial delays in decarbonizing the power sector. Generation, storage, and hybrid capacity in interconnection queues Source: Lawrence Berkeley National Lab Battery capacity buildup provides additional flexibility to the grid but still faces challenges As the deployment of solar and wind picks up, it has become more important to build more batteries that can store electricity and serve at peak demand hours, especially in markets with high renewable penetration. Utility-scale battery storage capacity in the US tripled to reach to 4.6 GW in 2021, from 1.4 GW in 2020 and less than 500 MW in 2016, thanks to a plunge in the cost of production. Over 66% of the added storage capacity in 2021 was co-located with solar projects, which allowed owners to take advantage of federal tax credits and increase expected returns on their investment. In California, batteries have been playing a sizable role in shifting renewable electricity produced in the afternoon to meet peak demand in the evening. This has helped prevent rolling blackouts during summer heat waves. However, 10% of California’s battery fleet experienced outages during daytime, compared to an average of 4% of outages in the state’s gas fleet. While 10% is a decent number, there is still a large gap to bridge. The much bigger challenge with batteries is the limited duration. Moreover, the capacity that utility-scale batteries can provide is still a fraction of the total renewable capacity in the country, at 3-4% today. The much bigger challenge with batteries is the limited duration (max. 4 hours), which does not allow for full replacement of traditional dispatchable generation such as gas plants. What is needed are long duration batteries (8 hours) to fully replace gas plants. This technology needs to be developed, commercially proven, manufactured on a large scale, and then deployed in large quantities. Supply chain uncertainty and bottlenecks can raise costs and delay deployment Another headwind to stay is supply chain costs, which have been on the rise over the past two years because of geopolitics- and macroeconomics-induced disruptions and bottlenecks. China dominates the global renewable energy supply chain, manufacturing 80% of the world’s key solar panels components and almost 60% of nacelle, an important input for wind turbines. Since late 2020, the cost of solar components has jumped in the US, due to reasons such as tariffs imposed on materials of Chinese origin, certain restrictions on importing from China, as well as investigations on several Southeast Asian countries which allegedly export solar panel materials using Chinese inputs. What added to the supply chain disruption is the elevated shipping costs due to pandemic-related shipping bottlenecks between mid-2021 and the beginning of 2022. Shipping costs have largely fallen, but can easily go up again in case of future disruptive events. Several recently passed federal legislations aim at domesticating clean energy supply chains. These measures will in the long run decrease dependence on China, but will in the short to medium term lead to considerable cost increases as the US does not currently have established manufacturing capacity to produce needed components. It is estimated that it would likely cost the US approximately $113bn to build the factories required for PV, battery, and electrolyzer plants to meet demand in 2030. This could hinder the speed of renewable development. Climate change and electrification add further pressure to the grid In addition, there are also exogenous, intensifying factors that are raising the hurdles for the power sector to be decarbonized on time. Two factors stand out: climate change and surging power demand from transport sector electrification. Extreme weather conditions are making the grid more vulnerable. Extreme weather conditions are making the grid more vulnerable. In early September, a record heatwave in the west coast triggered soaring demand for power and almost led to grid operators implementing outage rotations. This was the second power outage threat in the state since August 2020. And California is not the only case. In February 2021, Texas suffered from a two-week cold snap that resulted in massive blackouts; the state also experienced the hottest July in the last 128 years of record keeping. The transmission network in the US has failed far more often in recent years, increasingly driven by severe weather conditions. According to the US Energy Information Administration, since 2013, the average of duration of power interruptions per year without major events has stayed flat at around two hours per customer, but power interruptions caused by major events have substantially risen from less than two hours in 2013 to more than five hours in 2021. The second potentially disruptive factor is the need to support electrification targets. It is estimated that in the US, electricity generation will have to double by 2050 if two-thirds of the light duty vehicle fleet are electrified. This means that transmission owners will need to invest billions of dollars to upgrade the grid (substations, transformers, grid feeders, lines), with electric cars becoming an important part of managing reliability and supply in electric grid. For California, the state’s aggressive climate plan would increase electricity consumption by 68% by 2045, bringing enormous pressure for the grid to be modernized and capable of integrating electric vehicles. Federal-level policy to address key challenges and spur more renewable energy deployment The above-mentioned bottlenecks call for stronger federal policies to incentivize renewable energy development. This is partly what the recently signed Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) are designed to do and will hopefully tackle some of the challenges. The IIJA plans to spend $73bn on updating and expanding the US power infrastructure, which is urgently needed for the renewable projects to move forward. The IIJA is also targeting power grid-related research and development. Moreover, the government is investing $47.2bn in addressing extreme weather events. The amount of investment is likely not enough but is important in getting the snowball rolling. The landmark Inflation Reduction Act, which contains roughly $370bn of clean energy investment, extends current incentives for wind and solar projects for at least 10 years. The IRA has also created two new sets of tax credits for projects that are ‘technology-neutral’ – eligible power generation facilities will need to have net-zero emissions. The IRA also makes investment tax credits available for grid-connected stand-alone batteries – previously batteries needed to be coupled with renewable energy to qualify for federal tax credits. All these would help drive new renewable installations and further drive down cost. Bloomberg New Energy Finance – whose analysis is generally on the more bullish side – estimates that cumulative solar and wind capacity will reach 757 GW by 2030, up from its pre-IRA forecast of 650 GW by 2030. The IRA is also expected to boost storage capacity by 30 GW, hitting 110 GW by the end of the decade. Estimated 2022-31 tax credits and incentives in the Inflation Reduction Act Source: ING Research Cumulative renewable and storage capacity Source: Bloomberg New Energy Finance   The midterm elections, where Republicans have regained control of the House, will to some extent frustrate the Biden administration’s climate agenda. While the IRA is unlikely to be repealed, a Republican-controlled House will add difficulties to the execution of clean energy tax incentives and funding under the IRA. Indeed, Republicans have already indicated they would strictly oversee the spending allocation process.   Besides legislation, the Department of Energy announced in October to have launched the Interconnection Innovation e-Exchange in partnership with several research laboratories. The initiative aims to improve clean energy interconnection through establishing a stakeholder engagement platform, providing data collection and analysis, as well as offering technical assistance to develop region- and state-specific solutions. Supreme Court decision casts doubts on power sector emissions regulation At the end of June, the Supreme Court ruled that the Environmental Protection Agency (EPA) does not have authority to put a limit on greenhouse gas emissions from power plants. The ruling was based on the "major questions" legal doctrine that requires explicit congressional authorization for action on issues of broad importance and societal impact. This decision dealt a blow to the Biden administration’s climate agenda by weakening the EPA’s power to issue sweeping regulations from the federal level to curb power sector emissions. Nevertheless, the EPA is still in possession of power to limit emissions of pollutants such as carbon monoxide, lead, sulfur dioxide, etc.; it can also impose energy efficiency standards to be met by power plants. These measures will not be as effective as the EPA being able to directly regulate carbon dioxide and other greenhouse gas emissions, but it would still be useful in indirectly making it more expensive for coal-fired power plants to operate. State-level efforts are crucial to renewables deployment and grid improvement With insufficient federal regulation and a power stalemate in Washington DC, state governments and regulators need to ramp up efforts to decarbonize power plants. Two popular policies are renewable portfolio standards (RPS), which require utilities operating in a state to procure a certain percentage of renewable electricity, and clean energy standards (CES) in the supply of electricity to customers in their service territory. Compliance with the RPS is evidenced through renewable energy credits (REC) which are generated with renewable energy (e.g. 1 MWh of wind powered electricity produces 1 REC). By the end of 2021, 31 states plus the District of Columbia have adopted an RPS or a CES. Some states have also paired their requirements with cost caps to prevent huge increases in customer electricity bills. Bloomberg New Energy Finance estimates that if all current standards are met, renewable energy generation in the US would grow by 82%. However, these requirements in general are not aligned with the aggressiveness of the Biden administration’s goal. Of the states with an RPS/CES, 22 of them have a 100% clean/renewable electricity goal, but most of these goals are set for around 2050, more than a decade later than the Biden administration’s 2035 target. Moreover, Texas has already achieved its Renewable Generation Requirement established in 1999, and there has not been an updated one. This misalignment means that state-level support is there and will push for more renewable deployment, but are not enough just yet to fill the void of federal policy. Much effort, such as demand management and weather preparedness, are being made by state entities to improve grid flexibility and stability. Yet still, much effort, such as demand management and weather preparedness, are being made by state entities to improve grid flexibility and stability. For demand management, one common approach is to enhance reliance on variable retail tariff design and attract demand during non-peak hours. Another emerging approach is for utilities or demand service providers to manage residential load on behalf of customers and be compensated based on avoided costs. Moreover, regulators are experimenting imposing requirements that can facilitate the process. New York State’s Public Utility Commission requires utilities that are exploring transmission upgrades also consider demand management. On adapting to climate change, California is one of the states that have begun to improve its power system to be better prepared for extreme weather events. After the 2020 heat wave, California has been building backup generation sites, connecting more storage facilities to the grid, and improving coordination mechanisms during emergencies. Admittedly, the state has also extended the life of certain thermal plants, which is evidence that climate concerns will make the power decarbonization path a lot bumpier. Corporate ESG practices can further drive the demand for renewable energy As more corporates announce sustainability targets and actions, Scope 2 emissions, or emissions from an entity’s purchased power and heat, have become a focus for companies to decarbonize their businesses. Most companies reduce their Scope 2 emissions through corporate power purchase agreements (PPAs), a long-term contract under which a corporate agrees to buy electricity and the associated RECs from a renewable energy project. The US has seen tremendous growth of corporate PPAs in recent years: renewable capacity contracted by companies soared from a little over 3 GW in 2017 to 17 GW in 2021, with solar dominating the purchasing portfolio. Such a growth has largely been supported by purchases by tech companies, who are committed to decarbonize their data centers and other operations. While 2022 is likely to see a slowdown in total corporate PPA purchase, there has been a continuing diversification of top buyers, including telecom company Comcast and chemical companies LyondellBasell and BASF. And there is a strong favour for virtual PPAs over physical PPAs, as the former allow the buyer to be in a different electricity market than the renewable project. The share of virtual PPAs of all deals in the US went up from 70% in 2021 to 95% from January-July 2022. Admittedly, there are challenges for the corporate PPA market. For virtual PPAs, for instance, fixed PPA prices need to be competitive with wholesale market prices for the corporate PPA market to be sustainable, which is not the case all the time. Nevertheless, because of growing corporate sustainability practices, corporate PPAs will continue to play a key role in the long term in driving renewable energy demand in the US. US PPAs by technology Source: Bloomberg New Energy Finance; *2022 numbers are from Jan-Oct Top buyers of clean energy in the US in 2022 (Jan-Jul) Source: Bloomberg New Energy Finance Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The US economy has to remain strong in order for dollar to maintain its dominance in markets. Although the USD index gained over 12% in a year, thanks to high US interest rates and being a safe haven asset, they are not enough to maintain hegemony. Most of the effort should be allotted to making the US economy even more vital because benefits, such as dollar becoming the world's reserve currency, will follow naturally. This is actually why some analysts believe that the US seeks to suppress alternative currencies, including Bitcoin. They believe that the US wants to maintain dollar's dominance in order to control world trade. However, the US should consider using multiple currencies rather than keeping dollar as the unit of account and means of savings because there is a high chance that many alternative currencies will emerge, which could challenge dollar's traditional role as a medium of exchange, unit of account and means of saving. Of course, it is not certain that central bank digital currencies (CBDC) could monopolize the monetary system, but Blockchain technology will play a prominent role in the definition of money in the future. It could lead to greater decentralization and individual control over money. CBDC will have to compete on its own merits with other alternative currencies.   Relevance up to 10:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327914

Summary:  US equities rose yesterday to the highest close since 9 September despite US leading indicators for October delivered the biggest m/m decline since March 2009, if we exclude the pandemic, suggesting the US economy is deteriorating and getting closer to a recession. This is adding more evidence to our prediction that corporate earnings will fall next year making 2023 another troublesome year for equities and investors. An echo from the past US leading indicators for October came out yesterday at -0.8% m/m which is worst m/m change, excluding the pandemic, since March 2009 when the global economy was stuck in a global credit and banking crisis. Stretching out the perspective and smoothing the indicators, the 6-month average sits at the same level as in December 2007 when the US economy officially entered a recession that eventually continued and amplified into the Great Financial Crisis. As we recently wrote in one of our equity notes, the Eurocoin Growth Indicator (tracking real time GDP in the Eurozone) is already indicating that the European economy is in a recession, and now the US leading indicators are suggesting the US economy is close to being in a recession. The difficulty in these type of analyses is that recession dynamics change from time to time because the global economy is a complex system. This means that leading indicators fitting prior recessions well will intrinsically have difficulties getting the next recession right. In any case, we can say the economies in the US and Europe are slowing down rapidly due to the interest rate shock, and unless China pulls out a white rabbit successfully kickstarting their economy it will be difficult to avoid a recession. The next question is then what type of recession we get. Is it going to be shallow and short-lived, or is it going to be deeper and longer? Regardless of the severity of the recession the declining leading indicators are adding evidence to our prediction that corporate earnings will fall next year making 2023 another troublesome year for equities and investors. US leading indicators m/m | Source: Bloomberg Have the bears lost interest? S&P 500 futures rallied 1.3% yesterday on no significant new news and the theme basket gainers were predominantly the best performing baskets over the past year if we exclude semiconductors. In other words, it was a momentum driven session yesterday and took the S&P 500 futures to the highest level since 9 September. As we have discussed in our Saxo Market Call podcast the bears are sitting on solid gains for the year if they have been long energy, short bonds, and equities, and as such that there is little incentive for the bears to take a lot of risk in last five weeks of the year. This could lean the sentiment in favour of the bulls and could push equities higher despite the economic picture looks increasingly more negative as discussed above. S&P 500 futures weekly prices | Source: Saxo   Source: https://www.home.saxo/content/articles/equities/us-leading-indicators-are-flashing-red-alert-23112022

Black Friday is almost here, so salers are getting ready for customers looking for real bargains. However, it's still not the end of hard-knock time for consumers as high interest rates and inflation worry buyers, investors and companies. We asked Saxo's Steen Jakobsen for a few words on the ongoing events.       To what extent could high rates and inflation impair Black Friday effect?   It's a two-way street, clearly consumers have shown they still have excess saving from the Pandemic, but also recently that inflation/high rates will in the future slow spending down, however for this Black Friday it seems retailers is more in need of "moving products" than securing price, which may mean good volume sales but less revenue.   Core Durable Goods Orders and Building Permits are released this week - how crucial are these prints ahead of the December Fed meeting?   All data is important as Fed has moved to "observing the impact of recent hikes", but overall the two data points which constitute 90% of the FED "data dependency" is employment and inflation measures.   Read next: Fed interest rate hikes predicted to slow down, Bob Iger takes over Disney for the second time, US mortgage payments soaring| FXMAG.COM

Global gas market What is natural gas? Natural gas is considered one of the most effective energy sources in the world. Gas is used primarily for the production of electricity, heating and in industry. It is characterized by a low degree of impact on the natural environment, as emissions from its combustion are two times lower than in the case of coal. As a result, gas has become the preferred source of energy in European Union countries that are striving to significantly reduce greenhouse gas emissions in the coming years. What's more, with current consumption, global gas reserves - similarly to oil - are expected to last for more than 50 years, which is half as much as in the case of coal. However, this relatively long period is to be devoted to further energy transformation, during which fossil fuels are to be replaced by renewable energy sources. According to the annual BP energy report, the largest gas reserves in the world are held by Russia (24.3%), Iran (17.3%), Qatar (12.5%), the USA (5.3%) and Saudi Arabia (4.2%). What else is worth knowing about natural gas? Natural gas is lighter than air! This is due to the fact that it is largely composed of methane Natural gas has no smell! In order to prevent the gas from escaping, special chemicals are added to it, which are responsible for the characteristic smell Natural gas is found in the same regions as oil. Often both of these resources are mined at the same time Natural gas used in industry is not only used as fuel for power plants, but it is also used to produce chemical products, including fertilizers Natural gas is considered the cleanest fossil fuel, but if extracted from shale, there is a risk of earthquakes and excessive water consumption in the hydraulic fracturing process The biggest producers, consumers Russia, as the owner of the largest reserves of natural gas in the world, was also the largest producer of this raw material for years. However, discoveries of large deposits in Australia, Arab countries or shale gas in the USA have led to a reshuffling of the table of the largest gas producers. Even at the beginning of this millennium, the United States was a net importer of this resource, and most of the electricity produced came from burning coal. The shale revolution that has taken place in the last dozen or so years has led to the fact that the USA has become the largest producer, consumer and one of the largest exporters of natural gas. The gradual abandonment of coal in order to reduce carbon dioxide emissions into the atmosphere has made gas the preferred raw material on the green agenda of the European Union. Europe became increasingly dependent on gas - especially Russian. Russian gas was cheap, which led to the gradual abandonment of its own production. In recent years, dependence on Russian gas has reached nearly 50% for EU countries and over 50% for the entire continent. The development of LNG technology allowed for cost reduction, which led to imports of more and more gas from Qatar, Australia and the United States. Norway is also a significant producer and exporter to European countries. This country is responsible for supplying gas primarily to Great Britain, Germany, the Netherlands and soon also to Poland. How to analyze the natural gas market? Natural gas is analyzed in a very similar way to other commodities, although there are some differences. More attention is paid to transport due to its many forms. Due to the seasonal use of natural gas, attention is also paid to weather forecasts and stock levels. What should you pay attention to when analyzing the natural gas market? Relationship between demand and supply Specificity of the local market (the gas market is not as homogeneous as the oil market) Long and short-term supply contracts Mode of transport - gas pipeline or LNG? Connection network and development of export and import terminals Relations between exporters and importers Seasonality of the market related to the weather The level of stocks in relation to seasonality Changes in stock levels relative to averages and relation to price Natural gas and LNG gas Due to its state of aggregation, natural gas cannot be transported by ships or road transport (to a large extent). Gas is transported through gas pipelines, the construction of which obviously takes years and, among other reasons, long-term contracts for supplies are signed. This is why flexibility in supply is very low, even with such an extensive gas pipeline network as in Europe. The situation is different in the case of LNG, because liquefied gas can be delivered to almost any place in the world that has access to the sea and has an import terminal or uses the so-called floating terminal. LNG is produced by strongly cooling natural gas so that it reaches a liquid state, thanks to which its size is reduced by about 600 times compared to its gaseous state. One gas, many markets Due to the fact that the gas market is not homogeneous, we distinguish a few of the most important benchmarks in the world. They are: Henry Hub in USA EU TTF (Netherlands) NBP in Great Britain JKM in Japan and South Korea European gas is mainly traded between commercial market participants with some involvement of hedge funds . This market is not available to a retail investor, as is the case with NBP or JKM gas. There is also no TTF, NBP or JKM gas ETF available. For this reason, by far the largest trading in the futures market takes place in the United States, which is also available to the individual investor. Although there are certain dependencies between all benchmarks, American natural gas is governed by its own laws, which is why global financial institutions mainly analyze the American gas markGas prices in the US, EU, UK and Asia. As you can see, gas prices in the European Union are still at the highest level, which is why it is a very competitive market for American natural gas, which is up to six times cheaper than the aforementioned European gas (excluding the costs of LNG transport). Source: Bloomberg, XTB Please note that information and research based on historical data or results do not guarantee future profits.

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

A lot of information also appeared on social networks of financial institutions and the press. In this article: Credit Suisse's situation The Inflation Reduction Act India can became one of the largest economies The outlook for global markets in 2023 Gifts for children Cost Cuts Reuters Business tweets about Credit Suisse's situation Exclusive: Credit Suisse looks to speed up cuts as revenue outlook worsens https://t.co/qY3I1lXy4a pic.twitter.com/k2CeNEPFni — Reuters Business (@ReutersBiz) December 2, 2022 The Swiss bank found itself in a difficult situation. Takes action to limit losses. The next step is to cut costs. So what should you expect? Can cost cuts mean cuts in the number of employees? There is a high probability of such a scenario. The most ambitious and comprehensive legislative action Credit Suisse tweets about The Inflation Reduction Act The Inflation Reduction Act is the most ambitious legislative action the US has ever taken on addressing climate change. Our latest report says it could have a profound effect across industries for the next decade and beyond. #inflationreductionact — Credit Suisse (@CreditSuisse) December 1, 2022 Funding for innovation and R&D could position the US as a leader in the low-carbon economy. As the United States is the world's largest producer of fossil fuels, the IRA adds to the strategic advantages the country already has - in terms of natural resources, infrastructure, geological storage, technical expertise and technological talent - and could enable the industry to become the dominant energy supplier in a low-carbon economy. The combined benefits of clean electricity and manufacturing tax credits would make US solar and wind the cheapest in the world. The Inflation Reduction Act 2022 (IRA) is the most ambitious and comprehensive legislative action the United States has ever taken on addressing climate change, according to Credit Suisse. India can became one of the largest economies Morgan Stanley tweets about India’s impending economic boom India is on track to become the world’s third largest economy by 2027 thanks to global trends and key investments the country is making in technology and energy. Find out more about India’s impending economic boom. https://t.co/7AfAV7IdgU — Morgan Stanley (@MorganStanley) December 2, 2022 India is already the fastest-growing economy in the world. The country is developing not only economically but also technologically. India is also poised to become the factory to the world, as corporate tax cuts, investment incentives and infrastructure spending help drive capital investments in manufacturing. Moreover, it is highly populated, and thus many modern scholars come from this country. Such prospects work in favor of India, which may become one of the largest economies. Bloomberg TV interview Goldman Sachs in its Bloomberg TV interview with its Chief APAC Equity Strategist Tim Moe. "We've upgraded our view on Korea and feel very enthusiastic about that call." Find out why in this Bloomberg TV interview with our Chief APAC Equity Strategist Tim Moe, who shares our regional market outlook for 2023: https://t.co/QpIR7eGmBR" — Goldman Sachs (@GoldmanSachs) December 2, 2022 Tim Moe, Goldman Sachs Chief APAC Equity Strategist, discusses his outlook for global markets in 2023. The coming new year will also be full of challenges, because the situation will not change suddenly. Specialists, on the basis of current data, try to predict, forecast what may happen. The emerging comments on this subject may be useful for investors or other market participants in early 2023. Stocks and funds as a Christmas gift? Morningstar, Inc. tweets about stocks and funds as a Christmas gift This holiday season, why not put the "stock" in "stocking stuffer"? 🎄 https://t.co/msMLlYDN08 — Morningstar, Inc. (@MorningstarInc) December 2, 2022 The Christmas period is associated with a family atmosphere, and especially with gifts for children. Therefore, it is worth considering a more practical gift. The author of the tweet suggests that stocks and bonds can become as valuable a gift as toys. In adulthood, they can even turn out to be the best gift of childhood.

Strong job creation and a big increase in wages underscore the Federal Reserve's argument that a lot more work needs to be done to get inflation under control. It has certainly jolted the market. But with recessionary fears lingering, market participants will remain sceptical over how long the strong performance can last US job growth was strong and wages rose in November 263,000 Number of US jobs added in November   Surging employment and wages show the economy remains strong The US economy added 263,000 jobs in November, well ahead of the 200,000 consensus estimate, even when accounting for a 23,000 downward revision to the past couple of months of data. Private payrolls rose 221,000, led by 88,000 jobs in leisure and hospitality and 82,000 in education and health. Construction was up 20,000 and manufacturing gained 14,000. However, there was weakness in trade & transport (-49,000) and retail trade (-30,000). There was more positive news for workers in the form of big wage gains of 0.6% month-on-month, double what was expected, which leaves the annual rate of wage growth at 5.1%. The unemployment rate remained at 3.7% despite the household survey showing an apparent drop of 138,000 people saying they were in work – the second consecutive decline. The unemployment rate held steady because the participation rate fell yet again as workers remain reluctant to return to the workforce. Read next: FX: Today’s US Payrolls With A Strong Bearish Rhetoric On The USD| FXMAG.COM Given the Fed’s repeated warnings that rates are likely to stay higher for longer to ensure inflation is defeated, officials will be hoping that today’s numbers will be the jolt needed to get market participants to finally believe the Fed’s intent. Payrolls growth is slowing, but not fast enough for the Fed (Jobs added per month '000s) Source: Macrobond, ING Jobs market remains far too hot for the Fed In his speech earlier this week, Fed Chair Jerome Powell discussed the prospect of declines in inflation relating to core goods and housing. His focus though was on another area, core services other than housing, where the situation is more troubling. This grouping accounts for more than half of the core PCE index, the Fed’s favoured measure of inflation. The tightness of the jobs market and the implication for wage pressures, which make up the largest cost in delivering these services, is therefore key to the outlook for interest rates. In the speech, he argued that “job growth remains far in excess of the pace needed to accommodate population growth over time—about 100,000 per month by many estimates.” Consequently, wage growth “shows only tentative signs of returning to balance”. Today’s 263,000 jobs number confirms we remain a long way off from demand balancing with supply, which would ease those labour market related inflation pressures. Adding to the Fed’s problems, monetary conditions have loosened in recent weeks as the dollar and longer-dated Treasury yields have fallen and credit spreads have narrowed. This is undoing the tightening effects of the Fed’s recent rate rises. Furthermore, the latest consumer spending numbers together with the anecdotal evidence of the Black Friday weekend sales show that the economy has not yet met the Fed’s requirements of slowing to a rate “well below its longer-run trend”. As such, the Fed has more work to do and we look for further 50bp rate hikes in December and in February, with the potential for tightening needing to go on for longer. Read this article on THINK TagsWages US Payrolls Jobs Federal Reserve 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

Global wheat markets are likely to tighten over the 2022/23 season. Meanwhile, there are already several supply risks building for the next marketing year, which should support prices through 2023 In this article 2022/23 balance tightens Potential for lower output from key producers in 2023/24 What does this mean for prices?   2022/23 balance tightens Despite the fact that Ukraine has produced significantly less wheat in the 2022/23 season, global wheat production is still expected to edge higher in the current season. This is predominantly driven by a recovery in Canadian output as well as Russia producing a record harvest this season in excess of 90mt. However, even with supply growth, global wheat ending stocks for 2022/23 are expected to tighten to a little less than 268mt – the lowest levels since 2016/17. Given the significant amount of inventory carried in China, ex-China stocks are significantly tighter, standing at around 123mt – the lowest level since 2007/08. It is clear that Ukrainian wheat output this season has suffered. Due to the ongoing war, not all acreage would have been harvested. Ukraine planted more than 6m hectares of winter wheat for the 2022/23 season, but only around 4.6m hectares were harvested. As a result, Ukrainian wheat output is estimated in the region of 20mt, down from 33mt in the previous season. However, clearly the issue around Ukrainian supply this season is not just about production but the ability to export. The Black Sea Grain Initiative has allowed for larger export volumes. Although, wheat exports are still down around 55% year-on-year, whilst full season exports are expected to decline by 42% YoY to a total of 11mt. While the Black Sea grain deal was recently renewed, there is still plenty of supply risk from the Black Sea. However, Russian wheat output has performed strongly this year and farmers are expected to harvest a record crop in excess of 90mt. This is a result of good growing conditions. Russian wheat exports had struggled initially in the season, but the pace appears to have picked up recently. While there are no specific sanctions against Russian food product exports, there will be a fair amount of self-sanctioning and so potentially more difficult to get financing, shipping and insurance for this trade. It is estimated that Russia could export 42mt of wheat in 2022/23, up from 33mt last season. These exports would still be below full potential and so Russia is expected to carry a larger amount of stock into next season. The United States is expected to see the total wheat output in 2022/23 remain largely unchanged from 2021/22. This is despite a strong recovery in spring wheat output. Output in 2022/23 is estimated at 1.65b bushels (44.9mt), up 0.2% YoY, although this is still below levels seen in recent years. As a result, US ending stocks for 2022/23 are expected to be the tightest they have been since 2007/08. Drier weather in Europe has weighed on wheat yields in the European Union. These lower yields have offset larger acreage in the region. As a result, total EU wheat output in 2022/23 is estimated to have fallen by almost 3% YoY to 134mt. This lower output is expected to lead to a sizeable drop in EU ending stocks.   As for India, there had been a lot of noise around the government putting in place an export ban on wheat earlier this year. This was due to concerns over a domestic heatwave along with broader concerns over rising food prices following Russia’s invasion of Ukraine. While India is a large producer of wheat (in excess of 100mt), it is a marginal exporter. Therefore, regardless of the export ban, India would have not been able to play a significant role in offsetting Ukrainian supply losses. Australia is expected to see its second-largest wheat crop on record in 2022/23, with expectations of a 34.5mt crop. The harvest is currently underway. And while heavy rainfall for much of the year has seen crop prospects grow as we have moved through the year, this rainfall will raise some concerns over quality. In addition, whilst Australia is on course to produce a second consecutive large crop, there are export capacity constraints, which will limit how much of this volume can come out in a timely manner. Global wheat ending stocks USDA, ING Research Potential for lower output from key producers in 2023/24 As things stand, risks are skewed towards a tighter wheat balance in the 2023/24 marketing year. The key uncertainty is around Ukraine, not only in terms of how much wheat is produced, but also if this supply will be able to be exported. The Black Sea Initiative has been renewed for 120 days, but clearly risks to these flows remain. In addition, weather as usual will play an important role and right now there are already concerns for the next US winter wheat crop. It is also important to bear in mind the potential for lower fertiliser usage leaving crop yields more vulnerable next year. In America, the United States Department of Agriculture (USDA) expects that plantings for 2023 wheat will increase by 3.9% YoY to 47.5m acres. The general strength that we have seen in wheat prices this year should prove supportive for plantings. However, there are already concerns over US winter wheat. Winter wheat is in the worst condition it has been for this time of year in at least 20 years – a little more than 30% of the winter wheat crop is rated good-to-excellent. The poorer condition of the crop is due to drought conditions with 75% of the winter wheat area under drought at the moment, while more than 50% of the crop area is suffering from at least severe drought. This does suggest that we could see some downside to winter wheat yields, and this is key for total US output given that winter wheat makes up, on average, around 70% of total wheat output. However, this poor crop condition does not guarantee that yields will be lower, but the risks are certainly growing for the US domestic wheat balance to tighten further next season. Ukraine would have seen lower plantings of winter wheat for the 2023/24 due to the ongoing war. According to ministry data, the winter wheat area for next season is expected to total 3.8m hectares, which is down 38% from this year. Although, not all wheat areas this season would have been harvested. If we compared the projected planting for next season to the estimated harvested area for the current season, it would be a 17% decline. So, Ukraine will see a smaller wheat crop for next season. For spring crops, there is obviously much more uncertainty as this will depend on how the war evolves over the coming months. It appears as though it will be a challenge for Russia to repeat its current record harvest. Heavy rainfall has delayed winter plantings, whilst weaker prices in Russian ruble terms and export taxes do not help. Therefore, it is likely that area will shrink next season. Early estimates suggest that Russian wheat output could shrink between 10-15% next season. What does this mean for prices? Early estimates indicate that we could see a further tightening in the 2023/24 global balance, which suggests that wheat prices are likely to remain fairly elevated and well-supported. A key downside risk to this view would be de-escalation in the Russia/Ukraine war, as this would likely remove a fairly large risk premium in the market. ING wheat price forecasts ING research TagsWheat Russia-Ukraine Grains Commodities Outlook 2023 Agriculture Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

In the UK, many sectors are controlled. Yesterday there was an impromptu that the CMA imposed a fine on BMW, and today the FCA on the consumer bank Santander. Moreover, the investment attractiveness of the US still remains the best. CNBC will consider the magnitude of the consequences of the pandemic in the United States. In this article: Foreign direct investment UK Santander bank fined Consequences of the pandemic Idris Elba in the story expansion for Cyberpunk 2077 Megatrend potential Read more: Amazon, Google, Microsoft And Oracle Received A Cloud Deal From The Pentagon| FXMAG.COM The US is the best region for foreign direct investment Foreign investments due to the fact that they affect the economic profile of the region of location, because due to their impact on the production potential, changes in the labor market and the level of technological development. The more such investments in a given region, it indicates its attractiveness and builds its potential. Foreign investments have a positive impact on loyal markets because they generate new jobs (increase in employment - decrease in unemployment) and increase the circulation of money. As data showed the US, the Netherlands and China are at the forefront of regions with the largest number of foreign direct investments. The United States recorded the largest increase of inward foreign direct investment of all economies in 2021. The share of global foreign direct investment for the largest economies such as the United States and China has increased recently, while that of offshore financial centers has fallen. Our latest blog looks at how and why this happened: https://t.co/eWevJBEsYE pic.twitter.com/SpDiuJ0KBK — IMF (@IMFNews) December 8, 2022 UK Santander bank fined $132 million From a tweet of Reuters Business learns that Santander Bank has been fined by the UK Financial Supervision Authority (FCA). According to the FCA, the British branch of this bank did not perform its functions properly in order to prevent money laundering. Santander accepted the punishment. But what does this mean for the bank? This will largely affect its market image. Along with this, it may cause that in the UK it will be less likely to be chosen by new kilets. So far, the most important task for the British branch will be to improve its systems. UK financial watchdog fines Santander bank $132 million https://t.co/dZby7GFtPm pic.twitter.com/oLSu3SZXv1 — Reuters Business (@ReutersBiz) December 9, 2022 Consequences of the pandemic for the US The effects of the coronavirus pandemic are still underestimated. Every economy around the world is grappling with its direct consequences. Even the world's largest economy will have to bear high costs. They are currently valued at $3.7 trillion. Given the current economic situation, this can be a serious problem. You can find out more on CNBC's "This week, your wallet." Long Covid has affected millions of Americans — and it may cost the U.S. economy $3.7 trillion, according to one estimate.Join the conversation on "This week, your wallet." https://t.co/jlJPGtyvst — CNBC (@CNBC) December 8, 2022 Idris Elba and CD Projekt RED CD Projekt RED continues to work with Hollywood stars. After cooperating with Keanu Reeves, the studio announced that Idris Elba will play one of the main characters in the story expansion for Cyberpunk 2077. This time he will play Solomon Reed, an FIA Agent for the NUSA in Phantom Liberty. Introducing Idris Elba as Solomon Reed, an FIA Agent for the NUSA. Team up and take on an impossible mission of espionage & survival in #PhantomLiberty, a spy-thriller expansion for #Cyberpunk2077 set in an all new district of Night City. Coming 2023 to PC, PS5 & Xbox Series X|S. pic.twitter.com/jjTuv5PDXA — Cyberpunk 2077 (@CyberpunkGame) December 9, 2022 Megatrend potential Morgan Stanley has a habit of posting tweets that give clues not only to investors, but also, or rather, to average citizens in particular. Unpredictable markets and changing economic conditions make it difficult to know how to invest for the future and how to manage your portfolio. Financial institutions such as Morgan Stanley are constantly researching and drawing new ideas with which they are happy to share. This time he looks at megatrends and how they can help. There is no doubt that the changed has a big impact on everything, especially the social ones. What makes a trend a megatrend? Learn how structural changes in the economy and society can power growth in your portfolio for years to come. https://t.co/L4FLdkgSAz — Morgan Stanley (@MorganStanley) December 9, 2022

Poor November data on retail and industrial activity reinforce the message that recessionary forces are building. So while the Federal Reserve’s near-term focus is defeating inflation via higher interest rates, expectations of a policy reversal later in 2023 will only grow November retail sales in the US were softer than hoped Retail sales show broad falls US November retail sales were softer than hoped, falling 0.6% month-on-month versus the -0.2% consensus expectation. This is the biggest decline in 11 months. We knew that autos (-2.3%MoM) were going to be a drag given lower unit sales released at the start of the month, while the fall in gasoline prices was also going to depress sales given it is a dollar value figure – although we thought it was going to be even worse than the -0.1% it recorded. Unfortunately, there was a broader weakness with the "control group" which excludes volatile items such as autos, gasoline, food service and building materials, sinking 0.2% MoM after a solid run of 0.4% and 0.5% MoM gains. Furniture fell 2.5%, department stores saw sales fall 2.9%, while electronics were down 1.5%. On the positive side of the ledger, food and beverage sales rose 0.8% while health/personal care increased 0.7% and miscellaneous sales rose 0.5%. Level of US retail sales versus February 2020 Source: Macrobond, ING   Retail sales can be quite a volatile report, but this is a disappointing outcome, especially with some downward revisions also thrown in for good measure. In an environment where the Fed is purely focused on the battle to get inflation down and is signalling another 75bp of hikes from here on, it is going to reinforce market concerns about the prospect of a recession. Shrinking manufacturing output intensifies recessionary fears Adding to the negativity surrounding the US economy, the Fed has reported that industrial production fell by 0.2% in November versus the consensus expectation of 0.0%. This weakness was led by a 0.6% drop in manufacturing output – the first decline since June. Admittedly there was a small upward revision to October's print, but the overall outcome is still weaker than hoped. Auto output fell 2.8%, but even excluding this major component, manufacturing fell 0.4%. Utilities rose 3.6% on colder weather, while mining fell 0.7%, presumably in response to falling oil prices. US industrial production levels Source: Macrobond, ING   This data add to concerns that with the Fed not yet done with rate hikes, a recession has to be the base case. This will help to dampen price pressures as companies fight for customers, and with the inflation basket strongly orientated towards housing and vehicles, we think inflation will fall to 2% late next year. As such we stick with our call that there will be an eventual policy reversal from the Fed with interest rate cuts in the second half of 2023. Read this article on THINK TagsUS Retail sales Industrial production Federal Reserve 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

  Federal Reserve Chairman Jerome Powell has a new guide in helping him fight inflation, and it will put U.S. wages at the heart of monetary policy next year. Powell says he's looking at a price scale that covers everything from health care and haircuts to a night in a roadside motel. Because wages are a particularly large cost item for these service industries, "the labor market is key to understanding inflation in this category," he told the Brookings Institution in November in his closing speech before the Fed's latest interest rate hike.     In his press conference following that decision Wednesday, Powell returned to the topic. Now, he said, wages are rising "well above matching the 2% inflation rate." The key question for Fed officials is whether the rise in U.S. wages over the past 18 months or so is a one-time blow as companies adjust to labor shortages and the realization that their workforce is underpaid, or a pernicious feedback loop in which prices and wages are mutually reinforcing. There are signs that they are risk averse, which means that Powell's new guide is pointing to tougher policies. Forecasts released by the Fed last week suggest that the prime rate for next year will be 5.1%, higher than the expected value that led to the stock market crash. Relevance up to 17:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/330214

For several weeks, the world has been watching events related to the scandal around FTX. Today there was information about the development of the situation. Moreover, the American law may have more advantages than it might seem. In this article: Just take the chances – story of Lenny Pyrrhus IMF in Africa Extradition IRA Just take the chances Nearly 20 years ago, most of Lenny Pyrrhus' immediate family fled Haiti after his uncle, the popular musician known as Ti Pierre, was killed during a political protest against the repressive military-led government in 1991. Pyrrhus felt "drawn into a new world" when he arrived in the United States as a child. Pyrrhus says he was lucky to be enrolled in a school that did not hold back immigrant students by placing them in remedial classes. For Pyrrhus, this meant taking advantage of educational opportunities in the United States, where his mathematical talent led to a successful career. Today, he earns $130,000 as an infrastructure developer for JPMorgan Chase in Philadelphia. This seemingly simple story shows that a sudden change turned out to be a chance for a young man. The hero of this story himself can become an inspiration for many people to act, especially when the conditions are not favorable or this story simply teaches how to see opportunities. This 26-year-old fled violence in Haiti as a child — now he makes $130,000 working for JPMorgan. Here’s how he spends his money. https://t.co/CFaaO5zWTT (via @CNBCMakeIt) pic.twitter.com/gozJdBIDue — CNBC (@CNBC) December 20, 2022 Read next: The FCC Seeks More Than $200 Million From Four Cellphone Carriers| FXMAG.COM IMF in Africa The IMF's structural reform program in Kenya is progressing, albeit with some delays. In the areas of governance and transparency, the authorities have completed and published audits of COVID-19 vaccine spending and started publishing information on the beneficial owners of successful bidders in new contracts. However, progress on addressing the financial vulnerabilities of state-owned enterprises and the planned overhaul of the fuel pricing mechanism has been delayed during the political transition. The IMF Executive Board completed the fourth review of the EFF/ECF arrangements with Kenya, granting the country access to SDR 336.54 million As the data shows, the Kenyan economy remains resilient to difficult global conditions and is projected to grow by 5.3% in 2022. Inflation surpassed the Central Bank of Kenya (CBK) target range in June and is expected to peak in early 2023. The IMF Executive Board today approved the disbursement of $447.39 million (includes $215.81 million in additional low-cost financing) to Kenya under the current arrangement with the IMF to support the country’s reform program. https://t.co/HVi8q7sy2p pic.twitter.com/1OKWJnYy4P — IMF Africa (@IMFAfrica) December 19, 2022 Extradition Bankman-Fried was given the chance to speak to his U.S. counsel over the phone and then remanded back to the Caribbean nation's Fox Hill prison. He has decided to agree to be extradited to the United States to face fraud charges. Watch: Sam Bankman-Fried has decided to agree to be extradited to the United States to face fraud charges, a person familiar with the matter said, just hours after the FTX founder's lawyer told a Bahamas judge he was not ready to consent https://t.co/GSUFofn5OV pic.twitter.com/s2gyr94tTf — Reuters Business (@ReutersBiz) December 20, 2022 IRA For saving climate According to estimates by the US Congressional Budget Office, over 10 years energy and climate spending will amount to more than $390 billion, of which approximately $270 billion in the form of additional tax incentives for companies and individuals to seek and invest in cleaner and more efficient energy sources. Globally, we need $1.8 trillion in higher annual spending this decade to be on track to net zero by 2050. The Inflation Reduction Act (IRA), which aims to put the United States on an accelerated path to net zero The IRA also encourages concrete action. In August, First Solar, a U.S. solar technology company, announced $1 billion in additional U.S. investments to expand production capacity. It is expected that there will be more of these types of investments after an IRA is passed. While the IRA does a lot to attract and accelerate investment in decarbonizing the economy, it is not enough to drive the energy transition.   The U.S. Inflation Reduction Act is “shifting the worldview on the art of the possible” when it comes to investing in the country’s climate transition, according to our senior leaders. https://t.co/h0FX3sItN8 — Goldman Sachs (@GoldmanSachs) December 19, 2022

The last couple of US inflation readings came in well below expectations, showing a dramatic acceleration to the downside in the inflation rate. In fact, inflation for November was recorded as lower than in January. December might prove to be a bit of an exception because of the demand distortion around the holidays. But, the value of the dollar is tied to the expectation of the Fed's rate policy in the months ahead. Which in turn is largely predicated on where inflation is headed. One of the main questions is whether the Fed will keep rates high as the economy slows. If inflation remains high, the chances of a Fed "pivot" fade. However, there is an indicator here which could show increasing downward pressure on inflation, which could allow the Fed a little more room for dovishness. What happened? First, we need to distinguish between core and headline inflation. The latter is driven in large part by increasing energy costs, which tend to be more volatile. Headline inflation has been coming down in line with fuel prices. But the Fed generally ignores this indicator, and focuses more on the core rate, which doesn't account for energy or food costs. Diving a little deeper into the core inflation data from the last couple of months, we can see that the largest contributor to the drop was a cooling real estate market. CPI figures don't take into account the cost of houses, but do consider rent. And rent prices have been slowing down dramatically in line with slower home sales, as interest rates push up the cost of mortgages. The new data The presumption is that core inflation will continue its slide if rent prices continue their current trend. And a new gauge developed by the Federal Reserve Bank of Cleveland points in that direction. This indicator looks at the change in the amount of rent paid by new tenants and compares it to existing tenants. Essentially, it measures how much people are paying to rent a new place compared to their current rent prices. Rent prices rise slowly, as it takes time for landlords and tenants to negotiate new contracts. But prices of rent coming on the market can fluctuate quite quickly. If there is demand, then the price of new contracts will rise quickly. If there is less demand, then the price of new contracted rents will drop. That's even if landlords raise asking rent; it won't be reflected in the data unless a contract is actually signed. Read next: Netflix Wants You To Pay For Sharing Your Password With Others| FXMAG.COM The trends and the future What the indicator shows is that new rental contracts spiked through 2021 and early 2022, showing that people were renting at as much as 13% higher prices than the prior year. But, since September, those price increases have started to come down dramatically. People are still paying significantly higher rental prices, at a growth rate of 5% compared to the prior year in November. But the trend is showing an even faster fall than the rise in prior years. In fact, it's the fastest drop on record. If the trend maintains, it could contribute to core inflation coming in below expectations once again. That, in turn, could give the Fed more reason to keep rates from rising as high, and potentially allow room for a pivot to the downside at some point.

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.

Over the last year, the dollar saw an extended period of strength, but turned around in autumn. Although there were many events to influence that trajectory, the main overriding theme has been the Fed. And as we turn our attention to the new year, it appears that will be the main driver going forward, as well. And not just the dollar, as risk sentiment could have some significant fluctuations over the coming months. What's expected… There remains a discrepancy between what the market expects the Fed to do, and what the Fed says it will do. Fed officials have repeatedly said that rate hikes will continue. But the market is pricing in a terminal rate of under 5.0%. That implies at most two more hikes in the coming year, a significantly slower pace than what has been happening so far. The first quarter is the moment of truth, to find out whether the Fed stays true to its implication that rates will be higher than the markets are expecting. The economic situation might be significantly different in the coming months, which could change the Fed's position. It's not that the market thinks the Fed is being dishonest, it's that the market thinks the Fed is being too optimistic about the economy. Two roads diverged in a yellow wood… Everyone seems to agree that there will be some kind of slowdown in the US at the start of the next year. The issue is whether it will be severe enough to knock the Fed off its rate trajectory. Or, will the slower economic activity pull inflation down faster than expected. So far, headline inflation has come in below expectations by quite a lot over the last few months. But core inflation has been a little more "sticky". Slower economic activity would imply less demand for crude, and energy has been one of the leading factors pushing the difference between core and headline CPI. A more mild winter and a diffusion of geopolitical tensions could help reduce inflation faster than anticipated. Combined with an underperforming economy, the Fed could have every reason to not only stop hiking, but to retrace its steps. Less risk outlook and a dovishly inclined Fed could significantly weaken the dollar over time. The path less taken… The consensus among economists is that there will be a relatively mild and short recession in the early part of the year, followed by a slow recovery. That considers a Fed keeping rates tight, and aggressively winding off its balance sheet. That represents the scenario that could weaken the dollar initially, but generally remain strong through the year, thanks to higher interest rates. The divergent opinion is that there won't be a recession at all, and the US will power through on good employment figures and increased government spending. That means inflation could remain elevated, and the Fed might not be as aggressive in raising rates. This scenario implies that the dollar will weaken in the early part of the year and simply continue its trend. Check back in twelve months to see who was right.

A new year, and a new set of rotating Fed board members come in. Giving the varying opinions of the different main and alternate members, this annual transition can change the FOMC's bias and outlook. This could be a factor in the trajectory of the markets, because: There is extensive debate, still, on how high the Fed will go Once there, there are widely differing opinions on whether the Fed will hold fast or "pivot" Potential debate over whether the Fed will prioritize inflation or wages later in the year. The other factor is that Powell has managed to maintain a particularly tight ship, even during the extraordinary measures taken to fight inflation over the last year. In fact, there have only been two dissenting votes out of all the meetings since the bottom of the pandemic. Even if more doves do get on the FOMC, it's also a question of whether they will end up actually voting for a more restrictive policy. What's going on The FOMC has officially 12 members, 8 of whom are permanent. Well, technically 7 are permanent, but the president of the Reserve Bank of New York "rotates" in place. Often there are less than 12, as vacancies at the Fed tend to take a long time to fill. This means the changes from the four rotating members can have a bigger impact. The rotating members are the heads of the respective regional reserve banks. If the regional bank changes its president, and is rotated onto the board, then that will be a new member on the FOMC. That is the case this year with the arrival of the new president of the Chicago Fed, Austan Goolsbee, who's rumored to be dovish. However, it takes some time to assess the inclination of a board member's votes. What does the rotation look like The current holder of the Chicago chair is Evans, a noted hawk. But he will be stepping down early in the year. No hawks are slated to replace him, meaning that there will only be three board members inclined towards hawkishness next year. Centrists Collins and George will rotate out. But also no centrists are expected to rotate in. Instead Logan will rotate in, and he's generally considered a moderate dove. He will likely be joined by Goolsbee in this camp. Two doves will rotate out and be replaced by two other doves. That is, Kaskari and Harker will replace Mester and Bullard. Read next: Signals of softening inflation make US stocks come back from below-the-line levels | FXMAG.COM In summary, one less hawk, one less centrist; replaced by two moderate doves. The dovish end of the board remains unchanged. It's not a big shift, but it does incline the bias a little. The immediate impact of the shift might not be noticeable, as there seems to be pretty broad agreement among members on the near-term policy. The dot-plot shows unanimity in projections in the short term. But getting towards the end of next year shows a widening split. And now there could be two more votes added to the bottom half of the average, implying a softer rate path after summer.

It has been quite a quiet start to the week with many major markets still closed for Xmas holiday, but no one saw Santa coming this year, have you?  On the contrary, the Bank of Japan led drama across the global financial markets reminded that the year will certainly not end on a positive footage, even though the last trading week of the year is expected to be marked by a 'Santa rally'.  A few encouraging news, however, could give a minor boost to equity markets.  Read next: Residents Of Brazil Will Not Be Able To Use Cryptocurrencies As Legal Tender| FXMAG.COM First, released last Friday, the US PCE data, the Federal Reserve's (Fed) favourite gauge of inflation fell to 5.5% in November, the core PCE slipped below 5% to 4.7%. Still more than twice the 2% policy target, but on the right path after all the tightening drama of 2022.   The latter gave a very small boost to US equities before Xmas, but it really didn't help the S&P500 to reverse weekly losses. The index closed the week 0.20% lower than where it started. It is now below the major 38.2% Fibonacci retracement, meaning that we are now in the bearish consolidation zone and could expect a further and possibly a sustainable selloff below 3796, which is the 50% retracement level.  Second, the Chinese reopening continues, with news that the country will scrap Covid quarantines and lower Covid to a lower-threat disease. The news help the Chinese stocks gain at the start of the week. Yet, there is reportedly around 250 million new cases since the reopening, which will likely throw a shadow on the reopening glow.  But crude oil is up by around 15% since the December dip, and the Chinese reopening news could give a helping hand to oil bulls for an extension of the rally to the $88pb level.

The Swiss franc is steady on Friday. In the European session, USD/CHF is almost trading at 0.9240, up 0.08%. On Thursday, USD/CHF dropped by 0.6% and hit a low of 0.9210, its lowest level since March 28th. KOF rebounds in December A quiet post-Christmas week wrapped up with the KOF Economic Barometer release today. After losing ground in the past two readings, the index rebounded in December and climbed to 92.2, up from 89.2 in November. This easily beat the estimate of 86.9 points. The main driver for the improvement was stronger manufacturing activity. Earlier this week, ZEW Economic Expectations also headed higher, rising from -57.5 to -42.8 points. The upturn is encouraging, but the indicator is still mired deeply in negative territory, as financial experts remain pessimistic about the Swiss economy’s outlook. As we turn the page to 2023, let’s take a quick look at the highlights of the Swiss franc’s performance over this past year. There have been plenty of ups and downs, but interestingly, USD/CHF is only about 100 points higher from where it was on January 1st. A US dollar rally in September and October saw USD/CHF break parity and hit 1.0148, its highest level since May. Since, then, the momentum has reversed, with the Swiss franc gaining an impressive 800 points since November 1st. Read next: Real bargains on Wall Street, Barron's point to, i.a. Google and Amazon as undervalued stocks | FXMAG.COM The US dollar has enjoyed a strong year, with the dollar index rising 8%, its best performance since 2015. The greenback has been boosted by a drop in risk appetite, but this didn’t hurt the Swiss franc, as both the dollar and the franc are Swiss haven currencies. In a major policy change, the Swiss central bank raised rates three times this year, which helped the Swiss franc keep pace with the US dollar even as the Fed aggressively raised rates. USD/CHF Technical USD/CHF is putting pressure on support at 0.9256. Below, there is support at 0.9159 There is resistance at 0.9377 and 0.9498   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Swiss franc touches 9-month high - MarketPulseMarketPulse

Welcome to the first trading day of the New Year. Trading remains thin, as most markets are closed.  In the European session, EUR/USD is trading at 1.0679, down 0.23%. I expect a quiet day for the euro. German Manufacturing PMI improves There are no US events on the schedule. German Manufacturing PMI improved to 47.1 in December, up from 46.2 in November and shy of the consensus of 47.4 points. Manufacturing remains below the 50.0 level that separates contraction from expansion, and expectations remain pessimistic. The silver lining to a gloomy situation is that the outlook has improved slightly, as the December release was the strongest in three months. It was a similar pattern in the eurozone, as the Manufacturing PMI rose to 47.8, up from 47.1 in November, also a three-month high. Manufacturing in Germany and the eurozone has suffered a tough year, and demand remains weak. The global outlook remains uncertain and with the ECB promising further rate hikes, the risk-to-demand outlook is tilted to the downside. Still, December showed an improvement, as concerns over an energy crisis have lessened and inflation has eased. We’ll get a look at key inflation releases this week. German publishes December CPI on Tuesday, followed by eurozone CPI on Friday. Both indicators are pointing to inflation heading lower, which could have an impact on ECB rate policy. The ECB raised rates by 50-bp in December and meets next on February 2nd. Read next: Twitter Did Not Pay $136,260 Rent, Microsoft Reported Its Worst Quarterly Results In Years| FXMAG.COM If anyone needed a sober forecast for 2023, there was one today from the International Monetary Fund. The head of the IMF, Kristalina Georgieva, warned that 2023 would be tougher than last year, as the US, EU and China would see growth slow. Georgieva said that she expected one-third of the global economy to be in recession. In October, the IMF cut its growth outlook from 2.9% to 2.7%, due to the war in Ukraine as well as central banks around the world raising interest rates. EUR/USD Technical EUR/USD is testing support at 1.0674. Below, there is support at 1.0566 There is resistance at 1.0782 and 1.0852 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

I know, all we hope is to leave the horrible 2022 behind, and lick our wounds this year, but the New Year started with the IMF Chief Georgieva warning that the global economy faces 'a tough year, tougher than the year we leave behind'. Great... The IMF expects a third of the world economy to be in recession this year, as the US, the EU and China are slowing. Good news for the US is that the Americans could avoid recession, but the bad news for the Europeans is that, the EU will hardly be as lucky; half of the union will be in recession this year, according to the IMF.   China will also be facing a 'tough year' - even the sudden U-turn from the Covid zero policy won't be enough to boost growth, as the incredibly disastrous management of both pandemic, and the exit from pandemic measures cause hundreds of millions of infections at the same time, and millions of death... and you can see the ravage in economic data. China's Caixin manufacturing PMI fell the most in 3 months, from 49.4 to 49 in December. It was slightly better than the expectations, but it was the fifth straight month of drop in Chinese factory activity. Output, new orders, and export sales all declined. Employment dropped for the 9th month, and there was no sign of a rebound.  Elsewhere, the German PMI data pointed at a faster than expected contraction in manufacturing activity in December, while the European manufacturing PMI came in at 47.8, in line with expectations.   We will have more PMI data today, but don't expect to see anything brilliant.   Read next: New Record For Electric Car Manufacturer - Tesla Deliveries Increased By 40% Year-On-Year| FXMAG.COM This being said, trading in European markets was rather optimistic on the first trading day of the year, as European nat gas futures eased on mild weather.   The DAX gained 1%, and held ground near the 14000 psychological mark, which also coincides with the 50-DMA, and the minor 23.6% Fibonacci retracement on September to December rally, while the French CAC 40 jumped nearly 2% for a reason I don't really know.   Activity in European futures hints at a bearish start on Tuesday, while the US futures are in the positive at the tie of writing.  Forex market In the FX...  The US dollar index kicked off the year on a subdued note, letting the dollar-yen tip a toe below the 130 mark. The EURUSD however, couldn't build on gains above the 1.07 mark, while Cable remained steady-ish a touch above its 200-DMA, which stands near 1.2030 level.   Gold jumped to $1843 per ounce despite the positive pressure on the yields recently, while oil remained offered into the 50-DMA, which stands a touch below the $81 per barrel mark.   This week's news and events...  The first week of the year will be marked with a couple of important data and events, which will start giving some justifiable direction to market moves after weeks of slow trading.   First, the FOMC minutes on Wednesday will likely confirm, again, the Federal Reserve's (Fed) tough stance to fight inflation.   But more importantly, Friday's jobs data will give an insight on whether the Fed is being successful fighting inflation.   Besides, the FOMC minutes and the US jobs data, the OPEC meets this week.   US crude is struggling to take over the 50-DMA resistance, as the slowing China story – despite the reopening, and the mild winter in Europe weigh on the bulls' appetite to boost the price rally.   But the oil bulls may have not said their last word yet. The limited oil supply, OPEC's willingness to keep oil prices sustained to fill in the coffers, the switching demand from gas to oil, the Americans who sold 180 million of their strategic petroleum reserves last year, but who will also need to refill them as soon as possible – and possibly around $70-80pb levels, and the slow green transition, all hint that the downside in oil will likely remain limited.   How limited? Levels around $75-76 could give support to price pullbacks for a potential rise toward the $88pb level.

The US ISM Manufacturing PMI is seen dropping further to 48.5 in December. A potential improvement in US ISM components could drive the US Dollar trades. Moves could be restricted ahead of the Federal Reserve December meeting minutes. The US manufacturing sector contraction is set to deepen further in the final month of 2022, having shrunk for the first time in November after May 2020 when the economy began to recover from the Covid lockdown-induced downturn. The US data will be published on Wednesday at 15:00 GMT. The November ISM report showed that manufacturing registered an overall 49.0, down sharply from October’s 50.2, with New Orders and Employment sub-indices registering further deterioration. In December, the headline ISM Manufacturing PMI is seen lower at 48.5 while the New Orders Index is expected to improve to 48.1 alongside the Employment Index at 49.1. The US ISM Prices Paid component is likely to continue its downtrend, foreseen at 42.5 in December when compared to the previous reading of 43.0. Source: FXStreet.com Despite expectations of a softer headline figure, an improvement in new orders could provide the much-needed respite to the US Dollar buyers at a time when the European demand for orders is seen dwindling, with the full impact of winter and the Russia-Ukraine war coming through. Even domestic demand and exports are expected to be badly hit due to the stubbornly-high inflation in the US economy. Also, investors will gear up for the US Federal Reserve December meeting minutes due for release at 19:00 GMT, limiting the US Dollar price action on the US ISM data release The US labor market continues to show an uptrend but remains at risk of layoffs, with the global economy heading closer to a recession this year. However, the temporary signs of recovery in the sub-indices could revive the demand for the US Dollar. However, the US Dollar price reaction could be short-lived amid the extended retreat in the Price Paid component, suggesting a further easing of inflationary pressures in the world’s largest economy. Read next: 2023 Predictions: Natural gas prices in Europe and the US may in the nearterm struggle to find upside momentum with inventories staying elevated due to mild winter weather and consumers curbing demand| FXMAG.COM Also, investors will gear up for the US Federal Reserve December meeting minutes due for release at 19:00 GMT, limiting the US Dollar price action on the US ISM data release. Minutes of the Fed’s December meeting are likely to show that members see the need for interest rates to go higher for longer but markets will look for hints on any talk of pausing the tightening cycle or debates surrounding rate cuts later this year. It’s worth noting that markets are pricing in rate cuts for late 2023, with Fed fund futures implying a range of 4.25 to 4.50% by December. To conclude, mixed US ISM Manufacturing survey findings could fuel temporary buying in the US Dollar, which could fizzle out as the Fed expectations will lead the way starting out 2023.

The ADP said the US private sector added 235K jobs in December in a report ahead of tomorrow's official data release. The market expected an increase of 150k after a rise of 182K a month earlier. The ADP commented on the last report as a turning point, noting a decline of 100k in the manufacturing sector. This time, observers pointed to a jump in employment in small and medium-sized companies while large companies were downsizing. This is a typical story of small businesses being the first to adapt to changing conditions. Weekly jobless claims also came as a positive surprise. Initial claims fell to 204k against 223k a week earlier and an expected increase to 230k. The number of repeat claims fell from 1718k to 1694k, stabilising over the past five weeks. Wednesday's published job openings data also came in better than expected, showing 10.46 million openings - much better than the 10.0 million expected. The publication of robust data was further boosted by comments from Esther George, who said she had raised her benchmark rate forecast for this year above 5% and kept it at its peak until at least 2024. The bullish news set the dollar index up 0.75% in a couple of hours and is now trading near 104.80, its highest level since December 12. The technical picture is beginning to look more and more like the start of a new dollar momentum after the corrective pullback from late September to mid-December.

The BLS has reported that NFP have been above expectations for five months in a row. The most dramatic were the July figures which came in twice the number expected. It seems economists have been consistently underestimating the number of jobs the American economy can make. Of course, that this is a net figure instead of a gross number has something to do with this. Each month, around 6 million people find new jobs. Of them, about 4 million are quitting a current job in favor of a different one (typically, one that pays more). What the NFP represents, more accurately, is whether more people found work than lost work. A quirk of the numbers that can have market implications Given the extraordinarily high "churn" (the number of quits and rehires within the same month) NFP represents dynamism in the labor market. Which isn't the same as the number of jobs created. Because there are two aspects of the labor market: the number of job offers, and the number of people taking up jobs. We've written extensively about how there are vastly more job offers than there are people seeking jobs. Which is why we have to be wary about the concept of "job creation". If we are talking about new jobs being put on offer, whether there are enough people taking them, counts as a job "created". Or we consider that when an open offer is filled, then a job was "created". The hidden numbers There is a practical implication here. Businesses could be shutting down jobs and laying off workers at an increasing rate, conditions that we would normally associate with harsh economic times and even a recession. But NFP could still come in above expectations and the unemployment rate remains steady. In part, this could be because a high number of people quitting leaves open jobs for other people to take. This would be reflected as a stable number of jobs, even though one person less is working. Read next: ADP deliver markets with the print of 235K jobs. Manufacturing sector lose 100 thousands, employment increases in small and medium-sized companies | FXMAG.COM As long as there is a large difference between the number of open jobs and the number of people seeking work, NFP could continue showing dynamism in the labor market. That is, despite a consistent rise in the number of people on unemployment and several high-profile firing sprees, particularly in the tech industry. What to look out for Analysts are once again forecasting 200K jobs created in December, a slowing pace from the 263K reported in November. This is what normally would be considered good jobs growth, if it weren't for the distortion of covid. Although the total number of employed has returned to above the number before early 2020, the labor force participation rate remains significantly lower. The unemployment rate is expected to once again stay at 3.7%. Note that this figure is seasonally adjusted, and takes into account the normal surge in retail for the holiday shopping period.

The two largest economies in the world are expected to report inflation figures later this week. But, by far, the US figure is expected to be the most important. The yuan trades within a bound set by the PBOC, which limits the impact that data can have. However, the broader implication of prices and China, as well as their causes, can have global implications. China formally lifted all restrictions related to covid over the weekend, which initially supported risk-on sentiment in the markets. But comments from Fed officials later in the day completely reversed that situation. It's just an example of where the balance of influence is, when it comes to the key data coming up this week. China inflation is more important than it appears Effectively, China is the world's manufacturing center. If production costs increase for Chinese firms, they will end up pushing through the supply chain to the rest of the world. With China under restrictions for the last several months, productivity has been constrained. Meanwhile, the government has been spending in order to prop up the economy. This puts China in a similar situation as the rest of the world that is experiencing high inflation. China's lifting of restrictions, on the other hand, could help stop inflation from getting off the ground. But that depends on whether global demand remains sufficiently resilient. Inflation is the product of an imbalance between the money supply and the amount of productivity. If the money supply is expanded, and productivity increases to match, then inflation could be stopped. But, if the world slips into an expected recession this year, then Chinese productivity could falter, creating inflationary pressures. Since firms buy products months in advance, the evolution of Chinese CPI over the coming months could give some insight into a pending recession, and how bad it could be. Read next: Damage to the crypto industry increased by almost a half in 2022 | FXMAG.COM What to look out for China's inflation rate is expected to accelerate to 1.8% from 1.6% prior. This is still below the PBOC's 2% target, which means the government could continue to provide stimulus for the domestic economy. Meanwhile, across the Pacific, US CPI is expected to continue its rapid deceleration, forecast at 6.5%, down from 7.1% prior. After being caught by surprise for two months in a row, it seems economists are being more aggressive in their forecasts for slowing inflation. Core inflation is also expected to come down, but not as fast: It is forecast at 5.7%, down from 6.0%, still almost triple the Fed's target. What it all means What matters more to the markets is the core figure because that's what matters more to the Fed. Initial optimism that the Fed might not raise rates as much because inflation has come down is now facing a dose of reality as core inflation remains 'sticky'. That was reflected in comments from Fed officials yesterday, who both insisted that the terminal rate will be higher than what the market expects. Even if headline inflation comes down substantially, unless core inflation surprises to the downside, investors could start to bet on further rate hikes from the Fed.

Investors remain in an upbeat mood going into tomorrow’s US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates. Fed Chair Jerome Powell may have refrained from commenting on the monetary policy outlook on Tuesday but the chances are he wouldn’t have said anything investors would have liked even if he had addressed it. It’s been clear from other commentaries that policymakers are sticking to the hawkish script. Another good inflation number tomorrow could change that as the trend has already been very encouraging and the jobs data that appeared to throw a spanner in the works last month has since been revised out. From an investor perspective, it would take something pretty terrible tomorrow – the inverse of what we were treated to on Friday – to really rock the boat. Read next: InPost delivered 44% more parcels year-on-year. Stock price increased significantly| FXMAG.COM Building confidence Bitcoin is missing out on today’s risk rally but traders will be relieved by how the last couple of days have gone. It’s back above $17,000 and suddenly the mid-December peak doesn’t look too far away. Friendly newsflow and a solid CPI number tomorrow could help it gain some momentum from here but I remain sceptical about how much upside can be achieved in an otherwise hostile environment. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. All eyes on the inflation report - MarketPulseMarketPulse

The Yen is in focus today as the BoJ reportedly investigates ultra-loose policy side effects. Inflation is today's other main focus - US numbers of course, but also Indian and Chinese CPI.   Source: shutterstock Macro outlook Global Markets: Wednesday saw a return of cautious optimism in markets, with US stocks opening higher and then making further gains into the close. That resulted in a 1.28% gain for the S&P 500 and a 1.76% gain for the NASDAQ. Chinese stocks were a bit more circumspect. The CSI 300 was almost flat on the day (-0.19%) while the Hang Seng index rose just less than half a per cent. All of this took place on a day with little macro content to bite into. Bond markets were steadier after their recent gyrations, though we wouldn’t bet on the calm lasting. 2Y US Treasury yields retreated by 2.9bp, while the 10Y yield fell 8bp to 3.53%. EURUSD continued to ease upwards in this environment. It is now at 1.0766. Other G-10 currencies were also mainly a little stronger. The AUD is now at 0.6915, the JPY has opened sharply lower this morning at 131.78 on the news that the Bank of Japan (BoJ) will review the side effects of their ultra-loose policy. And Cable has pushed back to 1.2162. For the Asia FX group, Wednesday was a mostly positive day, led by the THB and IDR. There were small gains elsewhere, though the KRW slipped by 0.18% to 1245.99. G-7 Macro: December inflation data for the US will dominate markets later today. The consensus anticipates a small (-0.1pp) decline in the headline price level in December, which will reflect the further declines in retail gasoline prices over the month (amongst other things). That will take the headline inflation rate down from 7.1% to only 6.5%. Still high, but way off the peak of 9.1% back in June last year. Core rates are also expected to decline and should fall to 5.7% from 6.0%. If we get these outcomes or more, then we would anticipate risk assets rallying and the USD weakening. The bond reaction is less clear. The obvious move would be lower yields, but the interaction with equities could deliver something else. India: December inflation is released later tonight. Our own forecast is in line with that of the consensus, namely for inflation to remain at approximately 5.9%YoY, so just within the Reserve Bank’s inflation target range of 4%+/-2%, and below policy rates which are currently 6.25%. This outcome would stem from a more-than 0.2pp decline in the price level. But weakness in prices last year at this time will prevent this from lowering the inflation rate, at least for now. China: Inflation should continue to be mild in December given the high number of Covid cases after the sudden removal of most Covid measures. Similarly with PPI. Metal prices have increased in January so far, as the government is now allowing real estate developers to get funding from the market. Due to our expectation of a gradual pick up of activity after reopening, we don't expect there will be any inflation pressures in 1H23 for China. Read next: Czech Republic: CPI inflation hits 15.8%, noticeably less-than-expected| FXMAG.COM What to look out for: US and China inflation reports later in the week Japan trade balance (12 January) Australia trade balance (12 January) China CPI inflation (12 January) India CPI inflation (12 January) US CPI inflation and initial jobless claims (12 January) Fed’s Harker gives a speech (12 January) South Korea export price index and BoK decision (13 January) US University of Michigan sentiment (13 January) Fed’s Bullard gives speech (13 January) China trade balance (14 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US stocks initially rallied as inflation continues to ease and as Fed members are clearly signaling a smaller tightening pace going forward.  The dollar also headed lower as a subdued inflation report should let the Fed slow their hiking pace again. It became clear fairly quickly that stocks would not hold onto initial gains as we will likely remain being data-dependent going forward. The labor market is still hot and much of the relief we saw with energy prices appears to be going away this month. CPI Wall Street is feeling more confident about another downshift in tightening by the Fed after a pivotal inflation report showed pricing pressures continue to cool. Disinflation trends are clearly intact as cheaper energy costs helped deliver the first month-over-month decline in 2 ½ years.  The headline CPI index cooled from 7.1% to 6.5% as gasoline prices tumbled. Gasoline prices fell 9.4% on a monthly basis and declined 1.5% from a year ago. New and used vehicles also posted declines from a month ago, while shelter and apparel posted strong gains. Shelter prices take the longest to cool, so many traders are not too worried about the 0.8% monthly gain. As expected, core CPI on a monthly basis edged higher for a modest 0.3% gain. Inflation isn’t broadly coming down, but it is cooling as the economy starts to feel the impact of the Fed’s earlier rate hikes. Claims The Fed almost had a perfect economic day, but weekly jobless claims continues to support the idea that labor market will keep wage pressures alive. Initial jobless claims were little changed after the prior week saw a modest revision lower. Claims fell 1,000 to 205,000, verse an expected increase to 215,000. Everyone is expecting claims to rise but seasonality typically distorts this data set in January. Until we see strong signs the labor market is cooling, the Fed will keep suggesting a rate hike could be coming. Read next: At the moment, we see numerous factors that have a negative impact on S&P 500 and Nasdaq Composite – lowering money supply in the US and increasing interest rate environment to name a few| FXMAG.COM Fed Yesterday’s Fed comment by Collins that she’s leaning toward supporting a quarter-point interest rate hike is looking like it could become the consensus view. Fed’s Harker also joined the 25 bp pace camp and signaled that they could raise rates a few more times this year.  Harker’s comments are what moved the market as it clearly outlines what the Fed’s path playbook will be for the rest of the year.  The Fed appears poised to deliver a 25 bp rate hike at the February 1st meeting, then be data-dependent for the February and March meetings.  Oil Crude prices extended gains after the dollar weakened as inflation slowed for a sixth straight month.  This inflation report supports the idea that the Fed could be close to done with raising rates soon and that the US economy might avoid or see only a shallow recession.  Oil has been rallying on China’s reopening momentum and now that they stopped reporting COVID tally data, traders are focusing on satellite images. China could face a difficult surge over the Lunar New Year holiday period, but for now energy traders are locked into the potential upside risks to demand.  WTI crude has initial resistance at the $80 a barrel level and that could hold as the weaker dollar trade might have been exhausted.  Gold Gold prices tested the $1900 level after inflation cooled again and confirmed what everyone was already thinking the Fed would do going forward.  Gold has been steadily climbing since November, but it could be running out of momentum right now.  The dollar might be poised for a short-term rebound that could weigh gold down.  Gold needs to have a daily close above the $1900 level to pave the way for another move higher.  Bitcoin Bitcoin made a run towards the $18,500 level after inflation slowed for a sixth straight month.  The nearing of the end of Fed tightening gave risky assets an initial boost, but that is quickly fading away.  Bitcoin was unable to break the $18,500 barrier, which suggests price might remain trapped in the trading range that has been in place over the past couple of months.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Volatile session after another cool CPI report, Fed’s Harker/Collins support another downshift, Claims suggest labor still too strong, Oil rallies on weaker dollar, Gold tests $1900, Bitcoin nears $18,500 - MarketPulseMarketPulse

Yesterday's US CPI report for December, while positive for the narrative that inflation is falling back sharply, as well as reinforcing the belief that the Fed will implement another downshift in the pace of their rate hiking cycle to 25bps, also presents the FOMC with a problem. It is welcome that headline inflation has fallen back again, along with core prices, however given that most of the decline came as a result of sharp declines in gasoline prices, there is a risk that the market is missing the wood for the trees and becoming complacent that this trend can continue. The markets still appear to be pricing the prospect of a rate cut this year, with the sharp fall in 2-year yields presenting a huge problem for the central bank's credibility in not allowing financial conditions to loosen too much. If that were to happen inflation could well take off again, and while Philadelphia Fed President Patrick Harker, who is a voting member, said that a step down to 25bps was now appropriate, we haven't heard any Fed official argue for a terminal rate that is anywhere below 5.25%. Richmond Fed President Thomas Barkin was slightly more equivocal, saying that inflation was still way too high, while also arguing that the Fed can afford to slow the pace. St. Louis Fed President James Bullard said he was still in favour of getting rates above 5% as soon as possible and front-loading rate hikes, in a clear sign that splits were starting to open up about the future size of a move in February. The market appears to have already made up its mind that they are getting 25bps, with the potential for a pause in March, which at this point seems somewhat premature with such a tight labour market. Read next: CMC Markets' Michael Hewson comments on markets and Forex pairs EUR/USD, GBP/USD, EUR/GBP and more | FXMAG.COM Nonetheless the fact that inflationary pressure has continued to slow also had a positive effect on markets in Europe which continued their strong start to the year yesterday. The FTSE100 had yet another strong session and has risen by over 4.5% since the start of the year buoyed by strong gains from retailers and housebuilders, as the UK blue chip index looks to close in on the record highs of 7,903 set back in 2018, briefly pushing above 7,800 and, closing at a 4-year high. The DAX also had a strong session, closing above 15,000 for the first time since February last year, The strong start to the year appears to be a result of a combination of falling prices, warmer weather, and better than expected trading statements from a host of companies, after the widespread pessimism that characterised a lot of the narrative in the lead up to Christmas. Of course, challenges still remain, not least what happens to commodity prices as the Chinese economy reopens. This morning's China trade numbers merely serve to showcase the damage done by the various restrictions, lockdowns, and the relaxation that caused the virus to let rip in December. This decision to let the virus rip through a largely unvaccinated population is likely to have consequences over the next few months, which could act as a brake on Q1 economic activity, as we look towards Chinese New Year at the end of this month. As for the December trade numbers, exports were expected to slow by -12%, and imports set to decline by -10%. Today's actual numbers came in at -7.5% for imports and -9.9% for exports, more or less guaranteeing an economic contraction for the Chinese economy in next week's Q4 GDP numbers. While the numbers were slightly better than expected and will improve in January they still point to an economy that is experiencing with significant economic disruption as a result of the virus. This morning we get the latest November GDP numbers for the UK economy, which are expected to point to the UK economy already being in a modest recession. With the economy contracting in Q3, it is quite likely we might see a further contraction in Q4. Monthly GDP in October rose by 0.5%, although on a rolling 3-month basis the economy contracted by -0.3%. This rolling 3-month figure isn't expected to change in this morning's November numbers with another figure of -0.3%, while the monthly number is expected to decline by -0.2%. All sectors of the economy are forecast to show a contraction in November, manufacturing and industrial production are expected to slow by -0.2%, construction output by -0.3% and index of services of -0.1%. This is perhaps why the pound has underperformed in recent days, in that markets feel the Bank of England doesn't have as much scope to raise rates given how fragile the UK economy appears to be, with both the Federal Reserve and the European Central Bank considered to have more headroom. EUR/USD – moved through the June highs at 1.0787, opening up the prospect of a move towards 1.0950 which is a 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. GBP/USD – moved above the 1.2200 area, but the rallies aren't convincing, despite the recovery off 1.1830/35. The next big resistance lies at the 1.2350 area. We need to hold above the 1.2000 area for further gains to unfold. EUR/GBP – looks set for a move through the 0.8870/80 area, which could see a move towards 0.9000. Support remains at the lows this week at 0.8770/80 area. A move below 0.8770 opens a move back to the 50-day SMA at 0.8700. USD/JPY – the move below 129.50 looks set to see further losses towards 126.50 which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Resistance remains back at the highs of last week at 134.80. Above 135.00 targets a move towards 138.00. FTSE100 is expected to open 12 points higher at 7,806 DAX is expected to open unchanged at 15,058 CAC40 is expected to open 3 points higher at 6,978 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. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination

US inflation shows price pressures are easing, yet in an environment of a strong jobs market, the Federal Reserve will be wary of calling the top in interest rates. A 25bp hike in February is likely with a further 25bp in March. Inflation will slow even more meaningfully in 2Q though, with the prospects for 2H rate cuts looking strong as recession bites hard Source: Shutterstock Inflation clearly slowing December US CPI has come in exactly in line with expectations at -0.1%MoM/6.5%YoY for headline and 0.3%MoM/5.7YoY for core. The deceleration continues after headline had peaked at 9.1% year-on-year in June and core at 6.6% YoY in September. We still aren’t below the 0.17% month-on-month threshold that over time would get us to the Fed’s 2% YoY target, but the last three months of data are a notable step down from the 0.5-0.6% MoM average seen through the second and third quarters of 2022, giving the Fed justification to raise rates by 25bp from now on. Core MoM inflation readings and the key 0.17% MoM threshold to get to 2% Source: Macrobond, ING Shelter remain the main upside influence, but that will soon change Shelter remains strong at 0.8% MoM, but with house prices having fallen through the second half of 2022 and rents now topping out nationally, that will slow rapidly from the second quarter of this year onwards. New (-0.1% MoM) and used vehicles (2.5%) are falling and that will intensify in the months ahead as demand falters and production continues to rise thanks to improved supply chains. Medical care (+0.1%) will also remain depressed by the BLS medical insurance cost calculations through to September having risen 0.4-0.8% MoM pretty consistently through 2022. Zillow observed monthly rents $ Source: Macrobond, ING   The Fed has emphasised services ex shelter given the importance of wage costs in what remains a tight jobs market. The story here looks fine too with airline fares falling and recreation rising just 0.2% MoM with education/communication up 0.1% MoM. Apparel was the strongest component outside housing, rising 0.5%. As such it looks as though housing is the main issue keeping core CPI above that important 0.17% threshold. That will soon change so we believe there is enough here for the Fed to opt for a 25bp hike in February – Fed voter Pat Harker suggested such a move “will be appropriate going forward” immediately after the release. Nonetheless, given the strength of the jobs market, officials will remain cautious and likely heavily hint at a further 25bp hike in March. 5% Fed funds top by March We think that will mark the top for rates (5% Fed funds ceiling) with housing, vehicles, medical and weak corporate pricing power allowing inflation to moderate more significantly through the second quarter. In this regard, the National Federation of Independent Business produces a series for the proportion of businesses expecting to raise their prices over the coming quarter. It is collapsing as worries about the economy intensify. The chart below points to core inflation (both PCE deflator and core CPI) dropping to somewhere between 2-3% YoY by late summer. NFIB survey points to steep decline in core inflation pressures over the summer Source: Macrobond, ING But meaningful rate cuts in the second half are our base case With both the manufacturing and service sector ISMs in contraction territory, the National Federation of Independent Business optimism survey below the low point hit in the pandemic and the Conference Board’s measure of CEO confidence at its weakest level since the depths of the Global Financial Crisis the prospects for the economy are not looking good. As such we are strongly of the view that with inflation slowing rapidly and recession looking inevitable the second half will witness meaningful rate cuts, possibly as much as 100bp. Read this article on THINK TagsUS Interest rates Inflation Federal Reserve CPI Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

After months of inflation coming in way above the Fed's target, the latest releases show a different trend. US monthly CPI figures for December showed a drop in prices, largely aided by energy prices. Yesterday, producer prices came in much more negative than expected. If inflation is bad, then the opposite would be good, right? Not so much. The opposite of inflation is deflation, and it can be just as bad for the economy as inflation. Particularly in the case of the US, where the Fed has never had to deal with runaway inflation. High inflation, yes; but hyperinflation like experienced in Europe in the last century, for example, has not happened. What the Fed did have to deal with up until the US left the gold standard, were bouts of deflation. And, as such, the Fed tends to be more worried about deflation than inflation. The warning signs More immediately for traders, however, deflation is an important warning sign. Increasing economic activity typically translates into growing prices; and the reverse, slowing economic activity typically translates into deflation. Looking at yesterday's data, the surprise deflationary PPI came along with a surprise drop in retail sales and industrial production. The data was expected to be negative, but it was a lot more negative than expected. A similar vein is expected in the coming data to be released later today and tomorrow relating to the largest component of the American economy: Housing. Home prices have been on the backfoot as rising interest rates have made buying houses much more expensive. But, over the last few weeks, interest rates have been coming down, including the average mortgage rate. What are the projections Despite the lower costs to buy, housing starts are expected to continue to fall, forecast at 1.36M compared to 1.43M in November. Typically in the winter, homes sell slower, but the expected slowdown is much faster than what is typical of the season. Existing home sales are also expected to continue its descent to 3.96M compared to 4.09M in November. In the wake of the latest data, the dollar slid compared to other pairs as the US benchmark bond rates slid, hitting the lowest level since last September. The greenback was at its worst level since May of last year. Which brings us back to the potential Fed reaction. Which way are we going? This shift in price trends is happening in the middle of a market debate over whether the Fed will raise rates and keep them high, or there will be a pivot and the Fed will cut rates. Traditionally, the Fed is much quicker to cut rates to head off potential deflation than it is to raise rates to counter inflation. In the end, the Fed does want there to be some (controlled) inflation. For now, the deflation has shown up in the headline CPI figure and PPI, which aren't the key metrics used by the Fed to determine rates. Some volatility in the headline inflation number is understandable, particularly when the Fed is trying to lower inflation. But if this is the first sign that negative inflation numbers will become the norm, then it could increase the chances of a Fed rate cut in the near future.

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. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination

Let's see what Peter Garnry, Head of Equity at Saxo Bank, said about trends in AI investement in 2023 and Google stock expectations amid US Justice Department second antitrust lawsuit against the company. What are the trends in AI investment in 2023? Any specific industry investors are seeking?  AI as a technology has many different branches. The self-driving branch of AI has seen much lower investments over the past year as the technology has been slowing down remaining far from Level 5 autonomy driving. Other branches of AI like the large language models such as the newly released ChatGPT are seeing massive investments and Microsoft's $10bn investment underscores this.   Read next: GBP/USD Pair Is Struggling To Extend Previous Highs, EUR/USD Pair Continued Its Gains| FXMAG.COM The talk about ChatGPT and its potential threat to Google's search engine business is real and has increased the investment risk for Alphabet, but Alphabet's AI unit DeepMind has already proclaimed that it will release this year its competing product to ChatGPT. The technology is in itself revolutionary, but it is patent protected and large language models (LLM) can be copied, which is what DeepMind is pursuing. The real challenge is the engineering part in order to scale fast queries and responses on top of the huge costs of training the LLM. The jury will be out for a long time whether Microsoft overpaid for this technology. What are the expectations on the Google stocks moving forward, in the context of the U.S. Justice Department second antitrust lawsuit against it? Alphabet is still a strong business that has doubled its revenue and profits since 2018. Antitrust lawsuits are generally part of the operating environment for large US technology companies and as such it is not something that worries investors. What worries investors about Alphabet is the general slowdown in the economy that will hit the online advertising business with lower prices, and then ChatGPT from OpenAI which has the potential to uproot Google's search engine business. Microsoft's recent $10bn investment into OpenAI and its ChatGPT technology is seen as an offense move against Alphabet and its Google business. However, Alphabet's AI unit DeepMind has already proclaimed that it will release its competitor to ChatGPT so the impact from ChatGPT on Alphabet's businesses might be limited, but the risks have definitely gone up for investors in Alphabet.

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.

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)

This week is like a typical action movie - it begins with important, but not that striking events to gain momentum in time. First signs of the thrilling atmosphere will be earnings of McDonald's and other big names, but on Wednesday, it's the time for the first possible game-changer this week - the Fed interest rate decision. We reached out to Michael Hewson, Chief Market Analyst at CMC Markets, to discover his point of view, as for the first time since summer, the Fed rate hike of 25bp is indeed cemented. Is he of the opinion there will be no real market reaction though? Michael Hewson (CMC Markets): I am surprised at how complacent markets are about this weeks Fed decision - there seems to be this view that the Fed is close to signalling a pause like the Bank of Canada last week. If anything, the recent US data suggests that the Fed could easily get away with another 50bps move which is something I think they should do. With the Nasdaq 100 up over 11% year to date, financial conditions are too loose with the market pricing in rate cuts by year end. We are a long way from signalling that the fight against inflation is done and could see a hawkish surprise this week, especially if Powell pushes back on recent moves in bond and equity markets. Read next: Glovo Is Planning To Layoff 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM We also asked Michael about the situation on the British market. FXMAG.COM: Despite turbulent times of British economy FTSE 100 is close to reach new all-time high - what could be the effects of BoE interest rate decision on Thursday? Michael Hewson: There is unlikely to be much effect from this week's Bank of England meeting on the FTSE100, given that most companies in the UK index do the bulk of their business overseas.

Let's hear from Alex Kuptsikevich, Senior Financial Analyst at FxPro, who answers FXMAG.COM team questions. We asked Alex about Australian CPI, UK PMIs, 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? On average, market analysts expect inflation to accelerate to 7.5%. It is better to be prepared for lower data and a slowdown in CPI to 7.2-7.3%. The Australian dollar has risen more than 14% from its October lows, helping to reduce external price pressures. Also worth noting is the 14.6k drop in employment in December and the stubborn unemployment rate of 3.5% for the past six months. In other words, the labour market needs to do more to accelerate inflation. At the same time, the construction market has been in steady decline since October 2021, which is a significant negative signal for the economy. As in most developed countries, such a disposition could already be working towards lower annual price growth. If we are right, AUDUSD could give back some of January's gains as the market reassesses the outlook for monetary policy. The weak data reinforced the double top formation signal in the GBPUSD The UK PMI indices recorded another month of declining activity. However, the rise in the manufacturing PMI from 45.3 to 46.7 suggests that the rate of decline is slowing. The services PMI fell from 49.9 to 48.0, clearly indicating that the recession is spreading to the broader economy. The CBI's industrial orders balance was also a nasty surprise, falling from -6 to -17, the lowest since February 2021. The weak data reinforced the double top formation signal in the GBPUSD, which is turning lower for the second time since mid-December as it approaches 1.2450. Traders are likely betting that the Bank of England will struggle to maintain the pace of policy tightening in light of the economic data released. This is not for nothing, given the reversal in the inflation trend. Read next: The Aussie Pair Is Above 0.70$, GBP/USD Pair Lost Its Level Of 1.24$| FXMAG.COM The GDP report has a good chance of delivering an unpleasant surprise, pushing the dollar further down The impact of US GDP on the markets isn't a trivial issue. Much depends on the balance between growth and inflation. If US growth comes in at or above expectations, the Fed may have more incentive to keep raising rates for longer than the markets are currently pricing in. This would be negative for equities and oil but positive for the dollar. Such a market reaction is long overdue. However, it is still too early to confidently bet on the Fed's hawkishness to take on the entire market. The GDP report has a good chance of delivering an unpleasant surprise, pushing the dollar further down. Still, it is highly likely to push equities and metals higher in the short term. 

The financial services outlook includes more oversight by the US Congress and states. Regulations and executive actions will likely affect housing policies, digital assets, and ESG (Environmental, Social and Governance) investing in 2023.     Play Video The 2023 US Congress will shift global investment policies from both the Democratic-ruled Senate and the Republican-ruled House. With a 51-49 Senate, the Democrats hold a true majority and can lead more aggressively. To discuss the US regulatory landscape, Drew Carrington facilitated a policy discussion with Dean Sackett of Polaris Capital, and Dan Murphy and Andy Lewin of BGR Group. I wanted to share their outlook for financial services policy in the year ahead: More oversight throughout the investment industry for Environmental, Social and Governance (ESG); Diversity, Equity and Inclusion (DEI); and other high-profile, cultural investments, as part of Republican policy. The Investor Democracy is Expected (INDEX) Act will receive new light. They think Senate Democrats will likely push back, while asset managers appear whipsawed between the two political parties. Senate Democrats will try to hold financial institutions, asset managers and others to any NetZero emissions pledges that they previously made. Democratic states (e.g., New York, Illinois, and California) have started pushing back against ending the NetZero pledges. Regulators will issue rules, executive actions, and resistance against existing policies and laws. The increasing regulatory environment with relevant agencies will likely exercise and possibly exceed their maximum authority, including the Federal Communications Commission, the Department of Labor, Consumer Financial Protection Bureau, Department of Labor, Department of Treasury, and the Securities and Exchange Commission (SEC). Cryptocurrency (crypto), digital assets, and housing will likely rank top of the agenda for the Senate Banking Committee. The SEC will likely finalize rules pertaining to crypto, cyber notification, and climate disclosure in 2023. The Financial Stability Oversight Council could designate crypto-exchange chairs and others as systemically important and subject these entities to greater regulation and requirements. Opportunities will arise in alternative and retail investments, and in the capital formation space. The Equal Opportunity for All Investors Act of 2021 will help expand who can qualify to invest in certain private offerings and securities. Read next: Tracy Chen (Brandywine Global) talks agency mortgage-backed securities| FXMAG.COM From the farm bill to raising the federal debt limit, the group expects Senate Democrats to largely align with President Joe Biden. Divided government requires bipartisan agreement to progress policies and fund legislation. This power dynamic last occurred in 2011 when we experienced the 2011 Debt Ceiling Crisis and its financial and macroeconomic impacts. The 2023 outlook includes increasing monitoring for possible legislative and regulatory changes that guide how we serve our clients, invest in portfolios, and respond to regulatory situations. Stephen Dover, CFAChief Market Strategist,Franklin Templeton Institute What Are the Risks? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabilities; however, not all strategies are managed to “ESG” oriented objectives. Investments in alternative investment strategies are complex and speculative investments, entail significant risk and should not be considered a complete investment program. Depending on the product invested in, an investment in alternative investments may provide for only limited liquidity and is suitable only for persons who can afford to lose the entire amount of their investment. Buying and using blockchain-enabled digital currency carries risks, including the loss of principal. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk. Among other risks, interactions with companies claiming to offer cryptocurrency payment platforms or other cryptocurrency-related products and services may expose users to fraud. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. Investing in cryptocurrencies and ICOs is highly speculative and an investor can lose the entire amount of their investment. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies. There is no assurance that any estimate, forecast or projection will be realized. Past performance does not guarantee future results. This material reflects the analysis and opinions of the speakers as of December 8, 2022, and may differ from the opinions of portfolio managers, investment teams or platforms at Franklin Templeton. It is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the speakers and the comments, opinions and analyses are rendered as of the date of this podcast and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, security or strategy. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy. This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. Franklin Templeton (FT) does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact your results. FT cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Source: Quick Thoughts: US financial services policies shift to rules, regulations, and executive actions | Franklin Templeton

S&P 500 refused further decline, but picture is far from impending rebound strength. One though can‘t get rid of the impression from Kashkari‘s speech (the Fed is happy about the marlet reaction to Powell‘s FOMC speech), that this stock market rally isn‘t looked at exactly rhe same way as the summer one. Still, short-term caution rules as real assets haven‘t yet recovered, and the dollar relief rally had been confirmed as having started – I‘m looking for relatively uneventful session prior to Powell‘s yet another speech – speech which would give direction for the remainder of this week, till Friday‘s consumer confidence (yes, unemployment claims are likely to come in strong. Bringing up yesterday‘s extensive analysis: (…) So, stocks are correcting, but the short-term picture is far from clear – while the defensives are refusing to decline, financials haven‘t rolled over yet (and regional banking acts still OK). Neither value nor tech reversed on rising volume, indicating that this storm could be over in a couple of days, no matter the disastrous earnings thus far (yes, AAPL and beyond the tech layoffs) bringing negative surprises to -5.3% so far. Markets aren‘t fearing a hard recession, but stocks are uneasy – in the very short-term.The stunner creeping in is that the Fed somehow pulled it off, that soft landing – and job market data were taken as a proof, which however has consequences for services inflation even commodities, precious metals are nicely consolidating. Had been, till Friday – but that appears as a buying opportunity when deterioration in economic data sends yields and the dollar down. Summing up, I continue to think the soft landing thesis would be disproved by end of Q2 2023, and that a mild recession is ahead. Read next: The Court In Munich Decided In Favor Of BMW| FXMAG.COM Let‘s say that the soft landing calls would come to bite back those acting on them, and that real assets (oil defended the $81-83 zone by the way, and copper is back above $4 – precious metals are waiting for USD and Fed green light, but haven‘t rolled over into a bear) will correspondingly rise once it becomes apparent that the Fed hawkish path of newly three 2023 hikes with deferred easing, isn‘t going to be without consequences / prove doable. The bond market will decide. See you on my feed later today, and throughout for the Powell speech! 4,105 – 3,995 is the key support zone, followed by 4,070 – reaching which would require bond market weakness with junk bonds leading the decline. That‘s not likely to happen now, for I view the consequences of Powell‘s speech to be rather positive for TLT, and not feeding excessively into the USD relief rally (well worth watching it with Bollinger Bands displayed, to see where the low hanging fruit was). Chart courtesy by www.stockcharts.com. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there (or on Telegram if you prefer), but the analyses (whether short or long format, depending on market action) over email are the bedrock.So, make sure you‘re signed up for the free newsletter and that you have my Twitter profile open with notifications on so as not to miss a thing, and to benefit from extra intraday calls. Thank you for having read today‘s free analysis, which is a small part of my site‘s daily premium Monica's Trading Signals covering all the markets you're used to (stocks, bonds, gold, silver, miners, oil, copper, cryptos), and of the daily premium Monica's Stock Signals presenting stocks and bonds only. Both publications feature real-time trade calls and intraday updates. While at my site, you can subscribe to the free Monica‘s Insider Club for instant publishing notifications and other content useful for making your own trade moves. Turn notifications on, and have my Twitter profile (tweets only) opened in a fresh tab so as not to miss a thing – such as extra intraday opportunities. Thanks for all your support that makes this great ride possible!

US workers are clearly feeling the strain of economic uncertainty, according to Franklin Templeton’s third annual “Voice of the American Worker” study. Franklin Templeton’s Voice of the American Worker study, now in its third year, uncovered some interesting new trends and also a reversal in others that had taken root during the COVID-19 lockdown period. One thing that’s clear is workers today are feeling more financial stress and concern, which also has implications for employers.   Our annual survey, conducted by The Harris Poll on behalf of Franklin Templeton, is connected to Franklin Templeton’s Retirement Innovation Initiative (RII), which launched in January 2020. RII’s mission is to bring together industry experts who share the same vision—improving the future of retirement in the United States. The survey respondents represent a snapshot of the US workforce: across the country, across industry, and across generations and backgrounds. Throughout the last three years, we’ve seen some evergreen trends reconfirmed year over year: Workers continue to seek improved well-being and need support in addressing existing roadblocks. A focus on well-being continues to include urgency in improving financial health with key opportunities for employer support. Workers remain more focused on financial independence than traditional retirement. There has never been a more urgent time for employers to evaluate their benefit offerings and consider ways to evolve how employee needs are supported. Below are some highlights of specific findings in our 2023 survey, analysis and possible action items for employers. Financial stress and concerns are accelerating in the current economic climate  Financial independence, plans for retirement, and feelings of job stability are all in jeopardy as American workers grapple with economic uncertainty. Our Voice of the American Worker survey found Millennials and women feel especially insecure. Survey findings: Two-thirds of American workers (66%) surveyed said they are experiencing negative effects from the current economic environment. Nearly a third (30%) say it’s affecting their sleep, a quarter (25%) report strained relationships and nearly a quarter (22%) feel distracted at work. And as American workers grapple with economic uncertainty, 42% of workers said they are highly stressed by their financial health, up from 35% last year. Survey question: Given the current economic environment, which of the following applies to you? (Select all that apply) (n=1,000 total)This study was conducted by The Harris Poll on behalf of Franklin Templeton from October 17 to October 27, 2022, among 1,000 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated.  Action item for employers: With the stress of a potential recession on the horizon, it’s critical for employers to check in with their employees to see how they’re feeling and offer comprehensive, personalized support. When it comes to employee benefits, more American workers want access to a financial professional than last year (+7%), as part of their employee benefits. Over half (58%) show interest in speaking with a financial professional. The current economic climate is delaying and altering retirement plans It’s no surprise that given financial stress has increased, more workers are planning to delay retirement. The good news is that workers are more likely to contribute to their retirement, delay it or reexamine providers, and less likely to stop saving altogether or borrow against their retirement plan. Read next: EUR/USD Pair Is Belowe $1.07, USD/JPY Pair Is Back To 131 And GBP/USD Pair Is Slightly Above $1.21| FXMAG.COM Survey findings: Individuals now plan to retire at 65, a jump of three years due to the current economic situation. Six in 10 American workers (61%) feel their retirement plans are in jeopardy. Further, 73% of employees report that soaring living expenses have changed the way they envisioned their retirement. Most Americans (58%) plan to work in some fashion during their retirement, an increase of 6% from two years ago. Survey question: How much do you agree or disagree with the following statements? (Top 2 box: somewhat and strongly agree, n=1,000 total) (n=1,000 total)This study was conducted by The Harris Poll on behalf of Franklin Templeton from October 17 to October 27, 2022, among 1,000 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Action item for employers: We see some behaviors of concern revealed, such as borrowing against one’s retirement plan or moving money out of plan to cash. We think this is an ideal time for employers to evaluate their total benefit offering with some tools just recently made more readily available via SECURE 2.0—like emergency savings, loan provisions and student loan debt repayment. Employees are looking for additional income during the current economic environment and are less likely to cut back on their retirement savings, which is good news. However, their higher expenses are causing stress and could impact their work. If employers are unable to increase employees pay, they should consider offering incentives for good financial behaviors.  The Great Resignation turns into The Great Return The “Great Resignation” was a buzzword during the COVID-19 lockdown years, but amid today’s uncertainties, employees seem to be looking more for stability. Survey finding: According to our Voice of the American Worker study, 66% of employees said they want to stay put with their current employers, and 89% of workers said that they are likely to stay at their current job in the next 12 months. We are also seeing evidence of a “Great Return,” as 37% of individuals who had left jobs said they were considering going back to their prior employer, and 47% said one of their colleagues came back to a job they had left in the past five years. Survey question: How much do you agree or disagree with the following statements? (Top 2 box: somewhat and strongly agree)Survey question: How likely are you to stay at your current job in the next 12 months? (n=1,000 total)This study was conducted by The Harris Poll on behalf of Franklin Templeton from October 17 to October 27, 2022, among 1,000 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Action item for employers: We think there is a huge opportunity for employers to take a more holistic approach to benefits and support. The impact on sentiment is notable, as employees said it has an impact on how they feel working where they work, how much effort they put in while at work, and how long they’ll stay at their job. It’s important to point out that these feelings are emphasized for younger generations. Well-being and the need for a holistic approach Our survey revealed that American workers are turning to employers for more personalized support in improving well-being across all dimensions. Survey findings: Assessing all financial goals together continues to be a top priority for employees, with 70% keenly interested in more holistic benefits, meaning, benefits that access all goals together. This includes not only resources and tools that address retirement, but also those that support employees in all areas of their financial lives. Seven in 10 American workers (71%) said that it matters to them that their employer addresses the current economic climate. Survey question: Which of the following financial tools or information would be able to help you navigate the uncertain economic times as you plan for your retirement? (Select all that apply) (n=1,000 total)This study was conducted by The Harris Poll on behalf of Franklin Templeton from October 17 to October 27, 2022, among 1,000 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Action items for employers: It’s no surprise that 52% of employees want “an increase in pay” which would help alleviate inflation-related stress. What’s also interesting are some of the other things they are looking to their employers to provide, such as guaranteed retirement income, a contribution to an emergency savings fund or a health savings account, funding options for their children’s education, and contributions toward debt payments. We see this as a great punch list of items for those employers looking to closely consider updates to their benefits offerings. Financial independence remains a top priority   We define financial independence as “having enough income or wealth sufficient to pay one’s living expenses without having to be employed or dependent on others” and as you can imagine, the path to achieving financial independence will not look the same for everyone. Survey finding: All in all, regardless of the current economic or workforce environment, employees continue to view financial independence as their primary north star. This year, 74% stated financial independence is their top financial concern, up from 69% in last year’s study. In addition, 81% of respondents said they are more focused on becoming financially independent. Among other concerns, the next most important was paying off debt (61%), which was up 7% since last year. That is not surprising given that US credit card debt levels just hit a 20-year high. Survey question: On a scale of 1-10, how much of a priority are each of the following financial conditions to you? Top financial concerns (n=1,000 total)This study was conducted by The Harris Poll on behalf of Franklin Templeton from October 17 to October 27, 2022, among 1,000 employed US adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Action item for employers: We as an industry and employers have a key opportunity to engage employees across the full spectrum of financial aspects and provide holistic support in helping employees reach financial independence. Three-quarters (77%) of our survey respondents said they’d be more likely to participate or contribute more to their retirement savings if there were more personalized 401(k) investment options, and they are seeking access to advice. They want access to a financial advisor, they want auto-enrollment, tax guidance, budgeting and debt guidance. For additional information, please contact the Franklin Templeton Retirement Sales Department at (800) 530-2432 or visit https://www.franklintempleton.com/insights/research-findings/voice-of-the-american-worker-survey. The Voice of the American Worker study was conducted by The Harris Poll on behalf of Franklin Templeton from October 17 to October 27, 2022, among 1,000 employed U.S. adults. All respondents had some form of retirement savings. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Findings from 2020 reference a study of a similar nature that was conducted by The Harris Poll on behalf of Franklin Templeton from October 16 to 28, 2020, among 1,007 employed U.S. adults, and findings from 2021 reference a similar survey conducted among 1,005 employed adults from October 28 to November 15, 2021.Franklin Templeton is not affiliated with The Harris Poll, Harris Insights & Analytics, a Stagwell LLC Company. Source: Financial independence remains a top priority despite employee feelings of financial anxiety | Franklin Templeton

US inflation has picked up in January 2023 on a monthly basis. The yearly trend remains to the downside. Investors are set to ignore the housing sector, where price rises are outdated. Core services inflation supports further rate hikes. Is that it? Some investors surely have these thoughts, as they brush aside minor beats on yearly inflation figures – while they see the trend as remaining to the downside. That implies a risk-on mood in markets. The most important figure is the Core Consumer Price Index (Core CPI), which rose by 0.4% MoM in January, exactly as expected. While this is a tick-up from 0.3% in December, it remains below the high 0.6% levels seen in mid-2022. Yearly underlying inflation is up 5.6%, higher than expected but below the figure recorded in December. The same yearly picture is seen for headline CPI, which slowed from 6.5% to 6.4% but came out above the 6.2% projected. Inflation is hotter than expected but trending down. That is good news for the US economy – and for stocks. I also want to emphasize that the housing sector still contributes to higher inflation despite falling rent prices. This is due to a quirk in calculations, well known to economists at the Federal Reserve (Fed). The cooling housing sector will take a few more months to reach the data. Read next: GBP/USD Pair Rose Sharply Above $1.22, EUR/USD Pair Also Rose| FXMAG.COM Inflation is falling despite the rent factor – and has more room to fall without it. Perhaps the strongest argument to expect optimism in markets stems from the "super core" inflation – a calculation of the "non-shelter core services" factors. These exclude energy, food, rental, and other volatile factors, going beyond the basic core exclusions of food and fuel. This super-core is up only 0.27% in January, down from roughly 0.40% in December. Inflation is falling – and everybody is noticing it. The Fed is still set to raise rates in March, and the labor market is on fire. Nevertheless, even if employment is steaming hot, inflation is cooling. That is good news for the US economy, the world and stock markets. For the US Dollar, it means ongoing pressure.

US core inflation continues to track above the 0.2% month-on-month prints required to get annual inflation down to the 2% target over time, but at least the annual rate continues to slow. We remain optimistic that inflation can get close to 2% late in 2023, largely through flat to lower prices for shelter and a squeeze on corporate profit margins Shelter prices continue to remain elevated but should decline later this year and help ease CPI inflation 5.6% Annual US inflation (excluding food and energy)   Inflation continues its slow grind lower US consumer price inflation rose 0.5% MoM headline and 0.4% MoM at the core level (ex food and energy) in January, which was exactly in line with expectations. The year-on-year rates slowed to 6.4% (from 6.5%) and 5.6% from 5.7% respectively, which was a touch higher than expected and reflects recent revisions, but at least the disinflationary (slower inflation) trend remains in place. Nonetheless, we continue to track above the 0.17% MoM increases that over time would get us to the 2% target and with the unemployment rate at 50+ year lows the Fed will continue to hike rates at the March Federal Open Market Committee meeting and potentially also May. Composition of US inflation (YoY%) Source: Macrobond, ING Cars and rents were where the surprises were expected The focus ahead of time was on used cars and shelter. Those looking for a potential upside surprise pointed to used cars given movements in used vehicle auction prices pointed to an increase, but instead we saw a 1.9% MoM fall, so there is the potential of a big rebound next week. However, the re-weighting of the basket of goods and services means that this component has less influence this year (dropping from a weight of 3.624% in 2022 to 2.67% this year). Read next: Bartosz Milczarek, CEO at Cryptiony: Customers settle the crypto tax in annual returns, so our business model is also based on annual subscriptions | FXMAG.COM As for housing, the fall in house prices and the topping out of new rents led some to look for a softer core MoM% figure (see chart below), but in the end shelter remained high, rising 0.7% (its weight has risen from 32.9% to 34.4%). The re-weightings and the prospect of softer shelter numbers from the second quarter onwards means that we remain optimistic on the prospect of intensifying declines in the annual rate of core inflation from the summer onwards. Zillow observed monthly housing rents ($000s) Source: Macrobond, ING Services ex housing are looking less threatening Elsewhere, goods prices in general remain very soft, but there was a strong reading for apparel (+0.8% MoM), but this seems unlikely to last. Services is of more interest where recreation (+0.5%), education (+0.4%) and medical care (-0.4% MoM) offered a mixed picture. In general the story on services ex housing, which the Federal Reserve is focusing on, appears to be softening gradually. The concern being that a tight jobs market could keep labour costs more elevated and means inflation stays higher for longer, but there is nothing especially worrying here that points to the need for the Fed to ramp up its hawkishness. Corporate pricing intentions are moderating Source: Macrobond, ING Core inflation still likely to get close to 2% by year-end Moreover, we expect annual rate of core inflation to continue slowing. The National Federation for Independent Businesses reported a weaker than expected increase in small business sentiment earlier today, but one of the most interesting sub-components is the price intentions series. This is a measure of the proportion of companies looking to raise their prices in the next three months. It moved a little higher today, but as the chart above shows, weakening business sentiment has translated into more cautious pricing behaviour – companies no longer think they can raise prices with ease and consumers will just accept it. The chart has a decent correlation with annual core CPI inflation and indicates the potential for a sharp slowdown in inflation. This story, combined with housing means we continue to look for core inflation to drop to close to 2% by the end of this year, which will open the door to interest rate cuts in the second half if the activity numbers soften in line with our expectations. Read this article on THINK TagsUS Rents Inflation Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US retail sales jumped 3% month-on-month in January as warm weather encouraged people to go out and spend after harsh conditions depressed activity in December. Household incomes remain under pressure and with weather patterns normalising a correction is likely in February US retail sales rose by 3% month-on-month, exceeding estimates A strong start to the year with broad-based gains As suspected, we have a very strong US retail sales report for January with headline sales up 3% MoM versus the 2% consensus. This is the fourth biggest MoM rise in retail sales over the past 20 years. Importantly, the "control" group which excludes volatile categories and better correlates with broader consumer spending was also much stronger than anticipated, rising 1.7% MoM versus the 1% consensus. We knew autos would be strong (+5.9% MoM) given unit volume figures jumped 18%, but there were huge gains elsewhere with clothing up 2.5% MoM, general merchandise up 3.2% (within which department stores saw a 17.5% MoM jump) and eating & drinking out, which surged 7.2%. The one real surprise was the flat gasoline station sales despire prices having risen by more than 4%. US retail sales levels Source: Macrobond, ING Weather played a strong role and the risk of a February correction is high Much of this will be down to the stark contrast between the weather in December versus January. Remember that December experienced very cold temperatures with heavy snowfall disrupting travel in many parts of the nation. This also depressed spending with November and December both posting 1.1% MoM declines. Therefore we should expect a rebound in January anyway, but then very warm temperatures providing an additional stimulus that tempted more people to leave their homes and spend. Read next: Fed expectations have changed a bit. A record-breaking Federal Fund Rate can affect stock market| FXMAG.COM However, we have to be a little cautious that with weather patterns returning to more seasonal norms in February we could get a significant correction next month - especially with household finances remaining under pressure from high inflation and slowing wage growth. Consequently, today's numbers back the case for a March and probably a May hike, but it shouldn’t push the case for Fed tightening beyond that. Read this article on THINK TagsUS Retail sales DisclaimerThis 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 (link to: https://think.ing.com/about/content-disclaimer/)

After consumer prices, US producer prices delivered another hawkish surprise. PPI rose by 0.7% in January, impressively stronger than the expected +0.4%. The annual price growth rate slowed from 6.5% to 6.0%, against expectations of 5.4%. It is worth disregarding the slowdown in the annual inflation rate, as it is due to the high base effect of the previous year, while the monthly increase remains above the historical average. Producer prices are a couple of months ahead of consumer prices, so today's release is a crucial hawkish signal for the Fed to continue raising rates without letting inflation expectations hang in the balance. Aside from high inflation, the labour market also needs more reasons to take a breather. Initial jobless claims remained below 200k for the fifth week in a row, complementing the 3% rise in retail sales in January. Read next: Crypto industry to shift to stablecoins pegged to other fiat currencies? | FXMAG.COM Overall, this mix of data suggests that the economy is in good shape. Still, it now risks triggering a reassessment of the monetary policy outlook, which is harmful to the markets.

  The dollar and its DXY index have been rising since the opening of today's trading day. As of writing, DXY futures (CFD #USDX in the MT4 trading terminal) were trading near 104.20, while remaining in the ranges between 104.60, 102.39, 105.50, and 100.68. Below the key resistance level 104.70 (200 EMA on the daily CFD #USDX chart), the DXY index remains in the bear market zone.     The breakdown of support levels 103.85 (144 EMA on the daily chart) and 103.71 (200 EMA on the 1-hour chart) may become a signal for the resumption of short positions on DXY with targets at local support levels 101.50, 101.00. Read next: The AUD/USD Pair Remains Under Selling Pressure, The GBP/USD Pair Is Below 1.21 Again| FXMAG.COM In case of further decline, the targets will be the key support levels 100.00 (144 EMA on the weekly chart) and 98.80 (200 EMA on the weekly chart). The breakdown of the long-term support level 93.30 (200 EMA on the monthly chart) will confirm the final return of the dollar and its DXY index to the global downward trend zone.     In an alternative scenario, after the breakdown of the resistance levels 104.70 and 105.10 (144 EMA on the daily chart), DXY will resume growth, returning to the long-term bullish trend zone. And today, market participants who follow the dollar quotes will be waiting for the publication (at 19:00 GMT) of the minutes from the Fed meeting, which ended February 1. Support levels: 104.00, 103.85, 103.71, 103.40, 102.00, 101.50, 101.00, 100.00, 98.80. Resistance levels: 104.70, 105.10, 107.80, 109.25. Trading scenarios Sell Stop: 103.60. Stop-Loss: 104.80. Take-Profit: 103.40, 102.00, 101.50, 101.00, 100.00, 98.80. Buy Stop: 104.80. Stop-Loss: 103.60. Take-Profit: 105.10, 107.80, 109.25. Relevance up to 12:00 2023-02-23 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335822

February 22, 2023  $USD, Canada, Currency Movement, FOMC, Italy, Japan, RBNZ, US Overview: The surge in US interest rates and sharp losses in US stocks sent the dollar broadly higher in North America yesterday. The $42 bln of two-year notes auctioned by the US Treasury saw the highest yield in more than a quarter-of-a-century (4.67%) and it still produced a small tail. Sterling, helped by its own surprisingly strong data, was the only G10 currency to have gained against the surging dollar. Still, no important technical levels were breached, though the greenback rose to nearly seven-week highs against the Canadian dollar. The US dollar also rose to new highs for the year against the Japanese yen before settling at about JPY135.00. Rising US rates and falling stocks are the main driver and the FOMC minutes later today are the focus. While the US economic calendar is light today, Fed speakers return tomorrow, and the data highlight is the PCE deflator on Friday. The major US equity indices lost at least 2% yesterday and are little changed today. However, global equities were dragged lower, with sharp losses in Japan, Korea, and India. Europe's Stoxx 600 is off about 0.85%, the third largest swoon this year. European bond yields are mostly 1-2 bp higher. The G10 currencies are mostly heavier, but the yen and Swiss franc are slightly firmer, while the New Zealand dollar is virtually flat despite the 50 bp hike. Among emerging market currencies, the Mexican peso continues to shine, but nearly the rest are softer. Gold is holding above yesterday's $1830 low but is not making much of a recovery. April WTI is extending its pullback for the sixth consecutive session to trade below $76. Asia Pacific The Reserve Bank of New Zealand slowed the pace of its tightening by hiking the overnight cash target rate by 50 bp to 4.75%. It continues to see a peak at 5.5%, but now it is seen in Q4 23 rather than Q3. While headline inflation is easing, the central bank argued the core rate is too high and employment is "beyond the maximum sustainable level." The RBNZ said it was too early to assess the impact from the cyclone and the fiscal response. It continues to see an economic contraction beginning in Q2 but expects it to be short and shallower. The next meeting is on April 5 and the swaps market sees about a 50% chance of another 50 bp move. The New Zealand dollar initially traded higher in response, reaching about $0.6250 from about $0.6215 but has given it back to trade little changed on the day. Japan's January services producer prices edged up to 1.6% year-over-year. They peaked last June at 2.1%, and had slowed to 1.5% pace, the lowest since Q1 22. They averaged about 2.1% in the few months before Covid struck. The inflation focus in Japan is not about service prices but goods prices, not about producer prices, but consumer prices. The national consumer prices will be released early Friday. The Tokyo CPI warns of another jump in the national figures and the median forecast (Bloomberg survey) is for a 4.3% year-over-year pace. This would be a new cyclical high and could very well prove to be the highwater mark. Next week Tokyo's February CPI will be released. It does a good job of anticipating the national figure. We look for government subsidies, the appreciation of the yen on a trade-weighted basis, and the decline in energy and wheat prices to ease price pressures. Read next: The AUD/USD Pair Remains Under Selling Pressure, The GBP/USD Pair Is Below 1.21 Again| FXMAG.COM The dollar reached nearly JPY135.25 yesterday, a new high since last December's BOJ surprise. While it has held today, the greenback found support around JPY134.55. With US rates little changed, the exchange rate is seen consolidating. For the second consecutive session, the 10-year JGB pushed above its 0.50% cap. The BOJ bought bonds and offered five-year low-cost loans to banks to buy government bonds. The Australian dollar edged closer to $0.6800, slipping fractionally through last week's low. The 200-day moving average is about $0.6805. The $0.6780 area marks the (38.2%) retracement of the rally from the middle of last October's low (~$0.6170) and is the next important chart area. The greenback rose to almost CNY6.90 today, its best level since January 4 and slightly through the 200-day moving average (~CNY6.8885). The reference rate was set at CNY6.8759, tightly against expectations (CNY6.8760). Europe In a process that is difficult to disentangle cause and effect, or perhaps as an example of reciprocal causality, the weakening euro, rising yields, and widening peripheral premiums within the eurozone go hand-in-hand. The euro has moved back toward $1.06, which it has not traded below since January 6. The 10-year German Bund yields more than 2.50% and is challenging the high from the end of last year (~2.57%), which has not been seen in a dozen years. It is a similar story with France's 10-year yield, but almost 50 bp higher. Italy's 10-year yield is approaching 4.50%. Last year's peak was near 5.00%. Spain's 10-year yield peaked at the end of last year slightly above 3.65%, an eight-year high. It moved above 3.50% yesterday. Italy's 10-year premium over Germany pushed above 190 bp yesterday for the first time in over a month. Its two-year premium widened to above 50 bp, which it had not seen since January 2. Spain and Portugal's premium over Germany has also widened, but not as much as Italy. Italy's debt burden makes it particularly vulnerable, yet there is another consideration too. Italy's 2021 and 2022 budget deficit is likely to be revised up next week when the stats office assesses the impact of the tax credits initially aimed to encourage green building renovations. The cost has been estimated to in excess of 110 bln euros. There were various elements and the one that was terminated was called "the super-bonus." It was not well-targeted and the use of tradeable (between financial institutions and businesses) helped create the environment for misuse. That said, the initiative did appear to bolster the construction sector in 2021 and helped set the stage for a broader economic recovery. It had been enacted by the coalition government led by Prime Minister Conte from the Five-Star Movement. Former Prime Minister Draghi intervened to curb some of the program's excesses, and last week the Meloni government stopped the program altogether. A key judgment call that the Eurostat may decide, is whether the tax credits are "payable" or "non-payable" which will determine how the cost will accounted; whether is front-loaded or amortized over several years. The euro peaked on Monday a little above $1.07 and has been sold to about $1.0625 today. Last week's low was slightly below $1.0615. A break of the $1.0600 opens the door to a potential move toward $1.0460-$1.0500. There are options for 1.3 bln euros at $1.0550 that expire today. The intraday momentum indicators are oversold but with the FOMC minutes later today, the North American market may show limited enthusiasm for the euro. Resistance may be seen in the $1.0640-50 area. Sterling posted an outside up day yesterday by trading on both sides of Monday's range and settling above its high. It reached almost $1.2150 and has been sold to about $1.2065 today. Initial support is seen near $1.2050. On the top side, the $1.2100-20 area may offer a nearby cap. America The string of constructive US economic data continued yesterday and drove interest rates higher. It seems US rates are being driven higher more by the data than Fed's rhetoric. The flash composite PMI rose above the 50 boom/bust level for the first time since last June. It stands at 50.2 and is due to the recovery in the service PMI to 50.5 from 46.8.  Separately, the Philadelphia Fed's non-manufacturing survey also improved in February to 3.2 from 6.5.  The manufacturing sector is doing less well, which was a clear pattern in the eurozone and UK flash reports. The US flash manufacturing PMI rose to 47.8 from 46.9.  It is the second consecutive month that the weakness moderated. The Empire State manufacturing survey and the Philadelphia Fed survey picked up similar contractionary impulses from the manufacturing sector. Elsewhere existing home sales disappointed. The median forecast in Bloomberg's survey called for a 2% increase in January, but instead they fell by 0.7% and the December decline was revised to -2.2% from -1.5%. Existing home sales have not increased since last January and 4.00 mln unit (SAAR) is the slowest since 2010. Today, there may be keen interest in the FOMC minutes from the meeting earlier this month that delivered a 25 bp hike. As seems rather common recently, the market had one reaction to the Fed's statement and decision and then reversed during Powell's press conference. The message from the Fed is that price pressures remain, and it will take more than moves to reach a level of restriction that it will be comfortable pausing. After a clear campaign to bring the target rate above is seen as the long-run appropriate level, officials believe the pace of tightening can return to a more normal pace of 25 bp. Some of the discussion, like easing of financial conditions may be less relevant. Also, the market has dramatically scaled back ideas of a Fed cut late this year. The last meeting of the year is on December 13. The January 2024 meeting concludes on the last day of the month. The market's bias toward a cut saw the implied yield of the January contract fall to more than 40 bp less than the September contract most recently on February 2. It stood at 18.5 at yesterday's settlement, the smallest discount since early last October. Weaker than expected Canadian retail sales, excluding autos in December, coupled with the more modest increase in price pressures may have lent support to the Bank of Canada's pause that was being questioned after the recent unexpectedly strong employment report. Headline inflation rose by 0.5% (0.7% was expected), allowing the year-over-year rate to fall below 6% for the first time since last February. The base effect suggests the rate is likely to fall sharply over the next couple of months. The US two-year yield shot up 11 bp to 4.73% as it approaches last year's high reached in early November near 4.80%. The two-year Canadian yield was dragged up by eight basis points. However, the more significant weight on the Canadian dollar was from the broad risk-off move. The correlation between changes in the S&P 500 and the Canadian dollar on a 60-day rolling basis is little changed since the start of the year around 0.75.   The US dollar is extending its gains against the Canadian dollar. It has reached CAD1.3560, its best level since January 6. Options for about $475 mln at CAD1.3550 expire today. The CAD1.3600 area offers the next chart area, but the year's high was set near CAD1.3685. The gains in Europe have stretched the intraday momentum indicators and initial support is seen at CAD1.3520-30. The Mexican peso is one of the few currencies gaining on the greenback today. The US dollar recovered yesterday to around MXN18.4830 after testing the five-year low near MXN18.3350 seen last Friday and Monday.  It held MXN18.48 today and slipped back to MXN18.4135. A consolidative session seems likely.    Disclaimer

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

European markets finished the day lower yesterday, despite a softening in yields which was brought about by comments from St. Louis Fed President James Bullard that he envisaged a Fed funds rate of 5.37%. This is broadly in line with the Minneapolis Fed's Neel Kashkari who has consistently indicated a more hawkish stance of 5.4%, although this a slightly more benign stance than markets had started to price in over the past few days. Notwithstanding that, last night's Fed minutes didn't tell the markets much that hadn't been deduced already given the recent comments from Mester and Bullard last week. What they did show however was that there was significant sympathy for a 50bps rate hike from a few FOMC members before they settled on the more gradual option of a 25bps rate rise. Fed officials were also at pains to cite continued inflation risk, which suggests contrary to the narrative that followed the Powell press conference that the Fed is far from done when it comes to raising rates further. A lot of the takeaway from the minutes last night was that they didn't provide a lot of new information. That isn't entirely true, given that we now know that a number of other Fed officials share the view of Bullard and Mester that more needs to be done, and in light of the data since then that position will only have hardened further. Without last week's interventions these minutes would have been considered extremely hawkish, and with the interventions they now show that the Federal Reserve has further to go, with another 25bps in March, followed by further hikes into Q2. 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. US markets finished the day lower albeit off the lows of the day with the S&P500 posting its 4th successive day of losses, although the Nasdaq managed to close higher. This divergence looks set to help markets in Europe open marginally higher, although the FTSE100 looks set to underperform due to a host of big companies going ex-div, including GSK, AstraZeneca, Unilever and Barclays. Today's weekly jobless claims are likely to reinforce the tightness of the US labour market and are expected to rise to 200k from 194k. 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%. Read next: The Real Estate Market In China Has A Chance To Revive, Indonesia Economy Is More Resilient| FXMAG.COM 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 which are due tomorrow. Before this afternoon's claims data and US Q4 GDP we get the final iteration of EU CPI for January which is expected to be confirmed at a slightly higher 8.6%, due to hotter than expected Germany CPI numbers, while core prices are expected to remain steady at a record high of 5.2%. This guarantees another 50bps rate hike from the ECB when it meets next in March, a move which was reiterated earlier this week by ECB President Christine Lagarde..  EUR/USD - slipped below the 1.0610 level keeping the prospect of a move towards the 1.0480 level.  We have resistance at the 50-day SMA currently at 1.0730. GBP/USD – still ranging between support at the 200-day SMA at 1.1935, and resistance at the 50-day SMA at 1.2180. We need to see a move through 1.2200 to target a move back towards 1.2300. EUR/GBP – rallied from the 0.8780 area and currently finding resistance at the 50-day SMA at 0.8820 area. Further resistance comes in at the 0.8870 area. USD/JPY – slipped back from 2-month highs at 135.25 area, as it looks to edge towards the 200-day SMA at 136.70. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 10 points lower at 7,920 DAX is expected to open 60 points higher at 15,460 CAC40 is expected to open 21 points higher at 7,320

European markets slipped back yesterday with the FTSE100 slipping below the 8,000 level and posting its biggest decline in two weeks, despite better-than-expected flash PMI numbers, for February. While a positive development, this served to help push yields higher in anticipation that central banks might have to be slightly more hawkish when it comes to raising rates in the coming weeks and looks set to weigh on markets further later this morning. This has certainly been borne out in Asia trading after the RBNZ hiked rates by 50bps with the prospect of more to come. These moves by central banks can across as counterintuitive given that the reason for the improvement in economic activity was due to sharp declines in energy prices which is also exerting downward pressure on inflation, however core inflation isn't coming down yet. Today's final Germany CPI numbers for January look set to reinforce that with a decline to 9.2% from 9.6% in December, however due to the lag effect, core prices are still rising which means higher rates for longer. The latest IFO business survey for February is also expected to show a continued improvement from January's numbers, with the business climate expected to rise to 91.2, from 90.2, and expectations to rise to 88.2 from 86.4. US markets also fell sharply yesterday with the S&P500 falling to a one month low, and its worst one day decline this year, as equity markets start to move into line with recent bond market moves. "what we've got here is a failure to communicate" In the immediate aftermath of the recent 25bps Fed rate hike, there appeared to be a type of cognitive dissonance when it came to what the market wanted to hear from the Federal Reserve, and what the US central bank was trying to say. To borrow a line from the film Cool Hand Luke, "what we've got here is a failure to communicate". Long story short, the market thought that the inflation job was done, or at least close to it, even though the recent non-farm payrolls report, and ISM services report muddied the waters in that regard. For all of Fed chair Jay Powell's insistence that more rate hikes were coming at his post meeting press conference, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy was likely to evolve. Since that meeting, things have moved on somewhat with a succession of Fed officials pushing back on the dovish narrative, insisting that rates are likely to stay higher for longer, and which has seen yields push strongly higher in the almost 3 weeks since then. Read next: Food companies under pressure to source deforestation-free products under new EU law| FXMAG.COM It is also important to remember the release of the latest minutes needs to be set in the context of the fact that the meeting came before the recent jobs, ISM, and retail sales data. That said, the recent intervention by non-voting member, Cleveland Fed President Loretta Mester last week, that she saw a compelling case for a 50bps move at the last meeting was an unexpected intervention to the cosy consensus that had developed around the 25bps narrative. This was compounded by another non-voting member, James Bullard of the St. Louis Fed who suggested 50bps in March could be a consideration. This raises two questions, one is to how many other Fed members saw a compelling case for a 50bps move at the last meeting, and two, how much could that have shifted over the last few weeks in light of the recent strength of US data. The minutes should answer the first question, the second question will need to see more data, but given recent evidence, anything that could be considered hawkish from the release of today's minutes will be magnified even more given the strength of recent data.  It's also probably safe to assume that most Fed officials will probably still see the December dots as an accurate representation of future rate hike expectations.  EUR/USD remains under pressure while below resistance at the 50-day SMA currently at 1.0730. The bias remains for a move towards the 1.0480 level, while below the 1.0800 area. GBP/USD – having failed to fall below the 200-day SMA we've seen a squeeze back towards the 50-day SMA at 1.2180. We need to see a move through 1.2200 to target a move back towards 1.2300. EUR/GBP – slid below the 0.8860/70 area yesterday dropping below the 50-day SMA at 0.8810 area, and slipping towards the 0.8760 area, where we have the next support. Resistance comes in at the 0.8870 area. USD/JPY – continues to make gains pushing up to a new 2-month high at 135.25 area, as it looks to edge towards the 200-day SMA at 136.70. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 20 points lower at 7,957 DAX is expected to open 27 points lower at 15,370 CAC40 is expected to open 20 points lower at 7,288

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

Filling consumers’ needs can bridge communities with entrepreneurs and companies, but biases can cause missed opportunities. Chief Diversity Officer Regina Curry discusses the increasing financial strengths of Black and African American communities, a projected US $1.7 trillion economic bloc in 2030. Let go of blind spots to reveal limitless ideas. Entrepreneurs, the business world’s dream makers, see many opportunities and needs from a consumers’ lens then imagine and manifest solutions. Filling consumers’ needs can bridge communities with entrepreneurs and companies, but biases can cause missed opportunities. Companies that have not viewed Black and African American consumers and investors as a priority demographic for generations have missed and underserved essential needs, such as food, housing, healthcare, broadband, banking, and investing.1 Yet, despite their financial invisibility to many, Black and African American communities and entrepreneurs continue to increase in financial strength: At US$910 billion in 2019 to a projected US$1.7 trillion in 2030, Black and African American-buying power continues to grow in the United States as a powerful economic bloc, matching the gross domestic product of Mexico, Canada, and Italy.2 The Black and African American-buying power boost developed from a rise in cohort businesses ownership, population, and educational attainment with more college graduates, and the youth cohort yet to reach peak earning and buying-power years.3 Not a monolithic economic bloc, Black and African American consumers have shifting and diversifying preferences.4 The 2020 US Census reported that while the Black or African American population alone grew 5.6% since 2010, the multiracial Black or African American “in combination” population grew 88.7%.5  Black and African Americans hold more investments in cryptocurrency, real estate trusts, ETFs (exchange-traded funds), and college savings plans as compared to the US general public, according to respondents in our recent survey study.6  Entrepreneurial activity increased from Black and African Americans as the overall US rate of entrepreneurship declined over the past 30 years. Black and African American women and millennials rose as the fastest growing groups of US business owners.7 Black and African American entrepreneurs start businesses more than any other US community.8 Funding these businesses and real-estate ventures remains one of the greatest wealth-building opportunities.9 Companies and entrepreneurs will find that serving Black and African American consumers, investors, and communities will cultivate markets that may seem invisible. We all benefit when we eliminate biases and build bridges that connect communities with economic opportunities for generations to come. Read next: Some McDonald's Locations Don't Promote Hip-Hop Stars' New Meal| FXMAG.COM Endnotes Source: McKinsey Quarterly, “The Black consumer: A $300 billion opportunity,” August 6, 2021. Source: McKinsey Institute for Black Economic Mobility, “Black consumers: Where to invest for equity (a preview),” December 15, 2021. Source: University of Georgia, “Minority Markets Have $3.9 Trillion Buying Power,” March 21, 2019. Source: McKinsey Institute for Black Economic Mobility, “Black consumers: Where to invest for equity (a preview),” December 15, 2021. Source: United States Census Bureau, “2020 Census Illuminates Racial and Ethnic Composition of the Country,” August 12, 2021. Source: As of August 5, 2022, Franklin Templeton Investments, in partnership with Chadwick Martin Bailey, conducted a survey among a sample of 2,281 US adults ages 18 or older with at least $100K in investable assets. The sample includes key populations and audiences including: Millennials (298); Women 50+ (300); Latinx & Hispanics (295); Asian Americans & Pacific Islanders (299); Black & African Americans (595); LGBTQ+ (292); general population (502). Franklin Templeton Investments or any of its affiliates are not affiliated with Chadwick Martin Bailey. Sources: Entrepreneur, “Entrepreneurship and Millennials Are Thriving in Emerging Markets,” September 6, 2017; blackenterprise.com, “The Best New Way for African Americans to Invest In or Start a Business: Equity Crowdfunding,” February 8, 2018; and U.S. News & World Report, "Why the Rate of Black Business Ownership Is Going Up," April 13, 2022. Ibid. Source: “The Best New Way for African Americans to Invest In or Start a Business: Equity Crowdfunding,” February 8, 2018.   WHAT ARE THE RISKS?   All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Investments in fast-growing industries like the technology sector (which historically has been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. Buying and using blockchain-enabled digital currency carries risks, including the loss of principal. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk.  Among other risks, interactions with companies claiming to offer cryptocurrency payment platforms or other cryptocurrency-related products and services may expose users to fraud. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits.  Investing in cryptocurrencies and ICOs is highly speculative and an investor can lose the entire amount of their investment. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies. The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security. Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Source: Dimensions & Insights: The US$1.7 trillion economic bloc that many miss | Franklin Templeton

Today’s US data has been disappointing with housing, manufacturing and construction data all hinting at challenging conditions. Housing and construction will continue to be a big headwind for growth, but at least the China reopening story offers some hope for US manufacturing to rebound  US residential construction spending fell for an eighth consecutive month in January A rebound in mortgage rates depresses housing activity The resurgence in US mortgage rates continued last week with the typical 30Y fixed rising to 6.71%, which on the $428,000 loan size averaged last week works out at a monthly mortgage payment of $2,767 per month. At the start of last year the typical mortgage rate was around 3.5% and on a $620,000 mortgage you would have been paying the same $2,767 per month. This hit to affordability has led to mortgage applications plunging with yesterday’s S&P Case Shiller house price series reporting the sixth consecutive monthly fall in home prices. House price-to-income ratios remain above where they were in 2006 at the peak of the housing boom and to get us back to a long run average of 4.2 times for house price-to-incomes would imply prices need to fall by around 20% from here. Housing supply remains constrained so price falls are modest so far, implying this could be a long grind. However, should unemployment start to climb as a lagged response then the pace could rapidly gain momentum. Mortgage applications for home purchase and typical 30Y fixed rate mortgage rate Source: Macrobond, ING Construction will remain under pressure Construction is responding though with residential construction spending falling for an eighth consecutive month in January. We had been hoping that warm weather would have provided a bit of a boost in that a lack of wintery weather would provide less disruption. We were wrong. Non-residential did rise, but not by enough to prevent total output falling 0.1% versus expectations of a 0.2% gain. Unfortunately, given the lack of buyer interest in the residential property market we expect construction activity to remain a drag on overall US economic growth. Read next: Euro Is Rising, USD/JPY Falls Below 136.00, The Aussie Pair Also Gains| FXMAG.COM Construction spending Feb 2020 = 100 Source: Macrobond, ING Manufacturing remains soft but China reopening provides opportunities Rounding out the reports we have the February ISM manufacturing index. It rose from 47.4 to 47.7, so it remains below the break-even 50 level and undershot market forecasts of 48.0. The details showed employment falling back below 50, indicating job losses, while new orders, despite improving, also remain in contraction territory for a sixth consecutive month. This suggests that the sector will remain a drag on economic activity in the months ahead, but there is perhaps some light at the end of the tunnel. US ISM manufacturing index versus Chinese PMI Source: Macrobond, ING   The overnight surge in the Chinese PMI raised hopes the Chinese economy can bounce back strongly now that Covid containment measures have been scaled right back. If we do get a big big rebound in Asian growth that can help turn things around for US manufacturers. The chart above shows that historically the Chinese PMI tends to directionally lead the US ISM by 3-4 months. There has obviously been a lot of volatility in the Chinese PMI over the past year due to Covid measures, but perhaps the US sector is getting close to a bottom and we can gradually see some stabilisation in coming months. Read this article on THINK TagsUS Manufacturing Interest rates Housing 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

Curve inversions tell us that we're approaching the end of the rate hike cycle. But that conclusion to hikes is being pushed further into the future, and that is placing upward pressure on long dated rates. Deeper inversions and further upward pressure on long rates remains likely in the coming weeks. This will change, but not just yet given latest CPI data A deeper US inversion also point to bigger US cuts down the line... The terminal Fed funds rate hike discount continues to ratchet higher, now at 5.45%, and attaching a 40% probability to a 25bp hike in July (following 3*25bp through Mar, May and June). This is coinciding with upward pressure on the US 10yr, which has now re-touched 4%. Even at 4%, it’s almost 150bp below the market-projected funds rate. That’s unprecedented versus previous cycles over the past four decades (you have to go back to the 1970’s to see something different). And even then, the biggest discount is when the Fed is about to cut, not as the Fed is still hiking. That ensures that every build in the projected terminal rate directly impacts the 10yr rate. Hence the touch at 4%. US inversion is unprecedented versus previous cycles Upward pressure dominates in Europe too. New cycle highs have been seen this week on both ends of the curve, with the German 2yr now at 3.2% and the 10yr at 2.7%. The inversion is less dramatic, but is deepening all the time. Pressure on the European Central Bank to keep hiking is coming from the run of individual country inflation data so far this week, the latest being Germany. Eurozone inflation may be off the highs hit late in 2022, but has blipped up again for February, and a handle of 8% for German inflation (and closer to 9%) continues to touch a nerve. There’s a terminal Refi rate of 3.75% now priced. That can be compared with a 10yr Euribor rate now at 3.25%. Again the inversion here is far less dramatic than the US one. The eurozone curve is inverted by less, but the inversion will likely deepen Relative inversions tell us something about the market discount for interest rate cuts down the line. So the 10yr Euribor rate 1yr forward is priced at 3.2% (5bp lower versus spot), while the 10yr SOFR rate 1yr forward is priced at 3.5% (23bp lower versus spot). There is a slight credit inflation in the Libor rate (Euribor) versus the risk free rate (SOFR), but even accounting for this the market discounts bigger future cuts from the Fed (relative to the ECB) and a convergence of dollar market rates to euro ones. We’d agree with this, and in fact we’d have a more pronounced and quicker convergence later in 2023 (more aggressive than the forward discount). This reflects a likely higher degree of stickiness attached to eurozone inflation.   Ahead we’ll get the eurozone inflation estimate for February, with the market expecting core to stay steady at 5.3% year-on-year and headline slowing to 8.3% YoY. Based off recent releases, an upward surprise would not in fact be a surprise, and would keep the rising rates narrative to the fore. Meanwhile, in the US we get jobless claims that continue to show labour market strength at sub-200k in initial claims. At the same time latest ISM readings point to contraction in manufacturing, employment and new orders; these remind us of the bigger picture slowdown narrative. Based off this, deeper inversions are probable in both the US and the eurozone in the coming weeks. Read next: Rivian Automotive estimates production of 50,000 vehicles in FY23 | FXMAG.COM This won't last though. The most striking changes on curves as we progress through the coming quarters will be pronounced dis-inversion. Longer tenor rates can go higher first, but then later, front-end rates will collapse lower as the peak in official rates is eventually discounted with more conviction. We're just not there yet. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Europe is not having a good week in terms of economic news.   Today, investors will be focused on the flash CPI estimate for February, but there is not much suspense about the fact that the data will disappoint. On Tuesday, the data showed that French inflation hit a record, Spanish inflation ticked higher as well, and yesterday, it was Germans' turn to announce the bad results. Inflation in Germany ticked higher to 9.3% last month, even after the country limited household heating costs. Therefore, it's very likely that the Eurozone CPI, due this morning, is not going to hit the 8.2% mark expected by analysts.   The euro depreciation is to blame.  But the pricing in European markets already reflect, at least, a good part of the inflation disappointment: the European Central Bank's (ECB) peak rate is expected to reach 4% into next year, and some ECB members now back the idea of a more rapid reversal in bond buying to tighten the financial conditions faster. Bundesbank Nagel is one of them. He also thinks that the ECB should speed up the rate hikes and reach the peak rate around September.   As a result, the hotter-than-expected inflation data pushes the European yields higher. The higher yields support recovery in the euro. The EURUSD spiked to 1.0690 yesterday, while the European stocks fell after the German CPI figures and the disappointing PMI data flashed the bulls out of the market.   Note that today's inflation data may not make things worse; we could even see 'buy the rumour sell the fact' type of move, where the yields soften, the euro gives back some strength and equities rebound.   But the medium-term outlook for the European yields remains tilted to the upside. The latter should support the euro, but not the stock valuations.   The grass is not greener elsewhere.  Across the Atlantic Channel, the news is not great, either. The ISM manufacturing index revealed a slower contraction in February, but the improvement compared to the last month was less than expected.   A slowing economic growth is not bad news for the Federal Reserve (Fed), but the mounting price pressure is. This is what the ISM report revealed yesterday.  Fed's Neel Kashkari, who was once one of the most dovish Fed members, said that he may back a 50bp at this month's FOMC meeting, while Raphael Bostic said that the Fed should hike the rates to 5-5.25% territory, and keep them there until next year.   Activity on Fed funds futures now gives more than 30% chance for a 50bp hike at the next meeting, and Fed swaps price in a peak Fed rate of around 5.5%. This number was around 4.9% at the start of the year.  Consequently, the US 2-year yield continues its steady climb toward to 5% mark, and the 10-year spiked above the 4% psychological level yesterday.  Read next: Stock market has been calm thanks to a belief that peak rates are near. The US jobless claims are forecast to hit 196K| FXMAG.COM  The S&P500 tested the critical 200-DMA to the downside. There is major speculation about an aggressive selloff below this 200-DMA level. And given the persistent positive pressure on the yields, clearing the 200-DMA support is not a matter of if, but a matter of when.   The higher yields are supportive of the US dollar. The dollar index swings up and down, above the minor 23.6% Fibonacci retracement on the September to February retreat.   If the dollar's reaction to the hawkish Fed expectations is not more aggressive, it's certainly because other major central banks are also gearing up the rate talk. The Bank of Japan's 8BoJ) Ueda said he would consider normalizing policy if inflation remained sticky in Japan, while the Bank of England's (BoE) Bailey warned that if they do 'too little with interest rates now', they will 'have to do more later on.' Sure thing. The latest BRC report showed that shop prices in the UK indeed hit a record. But traders are not necessarily in to keeping the pair above the 1.20 level. The next natural target for the Cable bears stands at 1.1920, near the 200-DMA, and if cleared could pave the way for a further slide to 1.1650/1.17 region.   In energy and commodities, US crude jumped more than 1% yesterday as the EIA data was much less scary than the API data released a day before. While the API hinted at around a 6-mio-barrel build in US inventories last week, the EIA printed a 1.2-mio-barrel build.   But the 50-DMA is still not cleared, and even if it did, offers into the 100-DMA, slightly below the $80pb level, still look particularly strong.   As a result, the energy stocks were the worst performing in February, despite their record profits. There are worries that the Chinese reopening may not be enough to push prices higher... after all, and latest news suggest that Western companies are racing to quit the country, as tense geopolitical relations with China, and Xi Jinping's economic and political agenda don't inspire confidence. 

After starting the day lower yesterday, European markets gradually clawed their way back to finish in positive territory, even as EU core CPI inflation surged to a new record high, driving yields higher across the board. These inflationary concerns initially weighed on US equity markets after they opened, but the failure to push below technical support at the 200-day SMA on both the Nasdaq 100 and S&P500 prompted a rebound which resulted in a positive close, after comments from Atlanta Fed President Raphael Bostic that indicated he would be in favour of a rate pause by the summer. This looks set to translate into a positive European open. Yesterday's rebound in equity markets came about despite a further increase in US yields with the US 10-year yield finishing well north of 4%, at 4.06%, while the 2-year yield closed at 4.89%. With US yields continuing to push higher, markets are increasingly pricing a higher Fed terminal rate. Since the start of February, this rate has risen sharply from 4.9% to be currently sitting at 5.5%, yet despite this equity markets have continued to hold up well. Much of this resilience may have something to do with how the US economy is faring, with the labour market continuing to maintain its recent resilience, as weekly jobless claims once again came in lower yesterday at 190k. Today equity markets will face yet another crucial test with the release of the latest ISM services report for February, which could act as a decent leading indicator for next week's delayed US employment report.   Read next: NAGA analyst on Eurozone inflation: This is likely to trigger a more restrictive monetary policy from the ECB for two reasons | FXMAG.COM While a lot of the attention in January was around that non-farm payrolls report, the January services ISM report was almost overlooked, but it could be argued that it was just as important in shaping the narrative of a resilient US economy. The ISM services index jumped from 49.6 in December to 55.2, while new orders also surged, to 60.4 from 45.2, their highest level since August. Prices paid remained steady at 67.8, as was employment at 50.0. The resilience of these numbers, along with bumper retail sales, showed the US economy surged in January, and with this jump in manufacturing prices paid earlier this week, there is increasing evidence that the recent declines in inflation might well have bottomed out.   The question now with today's ISM report was this services resilience sustained in February. A slowdown to 54.2 from 55.2 is expected, with the employment component expected to remain steady at 50. Before that we have the latest services PMI reports for Spain, Italy, France, Germany, and the UK, all of which are expected to show modest improvements on their January numbers as lower energy prices feed into improvements in sentiment across Europe. Spain is expected to improve to 53.7, Italy 52.3, France 52.8, Germany 51.3, and the UK to 53.3 from 48.7, belying the expectation that the UK economy has slipped into a Q1 slowdown. Yesterday Bank of England chief economist Huw Pill said that inflation risks in the UK economy continue to remain tilted to the upside, and supported the idea that rates are likely to have to continue to rise. His tone was in contrast to Governor Andrew Bailey the day before who would have markets believe that the probability of another rate hike in a couple of weeks' time should not be taken for granted.   EUR/USD – slipped back from just below the 1.0700 area yesterday but remains above the Monday bullish day reversal off support at the 1.0530 area. We need to push through the 50-day SMA at 1.0730 to open up 1.0820. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85. GBP/USD – once again retested support at the lows this week at the 200-day SMA at 1.1920/30. A break of 1.1900 retargets the 1.1830 area. The 50-day SMA at 1.2150 remains key resistance, and which needs to break to retarget the 1.2300 area. EUR/GBP – failed again to move through trend line resistance at 0.8900 from the January peaks. Above 0.8900 targets the 0.8980 area. Support comes in at the 0.8830 area. USD/JPY – continues to try and push through the 200-day SMA at 136.90/00 but has thus far failed to do so. Support comes in at the 135.20 area. We also have interim support at 133.60. A break above 137.00 could see a move to 138.20.   FTSE100 is expected to open 24 points higher at 7,968 DAX is expected to open 50 points higher at 15,377 CAC40 is expected to open 20 points higher at 7,304

US Non-farm payrolls (Feb) – 10/03 – the boom in the January payrolls numbers proved to be a significant catalyst in a change of perception about the health of the US economy, as well as shaking markets out of the complacency that had characterised sentiment as we started 2023 on a strong note. The market reaction was most notable in terms of bond yields, and while equity markets have continued to hold onto a narrative that any further rate hikes are likely to be limited, the strength of the economic data since then has cast that perception into doubt. In the space of a month, we've gone from a narrative that had rate cuts coming before the end of the year, to an imminent pause in the next couple of months, to how many more rate hikes can we now expect? This week's payrolls report could well go further in reinforcing the latter if the jobs growth we saw in January continued into February. Just to be clear, no one is expecting another 517k, and we could also see a significant revision, but a February number anywhere close to 200k would still be in line with a robust US labour market. Wages will also be a key touch point, as will the unemployment rate which fell to 3.4% and the lowest level since 1969. In a sign that people are also returning to the workforce, the participation rose to 62.4% matching its highest level since the start of the pandemic. Job vacancy levels will also be a key benchmark given they rose to just over 11m back in December. Could they fall back in January after that bumper 517k payrolls print? Bank of Japan rate decision – 10/03 – much has been made of the recent appointment of Kazuo Ueda as the new Bank of Japan governor, replacing Kuroda as the new mouthpiece of Japanese monetary policy. A lot of the commentary around Ueda has seen him paint a fairly neutral stance when it comes to the prospect of possible policy tweaks. This would suggest that the current policy of yield curve control (YCC) is unlikely to see any changes in the short term. That said this will be Kuroda's last meeting as central bank Governor begging the question as of whether he might start to lay the groundwork for a policy change in the coming months. Japanese inflation is already well above target at 4.3% and looks set to continue rising. It's hard to envisage a scenario that would see the Bank of Japan happy with an inflation rate that is rising sharply, and a currency that is once again wilting against the onslaught of a strong US dollar.  Read next: Demand For Automotive Chips Will Continue To Grow As The Outlook For The Electric Vehicle Market Looks Solid| FXMAG.COM China Trade (Feb) – 07/03 – the last 2 months of 2022 saw the various rolling restrictions and lockdowns slow down the Chinese economy markedly. This has been shown clearly, not only in the trade numbers but also in a sharp decline in consumer spending, which has seen retail sales slide sharply. In Q4 the Chinese economy stagnated to the tune of growth of 0%, equating to annual GDP growth of 3%. With this week's trade numbers for the months of January and February which will showcase the period over the Chinese New Year, we will get a better idea of how much the relaxation of lockdown restrictions has unleashed pent-up demand. Having seen exports finish 2022 with a -9% decline, while imports declined -7,5%. This week's numbers will be a decent indicator of how much consumer confidence there is in the economy, compared to previous January, and February numbers. 12 months ago year to date exports saw a gain of 16.1%.  

Half a million jobs were added according the the January employment report, yet the raw data suggests it was more a case of warm weather reducing the ususal seasonal firings with favourable seasonal adjustments providing an additional boost. February is likely to revert to the 200k trend with downside risks for coming months as lay-offs rise January jobs showed interest rates could stay higher for longer The January jobs report was far stronger than expected and combined with the jump in retail sales and firm inflation data suggests that the economy is more resilient than thought. Comments from Fed officials became more hawkish in the wake of these reports and the market mindset firmly moved in the direction of interest rates needing to stay higher for longer. We then shifted our view on the outlook for Federal Reserve monetary policy to be broadly in line with the market pricing of 25bp hikes at the March, May and June Federal Open Market Committee meetings. However, we continue to see the potential for interest rates cuts later in the year on the basis that the most aggressive series of interest rate increase for 40 years will increasingly weigh on activity and inflation. We also sense that that the data for January is not as strong as headlines suggest. This is particularly true of the jobs report. Why was the jobs report so strong? The blowout 517,000 jump in January payrolls caught everyone by surprise, coming in 200,000 higher than even the most optimistic forecasts out there. The unemployment was also better than predicted, falling to a 53-year low of 3.4%. The issue was it didn’t tally with any of the business surveys so to try to explain we looked at one-off factors that could have boosted the numbers. The most obvious case is the 74,000 jump in government workers led by state and local government education workers. This was due to the ending of strike action by University of California Academics. This merely reverses job losses seen in November and December and means February will experience a return to much lower growth. This does nothing to explain the strength in private payrolls though, which rose 443,000, so we looked at the raw data. The table below charts what has happened in each month for the past seven years (excluding 2020 where the pandemic disrupted the usual seasonal patterns). Non-seasonally adjusted employment changes by months and year (millions of jobs) Source: Macrobond, ING   This first thing to say is that the US economy certainly didn’t add 517,000 jobs in January. January is a month where millions of people lose their jobs. This is partly down to the end of the holiday season with people spending less on retail, leisure and hospitality with businesses typically laying off staff at this time. Then there is the weather impacting with winter temperatures and snow limiting the ability of people to work outside – so the likes of construction gets hit along with mining and oil and gas drilling. Better weather and favourable seasonal adjustment factors According to the National Oceanic and Atmospheric Administration, January 2023 was the sixth warmest on record and was the warmest on record for the most North Easterly states with fewer snow days than the average over the past 20 years. This meant construction, mining and drilling has been less disrupted and people were out and about more, spending money. Typically, 2.7-3.1mn jobs are shed in January. This year there were only 2.5mn jobs lost in January, so fewer lay-offs, but not massively so. It is therefore likely that labour hoarding in the form of reduced seasonal layoffs post the holiday season was responsible for the strength, but 'generous' seasonal adjustment factors appear to have provided an additional boost to generate the seasonally adjusted 517,000 gain. What about the February jobs report? So far we have only had the ISM reports with the manufacturing index falling into contraction territory while the service index jumped four points to its highest level since December 2021. Nonetheless, the relationship month to month with payrolls has been poor. On Wednesday we will get the ADP private sector report, which the market expects to rise to 200,000, but remember that the 106,000 outcome for January gave very misleading signals. We will also get the job vacancy data from the JOLTS report for January, which is forecast to drop by more than 400k. This would still leave it pointing to far more job vacancies than there are Americans to fill them. Given the mixed messaging we have pencilled in a 200,000 jobs gain for February but we have little confidence in that forecast given the seasonal adjustment factors and unusual weather patterns. The consensus remains tight with a range of 100,000-325,000 so there is the risk of another big miss, both to the upside and the downside. Longer terms things are more challenging The outlook is deteriorating though. Job lay-off announcements are rising sharply with outplacement firm Challenger, Gray & Christmas reporting that lay-offs rose 440% YoY in January. The data is volatile, but if we take a 3M average of the annual rate we see that such big increases in lay-offs do typically result in employment growth eventually turning negative – the chart has employment on the right-hand scale inverted (orange line) so a movement higher implies weakening. Challenger lay-offs and monthly changes in payrolls YoY% Source: Macrobond, ING   This tallies with the fact that full-time employment in America has flatlined since March 2022. All of the jobs created since then have been part-time, which does not paint the picture of a vibrant jobs market. Instead, when combined with the lay-off announcements it points to a jobs market that will increasingly lose higher paid, full-time positions only to replace them with lower paid less secure, part time work predominantly in the leisure and hospitality sector. We therefore need to be wary that while the headline jobs figure may look ok, the composition is likely to be deteriorating. Full time versus part-time employment levels (mn) Source: Macrobond, ING   Nonetheless, the headwinds for that sector are likely to intensify as well. The fact that interest rates have risen so far so fast is weighing on business sentiment. The Conference Board’s measure of CEO confidence is on a par with every recession over the past 40 years, which points to a more defensive mindset with a greater focus on cost control rather than business expansion. Lending conditions and higher borrowing costs will turn the screws on struggling companies Compounding the problems is the fact we are also now seeing banks tighten their lending standards dramatically, meaning that not only is the cost of borrowing becoming more of an issue, but so too is access to borrowing. Companies and households that are already struggling will find themselves in an increasingly precarious position, especially with the Federal Reserve’s semi-annual monetary policy report emphasising that "a period of below trend growth and some softening of labor market conditions" is required to ensure inflation returns to 2%. Read next: In crude oil, we are increasingly likely to see a year of two distinctive halves| FXMAG.COM Banks tightening lending standards runs the risk of sharply higher unemployment Source: Macrobond, ING   The chart above suggests that following such a sharp tightening of lending standards the unemployment rate has a tendency to climb around 9 months later. So, while for now there is optimism on the jobs market that is fueling expectations of interest rate increases, we see a clear risk that this environment changes over the summer months and our call for rate cuts before year-end starts to become more mainstream. Read this article on THINK TagsUS Unemployment Jobs Interest rates Federal Reserve 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 February FOMC meeting saw the Fed dial back to a 25bp incremental hike. Jerome Powell's testimony shows that opinion has shifted again with the strength in data suggesting the need for a higher ultimate policy rate and potentially faster rate hikes. Given long and varied lags the odds of a hard landing and an eventual policy reversal are rising Federal Reserve Chair Powell at his Congressional testimony on 7 March 2023 Hawkishness back in fashion Federal Reserve Chair Jerome Powell’s semi-annual testimony has certainly taken a more hawkish tone relative to his last major comments in February. Back then he talked of disinflation but now acknowledges that “inflationary pressures are running higher than expected at the time of our previous Federal Open Market Committee”. Moreover, with the latest economic data having “come in stronger than expected”, it “suggests that the ultimate level of interest rates is likely to be higher than previously anticipated”. In December the median projection from Fed officials was for the Fed funds target rate to be at 5.1%, but Powell’s higher for longer message on rates now means markets are pricing the Fed funds rate at 5.4% for year-end. This is getting on for 100bp of hikes from here. Powell went on to warn that “if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes”. Before the publication of the testimony markets were pricing around 30bp of tightening at the March FOMC, but now we are up at 35bp. 25bp is therefore still the slightly favoured outcome, but between now and 22 March we have this Friday’s jobs report and then next week we have inflation, retail sales and housing numbers. But the risks of a hard landing are rising Generous seasonal adjustment factors and unseasonally warm weather – January was the sixth warmest on record across the United States – certainly helped the near-term activity and inflation story and this should unwind in coming months. The data isn’t going to be as 'hot' as it was in January, but we are not confident that it will show extreme weakness either.  Consequently, we do have to acknowledge the possibility that if the market moves in the direction of fully discounting 50bp the Fed are unlikely to hold back. Nonetheless, we continue to make the point that monetary policy operates with long and varied lags and so we are yet to fully feel the effects of the most aggressive period for monetary policy tightening for over forty years. It isn’t just the increase in borrowing costs that is the issue, but also the availability of credit with the Federal Reserve’s own Senior Loan Officer Survey highlighting how rapidly banks are pulling back from lending. So we have an intensifying issue regarding both the cost and access to borrowing, which runs the risk of a harder landing for the economy than markets are currently discounting. Read this article on THINK TagsInterest rates Inflation FOMC Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

After a fairly low-key start to the day, European markets eventually finished the day lower yesterday, dragged lower by weakness in US markets after Fed chairman Jay Powell's semi-annual testimony to US lawmakers on Capitol Hill. Any prospect that we might see a dovish Powell yesterday was quickly dashed as the Federal Reserve chairman struck quite a different tone to the one he used at the last FOMC press conference. While markets focussed on his comments about disinflation at the beginning of February, there was only one mention of that word in his statement, in his remarks to US lawmakers yesterday, and that was to say there was little sign of it. His comments that the pace of rate hikes may need to be accelerated, and that the likely rate peak could well be higher than expected were not well received by markets, but given the strength of recent data, the change of tone shouldn't have been surprising. The Fed has always insisted it is data dependent and Powell's comments appear to reflect that, given the strength of recent data, which means as strong as yesterday's reaction was, with 2-year yields pushing above 5% for the first time since 2007, it could just as quickly reverse if this week's payrolls data or next week's CPI numbers disappoint. We do have other labour market indicators due out today with the February ADP payrolls report which is expected to see an improvement from 106k in January to 200k. We also have the latest job openings (JOLTS) data for January. Given the strength of the January payrolls report of 517k, you would expect to see a sharp drop in vacancies from December's 11m to about 10.6m.   Powell's comments did something else yesterday as markets started to price in the prospect of a 50bps rate hike in 2 weeks' time, despite stepping down the pace of rate hikes in February to 25bps. If the Fed were to step back up to 50bps in 2 weeks' time it would be tantamount to an admission of failure and that they made a mistake, and open up the central bank to accusations of being too reactive, and flip-flopping. Such a move would probably be unwise and open the central bank of not knowing what it is doing. Far better to follow through with another 25bps and raise their dot plots indicating that several more 25bps hikes are likely to follow.    While US markets finished sharply lower, both the S&P500 and Nasdaq 100 still remain above their 200-day SMA which acted as strong support last week. Read next: Turkey: For now, inflation could be said to have dropped because of the high base in 2022| FXMAG.COM With the European Central Bank also making loud hawkish noises and likely to hike by 50bps next week, the weakness in equity markets also translated into lower commodity prices on increasing concerns over the effect of what higher rates for longer might mean for global growth prospects. Staying on the central banks front we have the latest rate decision from the Bank of Canada later today, and where it is expected to keep rates on hold. At its last meeting in January, the Bank of Canada decided that it would take the decision to signal a pause in its rate hiking cycle after its latest rate rise of 25bps took the headline rate to 4.5%. The central bank did indicate that the pause was conditional on inflation coming down, however, the decision to signal a pause with hindsight, given the strength of recent data does come across as a little hasty, especially given Fed chair Jay Powell's hawkish tone yesterday. Headline CPI in Canada has fallen to 5.9%, but core prices still look sticky at 5%, and recent economic data has shown the economy looks resilient. Consumer spending has held up well in recent months, while January payrolls also saw a huge jump of 150k, with most of them being in full-time employment. The participation rate also surged to 65.7%, a sharp rise from 65.4%. The Bank of Canada may have to settle for delivering hawkish guidance along with a hold. As for today's European session, we look set to see a lower open on the back of yesterday's sharp US sell-off, with the focus in Europe on German retail sales for January and the final iteration of EU Q4 GDP which is expected to see be revised lower from 0.1% to 0%. EUR/USD – looks set to retest the previous lows at 1.0530 with the prospect we could see a retest of the 1.0480 area. The 1.0730 area remains a key resistance. GBP/USD – falling below the 200-day SMA has seen the pound fall to the 1.1820/30 area, opening up the prospect that we could slide towards 1.1640 on a break below the 1.1800 area. Resistance back at the 1.1980 area. EUR/GBP – broken through the trend line resistance at 0.8900 from the January peaks and could see a move towards the 0.8980 area. We need to push below support at the 0.8820/30 area to retarget the 0.8780 area. USD/JPY – has retested the 200-day SMA which is now at 137.20, with a break through the 137.30 opening up the 138.20 area. Support comes in at the 135.20 area. We also have interim support at 133.60.   FTSE100 is expected to open 19 points lower at 7,900 DAX is expected to open 35 points lower at 15,524 CAC40 is expected to open 17 points lower at 7,322

Bulls in European equities didn't' really get washed out by the Federal Reserve (Fed) hawks; the DAX index closed higher at the wake of Powell's first day of testimony before the Senate – which went badly hawkish on the other side of the Atlantic.   The better-than-expected jump in January industrial production in Germany may have helped send the DAX higher on Wednesday, along with a further decline in the German 10-year yield from the March peak levels.   But beyond Germany, the GDP growth in the Eurozone was null in Q4, and slowed more than expected on a yearly basis, and the European Central Bank 8ECB) won't move a finger to boost economy because all the European policymakers want is... to abate inflation.   And the expectation is that, not only that the ECB will hike by 50bp at this month's meeting, but there will be 150bp hike from now till summer.   The ECB hawks fueled the European yields to fresh highs since the Eurozone's debt crisis– which is fundamentally not good news for equity traders.   And the euro is losing ground against the US dollar, as the hawks on the other side of the Atlantic Ocean look very threatening.   Even though a softer euro could be good for some businesses as a cheaper euro boosts sales abroad, it is obviously bad for abating inflation; it makes the cost of energy and raw materials more expensive for European businesses and boosts inflation. And rising inflation means higher rate hikes, and prospects of slower economy.  As a consequence, the European stocks should be more worried faced with a sinking euro and rising yields.  No decision yet.  Fed Chair Jerome Powell's second day of testimony was as hawkish as the first one, with one little exception.   Powell added a very small tweak to his Tuesday language, and said that the data will determine whether the Fed would increase the pace of the interest rate hikes, BUT that 'no decision has been made on this' yet.   If Powell's intention was to cool down the 50bp hike bets yesterday, it didn't go according to the plan. That probability went above 80% yesterday, as both the ADP report and the JOLTS data came in hotter-than-expected. The ADP printed 242K new private job additions in February versus 200K expected by analysts, while job openings in the US eased from last month's peak, but not as much as expected.   In other words, the jobs data was again too strong to soften the Fed hawks' hand.   Read next: ADP payrolls report hit 242K. Japan: YCC may remain unchanged| FXMAG.COM The US 2-year yield extended its advance above the 5% mark, the 10-year yield hovered around the 4% level. The widening gap between the 2 and the 10-year yield boosts recession odds.   Note that the 4% mark for the US10-year yield  has become a line in the sand that bond investors don't want to breach.   The S&P500 swung between small gains and small losses yesterday, as the strong jobs data didn't let much space for funded gains, but Powell's 'indecision' about the next rate hike helped the S&P500 eke out a small gain to the end of the session.   In the FX, the US dollar index extended gains above the 100-DMA.   Catch your breath before Friday!  Today, investors will mostly spend the session digesting Powell's hawkish testimony, the major shift in US rate expectations, and the strong jobs data. They will also watch the US weekly jobless claims and pray that the February NFP print doesn't surprise to the upside as did the ADP report.   As such, we could see some relief, and correction after two difficult days for risk assets, but investors will likely refrain from opening fresh positions before Friday's US jobs data, because only God knows what could happen when the data falls in. Risks are two-sided, as soft data could easily spur a risk rally.  Gold and energy  The rapid surge in the US dollar and the rising US yields weigh on precious metals. Gold, which was supposed to have a great year, is now in the bearish consolidation zone, below the major 38.2% Fibonacci retracement on November to February rally, and is now testing the 100-DMA, which stands a couple of dollars above the $1800 level, to the downside. A strong data between today and Tuesday could rapidly send the price of an ounce below the $1800 mark. The next natural target for gold bears is the 200-DMA, at $1775 per ounce.  American crude on the other hand failed big time holding on to the gains above the 100-DMA and dropped nearly $5 per barrel although crude oil inventories in the US unexpectedly fell last week.   Rising recession odds due to hawkish Fed expectations is why the bears are out and selling.

US President Joe Biden is expected to release a new budget plan on March 9, proposing changes to crypto taxation The new crypto tax policy is projected to raise $24 billion, targeting wash trading in cryptocurrencies. Reports have suggested that Non-fungible tokens could be taxable and anyone who has dealt with digital assets must report their activities to the IRS. US President Joe Biden is set to unveil the new budget plan on Thursday, March 9. Reports have suggested that crypto market participants can expect changes to crypto taxation, targeted towards wash trading and taxing collectibles, digital art. US President Joe Biden could propose changes to crypto taxation in budget plan US President Joe Biden is set to target wash trading and this plan could directly affect crypto trading. According to a Wall Street Journal report President Biden will propose changes to crypto taxation rules. Currently, rules against wash trading apply to stock and bond trading, those rules are not being applied to crypto trading. As of now investors can sell certain investments and accept a tax-deductible loss before reinvesting. This is considered an illegal practice in stocks and bond trading and the government wants to prevent it in crypto trading as well. The new crypto tax policy could raise $24 billion as part of Biden’s broader 2024 budget plan. There is a likelihood that Biden’s proposal gets opposed by the Republican party. Tax policy changes that affect crypto investors in the US While Biden’s changes are not guaranteed to come into effect, the Internal Revenue Service (IRS) recently expanded the scope of crypto tax rules in February 2023. These changes require anyone who has dealt in cryptocurrencies to report their activities. Another report suggests that Non-fungible tokens (NFTs) could be taxed. According to a recent third-party survey by CoinLedger, only 58% of the survey participants have included cryptocurrency on their tax reports in 2022. What traders and analysts think about Biden’s proposed crypto tax rules? DivXMan, crypto trader and YouTuber is bullish on the updated crypto tax rules. The crypto trader believes the updated rules could incentivize holding Bitcoin in the long term. DivXMan told FXStreet, "I think the proposing changes to rule against wash trading is a smart move. This is normally done to show taxable losses where many investors intend to rebuy and continue to hold the asset. It’s also more frequently done by much wealthier and savvier investors than your normal retail investors. Even if this adds a minor amount of stability to markets I see it as win for retail and one of the few steps I’ve seen in the right direction for regulation."

Throughout the day, investors will be concentrating largely on the Non-Farm Payroll figure and will be preparing for the next weekly inflation data. Altogether, there will be 4 major announcements over the next week. This afternoon investors will be monitoring February Non-Farm Payroll, which is expected to return to previous figures. Economists expect the NFP figure to read 225,000, less than half of the previous month but still considerably high. Some economists believe the Unemployment rate may remain at 3.4%, whereas others lean towards 3.5%. However, the Unemployment rate would need to be significantly higher to lower inflation. Some analysts have stated the Unemployment rate would need to be more than 4% for the employment sector to become “more balanced”. Read the first part of the update by NAGA: Dow Jones has declined for 4 consecutive days and lost 1.7% yesterday| FXMAG.COM Investors should note that next week’s inflation figures will likely strongly influence the US Dollar and Stocks. Therefore, traders need to remember that investors will start to prepare for the inflation figures later in the day. The Consumer Price Index is expected to read 0.4%, which will keep the yearly inflation at a similar rate. Furthermore, investors are expecting the Producer Price Index to show 0.3%. If the employment and inflation data is higher than expected, investors will likely lean towards the Dollar as interest rates will accelerate. GBP/USD - Investors Brace for Non-Farm Payroll Results and Inflation Figures The GBP/USD continues to increase as the US Dollar generally weakens over the past 24 hours. The Pound has also been supported by the latest Gross Domestic Product figures released this morning. Even though the Pound has gained 1.35% since yesterday’s US session, investors still should be cautious of a potential downward trend. The exchange rate has still formed 3 significantly lower highs over the past 2-weeks. When looking at technical analysis, we are still waiting to get a major indication of a longer-term upward trend. However, this is possible if the price maintains momentum and surpasses 1.19628. Nonetheless, the price is currently trading at a resistance level and following a downward trend pattern. Traders await bearish indications from moving averages, crossovers, and price action. GBP/USD 2-Hour Chart on March 10th Global stocks over the past week have tumbled and have lost more than 4% since Tuesday’s Fed testimony. Since the reaction, the market has started buying bonds with a significantly higher yield than in previous years. This indicates that safe-haven assets are coming into play and can also affect the US Dollar. Though the US Dollar will only be able to act as a safe haven asset if interest rates remain competitive. Read next: USD/JPY Is Close To 137.00, EUR/USD Is Below 1.06, GBP/USD Is Trading Below 1.20| FXMAG.COM This morning the GBP/USD has been fueled by the UK GDP figure, which read 0.3% instead of the expected 0.1%. The figure is deemed positive for the Pound as it indicates the UK may be able to avoid a formal recession for the time being. The UK’s GDP figure was significantly higher than the previous month, which read -0.5%. Though traders should note that the price action can change if the NFP figure is higher than expected.

Another strong jobs figure for February would on its own have boosted market expectations for a 50bp rate hike on 22 March, but market angst is on the rise. Monetary policy operates with long lags and higher borrowing costs and reduced access to credit are going to make the jobs market look a lot weaker later in the year. The likelihood of policy reversal is high US jobs growth was strong once again in February 311,000 Number of jobs added in February   Better than expected Strong headline jobs growth, but the composition should be considered US non-farm payrolls rose 311k in February, above the 225k consensus. There were 34k of downward revisions to the past two months of data, but this is still a strong number. A third of the jobs created were in the leisure and hospitality sector while retail added 50k, trade and transport rose 38k and private education/heath gained 74k. Those sectors that didn’t do so well include manufacturing, which fell 4k and financial services, which was down 1k. One of our concerns about the labour market is that we are seeing a big pick-up in lay-off announcements in well-paid, full-time sectors such as technology and financial services while the growth has been in lower paying, less secure, part-time sectors such as leisure and hospitality. This caution remain valid, but at least this month we did see the job growth coming from full-time positions. Nonetheless, as the chart below shows, the number of full-time Americans in work has effectively flat lined since March last year. Virtually all of the jobs created on balance over the past 11 months have been part-time, which isn’t a sign of strength. Therefore the composition of the jobs created is an important consideration in gauging the strength of the economy. Full-time versus part-time employment levels (millions) Source: Macrobond, ING Market angst and bank caution means the jobs market will weaken Moreover, the report isn't strong throughout with average hourly earnings coming in below expectations at 0.2% month-on-month/4.6% year-on-year and the unemployment rate ticking up to 3.6% from 3.4%. Indeed the household survey showed employment rising a more modest 177k while the labour force grew 419k. Read next: Surprise UK growth rebound means technical recession could be avoided| FXMAG.COM We are concerned that the labour market is a lagging indicator – it is the last data point to turn in a cycle – and the outlook is becoming increasingly challenging. Certainly, we have been experiencing the most aggressive period of monetary policy tightening for 40 years and our long-term fears have been that the harder and faster you go into what we would term “restrictive” territory, the less control over the outcome. As a result, we are constantly looking for signs of stress and clearly concerns about the stability of Silicon Valley Bank (SVB) and potentially other institutions are making investors nervous right now. The January Federal Reserve Senior Loan Officer survey has shown banks are becoming much more cautious with the proportion tightening their lending standards having increased significantly over the past two quarters. Therefore, we should not only be concerned about the rapid rise in borrowing costs, but also access to credit. Struggling companies and households are going to find themselves under intensifying pressures, with the chart below showing that typically when you see spikes in bank caution, the real world on activity and jobs isn’t far behind. Indeed, this charts suggests we should be braced for unemployment to rise from late second quarter onwards. Senior Loan Officer survey shows banks are nervous and weaker credit flow means job losses Source: Macrobond, ING Fed is a close call, but lingering market worries would favour a 25bp move This then brings us to the question of what the Fed will do on 22 March. Chair Powell’s testimony clearly signaled that 50bp was firmly on the table and another strong jobs number will embolden the hawks on the committee. Next week we have CPI, retail sales and industrial production. We think the two activity reports will be soft, but see little reason for the core CPI to come in below the 0.4% MoM consensus forecast this month. This is still more than twice the rate needed (0.17% MoM) that would, over time, get us down to a 2% YoY inflation rate. The macro newsflow and Powell's testimony on their own would therefore suggest 50bp on 22 March, but market angst regarding SVB and potentially others is unlikely to disappear. If that's the case a 25bp move would make more sense, especially given monetary policy operates with long lags and the cost and access to borrowing are going to increasingly weigh on the economy. Read this article on THINK TagsUS Payrolls Jobs Federal Reserve 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 US Nonfarm Payrolls data for the month of February came in at 311,000, above expectations. Solid NFP data fuels expectations of a 50 bps rate hike by the Federal Reserve at the March 21-22 meeting after Chair Jerome Powell's statement from Tuesday. The crypto market reacted positively to the NFP data as Bitcoin price rose above $20,000. The United States Nonfarm Payrolls (NFP) data showed the US economy added 311,000 jobs in February, surpassing forecasts of a 205,000 gain. The month of February was expected to note a relatively lesser increase in the jobs report as compared to January. The enormous increase of 504,000 (revised from 517,000) in January was beyond expectations, but it also noted that the economy was in good shape. In addition to the strong jobs report, the unemployment rate rose to 3.6% while the labor force participation rate was little changed at 62.5%, still standing below the pre-pandemic levels of 63.3% in February 2020. However, another strong jobs report is expected to result in a higher rate hike next month, as stated by FXStreet Lead Analyst Eren Sengezer, The CME Group FedWatch Tool shows that markets are pricing in a 78% probability of a 50 bps rate hike in March, suggesting that there is more room for additional US Dollar strength in case NFP surpasses the market consensus. Still, despite the higher-than-expected job gain, the US Dollar weakened as an immediate reaction, sending the Bitcoin price back above the $20,000 level to the $20,300 area. Read next: Binance has proven to be a more trusted player in this space than 99% of other crypto companies | FXMAG.COM Going forward, the Fed is expected to increase the rate by 50 bps in March, a sentiment shared by Chair Jerome Powell as well. Powell on Tuesday was noted saying, The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. The crypto market reacts positively At the time of writing, the crypto market noted a bullish response to the NFP data. Bitcoin price could be seen hovering around $20,200, rising by 1.32% in the last hour after touching its lowest level in two months at $19,550. Altcoins seemed to be following BTC's lead as well. BTC/USD 1-day chart Following the release of the NFP report, Ethereum price rose by over 1.02% to trade at $1,406. Cardano price noted a similar reaction gaining 2.32% to $0.3113. XRP could be seen moving at $0.368, noting an increase of 1.21% over the last minutes. Similarly, MATIC price rose by nearly 2% and was trading at $1.00.

The Silicon Valley Bank (SVB) went bust on Friday, around 44 hours after announcing that they would raise capital to fill in an almost $2 billion hole, after the bank sold its loss-making portfolio, rich in US treasuries, to pay their depositors – who are mostly tech startups – back in the actual environment of rising interest rates.   Signature Bank also collapsed abruptly this weekend, as regulators said that keeping the bank – which has a big real estate portfolio and law firms' money, could threaten the stability of the entire financial system.  SVB's flash crash raised questions that other similar local banks in the US could also experience liquidity issues and may not be able to pay their depositors back, unless they also start selling their probably loss-making portfolios.   So, the likes of First Republic Bank, PacWest Bancorp and Signature Bank suffered heavy losses on Friday.   Across Europe, big banks pulled indices down on Friday, as well – even though they are not expected to have similar liquidity issues as the Silicon Valley Bank. Most big banks have a diversified client base and more importantly don't have the same exposure to tech startups, which are extremely rate sensitive.  The contagion risk remains for small banks with highly rate-sensitive clients, but the US authorities now step in to avoid contagion. They said that SVB depositors could access their money today.  The bank crisis changes the landscape for Fed expectations.  The bank crisis will be sitting in the headlines, as solutions and possible contagion beyond the banking sector and beyond the US borders will be on the menu of the week.  The latter will likely interfere with Federal Reserve (Fed) rate hike expectations, as well, as the Fed may want to think twice before stepping on the gas this month; Mr. Powell certainly doesn't want to go down in history as the clumsiest Fed President in the history of the Fed.   So, it is well possible that the Fed may simply FORGET about a 50bp hike this month or may not hike at all.   Activity in Fed funds futures now assesses more than 98% chance for a 25bp hike in March, not because the US jobs data was soft enough to overhaul rate hike expectations last Friday, but because the Fed can't ignore the issues caused by the steep interest rate increases in the banking sector and can't afford to trigger a financial crisis to bring inflation back to 2%.   Read next: Icahn Battles Illumina For Three Board Seats| FXMAG.COM Economic data will be important, but the developments across the banking sector could overshadow the data.   Last Friday, the US released a mixed jobs report. The NFP printed another strong 311'000 new nonfarm jobs additions in February, versus around 200'000 expected by analysts. But the unemployment rate ticked higher from 3.4% to 3.6%, as the participation rate improved, and the wages grew less than expected.   The kneejerk market reaction was a swift decline in the US dollar, and the yields. But of course, a major part of the decline in the US short term yields is due to the expectations that the Fed may have its hands tied faced with the banking crisis and could forget about another rate hike in the immediate future.   The latest fall in US yields is not necessarily based on the best foundation for a stock rally. And indeed we saw the S&P500 dive on Friday to the bearish consolidation zone below the major 38.2% Fibonacci retracement on the October to February rally. But at the time of writing, the S&P500 futures hint at an almost 2% rise at the open.  Tomorrow, the US will release the latest inflation figures for February, and the expectation is a further decline both in headline and core inflation. A sufficient decline in US inflation will cement the idea of a 25bp hike, or no rate hike from the Fed this month. But even disappointing inflation figures may not fuel the Fed rate hike expectations, depending on how the situation evolves on the banks' front.

Non-farm payrolls came at 311K last Friday noticeably beating expectations. We reached out to Andria Pichdi to have a more detailed look at the possible implications for the incoming Fed decision. FXMAG.COM: Could you please comment on the NFP print after it's released, what could presented value mean to Fed? Andria Pichdi (HF Markets): Fed policy uncertainties rose after the collapse of SVB in the US! Local stock markets rallied as traders reined in Fed tightening expectations. The employment report failed to fully support expectations for a 50 bp Fed hike, coupled with a huge flight to quality and short covering trade on SVB news. The softening in some of the metrics in the February jobs report is easing fears of a more hawkish Fed, especially in light of the failure of SVB, with many in the market seeing that as a harbinger of troubles in the financial system. And they further suggest "the Fed broke it and will have to fix it with an easing in rates." The March implied rate has slipped to 4.908% versus 5.003%, again reflecting a better chance for a 25 bp increase rather than a half point pop. Read next: To Protect Customer Deposit, SVB UK Will Be Sold To HSBC, The Food Crisis Is Getting Worse| FXMAG.COM

The US consumer price index rose 0.4% in February, slowing the annual rate to 6.0%, in line with economists' expectations. The core price index, which excludes food and energy, rose 0.5% for the month (0.4% expected) and slowed slightly to 5.5% for the year from 5.6%. Technically, the latest figures do not support the hypothesis of a sustained slowdown in inflation It is important to note that the monthly price increase remains above the 0.17% needed to reach an annual inflation rate of 2%. This is despite falling commodity prices. Technically, the latest figures do not support the hypothesis of a sustained slowdown in inflation. Nevertheless, price increases are not out of control, and the effects of the previous policy tightening are not yet fully reflected in the economic data. The robust labour market data of the last two months has not led to a significant acceleration in the rate of price and wage increases, and this seems to be a good reason for the Fed to raise rates by 25 points and not 50 as feared a week ago, but also not to abandon the rate hike altogether, as was almost done at the height of the banking mini-panic on Monday. The inflation data did not initially trigger a strong reaction in the currency market. However, in the last few minutes there was some demand for the dollar and for equities, as we see a return of capital to US assets after yesterday's near-panic selling. Looking beyond the next few minutes, it is worth remembering that the recovery in risk demand (stock buying) is also feeding a weaker dollar and supporting commodity prices. Read next: Pfizer Will Buy Biotech Seagen For $43 Billion| FXMAG.COM

US data shows soft producer price inflation and retail sales, which gives the market further excuse to push in the direction of a no change Fed decision next week. Coupled with an inevitable tighting of lending conditions given recent events the need for extra hikes is doubtful Headline producer prices fell 0.1% month-on-month in February Disinflation theme remains in place Headline producer prices fell 0.1% month-on-month in February versus expectations of a 0.3% rise, while prices were flat on the month for ex food and energy versus a consensus forecast of 0.4%. This means the year-on-year rates drop to 4.6% from 5.7% for headline and 4.4% from 5% for core. This means we have more evidence of pipeline price pressures easing, which should help keep the disinflationary trend in place regarding the consumer prices story, as the chart below shows. Inflation rates are slowing across all areas Source: Macrobond, ING   Within the details, the key story is the 0.8% MoM drop in 'trade services', following a 1.1% MoM decline in January. This picks up supply chain strains and can be taken as a proxy for the direction of travel on profit margins. With competitive pressures intensifying as the growth outlook darkens this component is going to be a key story that contributes to a rapid slowdown in consumer price inflation through the second half of this year and into 2024. Mixed retail sales picture after weather boosted January Meanwhile, retail sales fell 0.4% as expected, dragged lower by a 1.8% drop in auto sales, a 2.5% decline in furniture, 4% drop in department store sales and a 2.2% fall in eating/drinking out. Nonetheless, this follows from a very strong January – remember that January was lifted by really warm weather after wintery conditions depressed activity in December – which was revised up to show headline growth of 3.2% MoM. Read next: Poland: CPI inflation peak behind us, but disinflation will be gradual| FXMAG.COM Interestingly, the core 'control' measure that excludes volatile components such as building materials, gasoline, autos and food service was actually up 0.5% MoM. This is important seeing as it typically better matches movements in broader consumer spending. It is almost entirely down to a 1.6% rise in non-store sales. Retail sales levels Source: Macrobond, ING The case for rate hikes keeps weakening The PPI story is quite rightly attracting most of the attention so the market pricing for a potential Federal reserve rate hike next week has slipped to 11bp. We are of the view that there is no need to hike – the Fed can easily say it is pausing and looking to potentially restart once markets have calmed – but there are plenty of inflation hawks on the Federal Open Market Committee, which is why they opened the door to 50bp in Chair Powell's testimony to Congress last week. Tomorrow’s European Central Bank meeting will play an important role in this. If the ECB hikes and markets react badly then the no change Fed outcome will gain greater momentum. Likewise if markets take it in their stride, then a Fed 25bp move will look more likely. US lending conditions remain our major concern with banks already pulling back on lending before last week as highlighted by the Fed's Senior Loan Officer survey. Lending conditions are only going to get worse given recent events as banks and regulators become far more cautious. Therefore, the combination of higher borrowing costs and reduced access to credit are going to weigh heavily, which we argue removes the need for further hikes. Read this article on THINK TagsUS Retail sales PPI Inflation Federal Reserve 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

Brandywine Global: As investors and markets navigate the immediate fallout of the banking crisis, we look at the broader macroeconomic implications and the potential outlook for fixed income and currencies.. As the Silicon Valley Bank (SVB) and Signature Bank closures dominate news headlines and reverberate through the US financial system, investors and markets continue to navigate the fallout. Beyond the immediate impact, the crisis has broader macroeconomic implications and serves as a potent reminder that the banking system, asset markets, and the broader economy are all intrinsically linked via interest rates. Contagion risk While the coordinated actions of the US Treasury, Federal Reserve (Fed), and Federal Deposit Insurance Corporation (FDIC) to make depositors whole has stemmed any immediate contagion risk, we will continue to monitor deposit flows over the next several days and weeks to evaluate signs of further stress in other banks. The regulators are clearly concerned about a broader threat to the banking system. All large deposit holders will be reassessing their counterparty risks, with a strong incentive to switch from regional banks to global systemically important banks (G-SIBs), money market funds, or T-bills, hence we expect further pressure on deposits. Anyone holding deposits in excess of the FDIC guarantee will get a higher yield and more safety by owning Treasuries. As for large corporations that need to hold large deposits to fund payrolls, the contagion risk is that deposits are driven to the money center banks and away from regional and small banks. The Fed’s new lending facility, the Bank Term Funding Program (BTFP), means banks do not have to sell their securities at a discount to fund deposit outflows, which will tend to mitigate against illiquidity or forced selling of assets at a loss. While this intervention may help banks avoid insolvency, it still leaves open the bigger question—especially for small banks—as to how big any deposit outflows turn out to be. While all this plays out, it is hard to imagine small regional bank lenders not curtailing new lending plans as they look to defend their equity. Credit conditions Undoubtedly, this incident will result in tighter credit conditions and weaker economic growth. Regional banks will be forced to pay more for deposits at a time when there are growing concerns about potential losses on commercial real estate loans. The recent divergence between the Senior Loan Officer Opinion Survey (SLOS) and credit spreads has been noted by many strategists. The SLOS is likely to report even tighter credit conditions following the March 10 failure of SVB and subsequent events. Ultimately, these constraints will lead to higher costs for banks, and we expect reduced availability of credit for borrowers as lenders go into defense to protect shareholder equity. Recession risks have increased because of this likelihood of tighter credit conditions and strained banking profitability. US technology sector US technology firms benefited from a one-off surge in demand and very easy global liquidity conditions following the COVID shock. As a result, technology equity valuations surged, and the sector saw massive capital inflows. This influx of capital was often spent on technology products, such as hardware, cloud services, cybersecurity, etc., further boosting revenues for technology companies and leading to even higher valuations. Since the start of 2022, this virtuous cycle has reversed. In light of SVB's importance to the technology sector, we would expect more tech layoffs, lower spending on technology products, and more difficult access to new capital, which could potentially become an outright credit crunch for the tech sector. Read next: The year-to-date trend for green cryptos remains very bullish. ADA has propelled 32%, and DOT witnessed a 37% surge, just to name a few| FXMAG.COM Monetary policy For several months we have been writing about growing monetary tensions and the prospect for something about to break in the system. The history of Fed tightening episodes is that they generally end in a financial crisis, which drives a credit crunch. Current developments may or may not be the start of a similar sequence, but they definitely rhyme with the playbook. The yield curve has been suggesting for some time that the Fed is in overreach mode. At a minimum, the Fed now has a more balanced outlook to consider, which leaves it in a bit of a pickle. Inflation has not been falling fast enough and until last week, rate expectations were rising. However, raising interest rates further in an environment of potentially accelerating credit disintermediation increases the risk of recession. The period between now and the March Fed meeting will be important, but at this point a pause seems highly appropriate. However, we cannot rule out the Fed staying the course with another 25-basis point hike given the central bankers’ myopic focus on inflation and the labor market, which are at best coincident if not lagging indicators. Ultimately, the collapse of SVB should result in a lower peak federal funds rate and a greater probability of rate cuts in the second half of 2023 and first half of 2024 for the reasons discussed above. Asset prices and currencies The events of the past week are clearly negative for risky assets and bullish for fixed income. We believe this situation should ultimately result in lower US yields and a steeper curve than we anticipated prior to the bank failures. If the Fed is forced to cut rates in response to financial contagion even with inflation risks still elevated, that could ultimately lead to a much steeper US Treasury curve. The combination of lower Fed terminal rate expectations, the additional funding available through the new BTFP, and a partial reversal of quantitative tightening (QT) should be US dollar (USD) bearish. G10 creditor currencies, including the Japanese yen (JPY), euro (EUR), and Swiss franc (CHF) should benefit the most, in our view. The impact on emerging market currencies will depend on how much global equity markets fall. On volatility-adjusted terms, we would expect emerging market currencies, which should benefit from reduced Fed hiking expectations, to do better than US equity markets. Emerging market fixed income should fare okay in our view, although these bonds would not be able to keep up with declines in US Treasury yields in the event of a full-blown flight to quality. Looking ahead The Fed’s task of reining in inflation has become exponentially more difficult and could face additional challenges as the year progresses. Let us not forget that in a few months, we will also be focusing on US debt ceiling negotiations. The events of the past few days reinforce our preference to be long US fixed income, both outright and relative to European and Japanese bonds. We also believe these developments are ultimately negative for the USD. Definitions: The Federal Reserve Board ("Fed") is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. federal government that preserves public confidence in the banking system by insuring deposits. The Bank Term Funding Program (BTFP) was created to support American businesses and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. A global systemically important bank (GSIB) is bank whose systemic risk profile is deemed to be of such importance that the bank's failure would trigger a wider financial crisis and threaten the global economy. Disintermediation refers to withdrawal of funds from intermediary financial institutions, such as banks and savings and loan associations, in order to invest them directly. In Europe, a structural shift away from bank financing is occurring. The Senior Loan Officer Opinion Survey (SLOS) on Bank Lending Practices is a quarterly survey of approximately sixty large domestic banks and twenty-four US branches and agencies of foreign banks that is conducted by the Federal Reserve. One basis point (bps) is one one-hundredth of one percentage point (1/100% or 0.01%). The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. Quantitative tightening (QT) refers to a monetary policy implemented by a central bank in which it reduces the excess reserves of the banking system through the direct sale of debt securities from its own inventory. The Group of Ten (G-10 or G10) refers to the group of countries that agreed to participate in the General Arrangements to Borrow (GAB), an agreement to provide the International Monetary Fund (IMF) with additional funds to increase its lending ability.   WHAT ARE THE RISKS? Past performance is no guarantee of future results.  Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors. U.S. Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities. Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Source: Banking crisis lends uncertainty to macro outlook | Franklin Templeton

While the most prudent course of action may be to pause and digest the fallout from regional banking woes, the Federal Reserve is focused on inflation and will look to hike 25bp if conditions allow. With both higher borrowing costs and reduced access to credit set to weigh on growth and inflation, we continue to expect rate cuts in the second half of this year Banking stresses are a de facto tightening It has been a remarkable few days in financial markets. As recently as 7 March, Fed Chair Jerome Powell opened the door to a 50bp rate hike, citing concerns that “unacceptably high” inflation could last for longer given the tightness of the jobs market. Just two days later and troubles at Silicon Valley Bank prompted fears of contagion and turmoil, leading to a collapse in rate hike expectations for both the 22 March FOMC meeting and the future path of interest rates. In fact, from pricing 100bp of cumulative hikes, we were looking at a potential 75bp of cuts by the end of the summer at one point. For a long time, we have been on the more dovish end of expectations for interest rate moves in 2023. The concern was that this has been the most aggressive monetary policy tightening cycle for 40 years and by going harder and faster into restrictive territory you naturally have less control over the outcome. In such an environment we need to be alive to the risk of economic and/or financial stress and Silicon Valley Bank is a clear example of this. SVB and the failure of Signature Bank could be viewed as special cases but Credit Suisse’s woes are intensifying the nervousness that is rippling through the industry. Disrupted credit flow will hit growth and depress inflation Furthermore, it wasn’t just the rapid increase in borrowing costs that we felt was an issue for the economy. There has also been a rapid tightening in lending conditions too, which we felt would increasingly weigh on credit flow to the detriment of the economy. We imagine that the stresses created by the SVB fallout will only make banks more nervous about who they lend to, how much they lend and at what interest rate. With regulators also likely sensing a need to be more proactive, this could lead to a snowball effect of risk aversion and tightening of lending standards that hampers credit flows, weighs on the economy and allows inflation pressures to ease more quickly. The chart below shows that when banks pull back on credit (tightening of lending standards), unemployment soon starts climbing. That can quickly stamp out any residual inflation threat. Read next: EU goes head-to-head with the US in race to produce clean tech| FXMAG.COM Tighter lending conditions result in rising unemployment Source: Macrobond, ING 2% inflation isn't the Fed's only job We then need to look at the purpose of the Federal Reserve – “To promote the health of the economy and the stability of the US financial system” They do this via five functions: 1.           Conducting monetary policy to keep inflation at 2% and maximise employment 2.           Supervising & regulating financial institutions and their activities 3.           Promoting consumer protection & community development 4.           Promoting financial system stability 5.           Fostering payment & settlement system safety and efficiency Now at least three of those functions are scrambling to deal with SVB and potential issues in other regional banks and that, in the near term, should trump inflation. Then again, just as the European Central Bank did, the Federal Reserve can argue that it has different tools for different problems and the lending backstops and liquidity measures introduced can mitigate some of the current pain. Fed would prefer to hike rates with 25bp the most likely outcome Moreover, there are clearly major hawks on the Fed, hence Chair Powell opening the door to 50bp last Tuesday so we can’t dismiss the possibility of a rate hike. The fact that the ECB was able to raise policy rates by 50bp with limited market reaction also suggests a hike is doable. A 50bp Fed rate hike would though, in the market’s mind, unnecessarily heighten the recession risk in an environment of tightening credit conditions. A surprise rate cut, as predicted by one bank, would signal major concern at the Federal Reserve, which could in turn mean financial market worries turn into a panic that exacerbates recession risks. It is therefore between a 25bp move and no change on 22 March. The most prudent course of action, in our view, would be to pause to assess the damage, but leave the door open to a potential restart if the fallout is limited and inflation concerns persist. However, it is those inflation concerns that mean the Fed retains a desire to get the policy rate higher, should conditions allow. We also suspect the Fed will want to express confidence in the financial system and one way to do this would be to hike 25bp and signal in their forecasts that they think the Fed funds rate will end the year higher than it currently is. ING expectations for the Federal Reserve's new forecasts Source: Macrobond, ING   Ten days ago the expectation was that the Fed could be looking to get the Fed funds rate up to 5.5-5.75%, with some commentators talking about 6%. We doubt this will happen for the reasons already outlined. Instead, we think the Fed will likely raise their end-2023 central tendency projection to 5.4% from 5.1%. To indicate rate cuts in their forecasts for this year would give the green light to Treasury yields plunging and the dollar selling off, which the Fed would likely contend risks keeping inflation higher for longer. Rate cuts to be the key theme for 2H 2023 Our own view is that if they do hike 25bp on 22 March, we could get one final 25bp hike before the summer leaving the Fed funds range at 5-5.25%. This is not a conviction call given the likely damage to credit flow on top of the “long and varied lags” from monetary policy changes on the economy, in what has been the most aggressive tightening cycle for 40 years. Higher borrowing costs and reduced access to credit mean a higher chance of a hard landing for the economy. Rate cuts, which we have long predicted, are likely to be the key theme for the second half of 2023. Fed's new Term Funding Program will add liquidity, the reverse of what quantitative tightening achieves There will be a keen ear to any commentary from Chair Powell on the new Term Funding Program. The terms on this facility are so good that a significant take-up is quite probable. Initially, there may be reluctance to take advantage, so as to avoid raising red flags on individual names. But names will not be published, and once volumes build, more and more (mostly smaller) banks will likely use the facility. Note that this will re-build bonds on the Fed’s balance sheet. Not quite quantitative easing, but going in the opposite direction to the quantitative tightening process that’s ongoing (through allowing redeeming bonds to roll off the front end at a pace of US$95bn per month). Meanwhile, there is still some US$2tn of liquidity going back to the Fed through the reverse repo facility, the counter of which shows up in lower excess reserves than there would otherwise be. In fact, falling deposits in the banking system are generally reflected here too, with many such deposits showing up in money market funds, and from there into the Fed reverse repo facility. Directionally, we doubt there is huge room to the downside for market rates, especially given the virtual collapse seen in the past week or so. That said, further falls in the near term are entirely possible should the banking story deteriorate further. But so far the banking issues are more idiosyncratic than systemic, and a system breakdown has become far less likely in the wake of the extraordinary deposit support announced by the Fed in the wake of the SVB collapse. Plus, delivery of a 25bp hike still means the Fed is tightening, and there is likely at least another hike to come. In the background, we envisage a medium-term Fed funds rate equilibrium at 3%, so long rates should not really be shooting below this, barring exceptional circumstances. There is, in fact, a probable scenario where longer-dated rates are under rising pressure, even as the front end ultimately sees pressure for lower rates later in 2023. The inflation issue remains a significant one, and any let-off through interest rate cuts, or even the discount thereof, would leave longer rates less protected from residual medium-term inflation risks. FX: Financial stability concerns will still play a role Policy intervention by authorities in both the US and Switzerland has seen stress levels start to improve in FX markets over recent days. Traded FX volatility levels are softening and some of the risk reversal skews to protect against a stronger dollar have started to narrow. Notably, however, investors still resolutely want to own downside protection in USD/JPY – a key financial crisis hedge. Heading into the 22 March FOMC meeting, the FX options market is pricing a relatively subdued 0.7% range for EUR/USD. The thinking here is that the Fed, like the ECB, manages to get away with probably a 25bp hike without heaping more pressure on markets. But events in banking markets over the last week suggest investors will not be quick to return to the kind of macro drivers prevalent in FX markets over the last two years. We had been waiting for the turn in the Fed cycle on the back of disinflation/activity to break the huge inversion of the US yield curve and weaken the dollar. That yield curve inversion has broken – but it has been a financial crisis and not the macro proving the catalyst. Ultimately, we think events over the past week make it more likely that the dollar does indeed weaken later this year and we retain end-year EUR/USD and USD/JPY targets at 1.15 and 120. But in the interim, we need banking markets to settle. For reference, it took a couple of months from the start of Covid (February 2020) for conditions to settle and for the weaker dollar trend to win through. This is consistent with our call now for dollar weakness to be a cleaner story in the third quarter after continued volatility in the second. For Wednesday’s meeting itself, we do not expect too much volatility if conditions allow the Fed to hike 25bp and the dot plots do not surprise too much. An unlikely 50bp hike would be very bullish for the dollar – and EUR/USD could well trade under big support at 1.05 on the news. A pause could see the dollar weaken a little – but it would be understandable after recent bank failures. Our overall preference is to remain defensive this month and maintain overweight positions in the Japanese yen. Read this article on THINK TagsUSD US Powell Interest rates Federal Reserve 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

Federal Reserve rate decision – 22/03 – before the recent events around the collapse of Silicon Valley Bank, and the subsequent rescue package that followed, the calculus around this week's Federal Reserve rate decision had been a relatively simple one. Whether to raise rates by 25bps or 50bps. The sharp selloff in US banks and the ensuing volatility in the last few days appears to have trumped concerns about inflation, even with the recent payrolls report, which was another solid number. These concerns about the effects of rising rates on the banking sector and wider economy have even seen some suggest we might see a pause or even a rate cut this week. This seems somewhat of an overreaction, even with the recent volatility and could prompt the opposite effect by spooking markets further. By cutting rates the Fed would in effect be signalling there is a wider problem, prompting the very reaction they want to avoid. Powell's recent comments to US lawmakers have shown the Fed is becoming increasingly concerned about rising prices, and despite recent events this is unlikely to have changed. The wider question will be how much the FOMC sees fit to raise its dot plot guidance when it comes to the number of rate hikes to expect over the rest of this year in light of recent economic data. There had been some argument, prior to SVB that the Fed should upshift to a 50bps rate hike, however, that would be compounding one mistake with another. Given the strength of recent economic data, it would have been wiser for the Fed to have done 50bps in February and not downshifted to 25bps, however, that's ancient history now. A move back to 50bps would signal the Fed made a mistake and is being reactive. Much better now to hike by 25bps this week and guide to further rate hikes of 25bps in the coming months, while changing their forecasts for GDP and inflation. Bond markets had appeared to have adjusted to the new dynamic of higher rates for longer, and in spite of the recent volatility financial conditions are now tighter than they were at the start of February. How Powell manages market expectations this week, especially with respect to how recent events have affected this week's decision will be as equally important as the decision itself. A rate hike of 25bps still seems the most probable outcome, with the bigger risk being that he overcompensates after the market's buoyant reaction to his February press conference, and negative reaction to his testimony to US lawmakers. He needs to steer a middle ground. Minneapolis Fed President Neel Kashkari has always maintained a terminal rate of 5.4% is his base case and market estimates did briefly move up to those levels earlier this month, although we have since fallen from those peaks. Inflation is now starting to fall back, even as core prices remain sticky. The recent volatility has seen markets start to price in rate cuts later this year, although this could change if things start to calm down. If inflation remains sticky, rate cuts seem highly unlikely anytime soon if the Fed is to get back to its 2% target, and that's something the markets haven't yet come to terms with.

We saw a huge decline in commodities prices - was it about higher temparatures in the USA? Let's hear from Andrey Goilov from RoboForex. Andrey Goilov: An unusually warm winter in 2023 in the US could be the main reason for a number of declines in commodity prices, such as the prices for crude oil, oil products, gas, and other assets.Andrey Goilov: With energy demand normally increasing in winter, demand for energy carriers becomes higher as more fuel is withdrawn from reserves for heating purposes. The December 2022 to February 2023 period was expected to be cold, and asset prices were based on this forecast. However, weather conditions turned out milder, as a result of which expectations were not met. Read next: Microsoft, Amazon and Google increased by nearly 15% last week| FXMAG.COM Andrey Goilov: In the US, this was well displayed in the Department of Energy's weekly reports on commercial oil reserves. Towards the end of winter, the figures increased noticeably. This, among other things, put pressure on the price of crude oil. Naturally, weather conditions are just one of the factors negatively affecting oil prices Andrey Goilov: Naturally, weather conditions are just one of the factors negatively affecting oil prices. There are many other reasons to sell black gold. However, in this case, it was the average daily temperature that became a persistent fundamental trigger for the decline in crude oil prices. Visit RoboForex

Emergency Fed support for banks is at Great Financial Crisis proportions on some measures. Deposit flight from smaller banks remains a worry to boot. It should not be, but is. That said, there is wider evidence pointing to no material rise in angst at a regional level in the past week. It's early days, and things can still turn sour. But a silver lining it is   It’s been two weeks since Silicon Valley Bank went down. The question now is where are we. And more important, where are we going to. We are at the early stage of some banking sector naval gazing at a minimum When Lehman Brothers went down on 15 September 2008 we were already at a deep stage of the subprime crisis. The troubled Bear Stearns had been taken out by JP Morgan six months prior to that, and the Federal Reserve was already in rate-cutting mode. Here, we are at the early stage of some banking sector naval gazing at a minimum, and facing worries on the stickiness of deposits in the smaller banks. If we add all those small banks up they quickly become systemic, which is why they have our full attention. Which is why their deposits are now implicitly insured. But if there is deposit flight regardless, then such banks will (have to) disappear. Not our base case, but that would be a painful process, effectively a managed crisis. Silicon Valley Bank, while not small, was nowhere near as systemic as Lehman’s was. It’s balance sheet was also far less complex, and counterparty linkages less damning. The same can be said of First Republic Bank, which has received a dig-out deposit boost from the larger US banks, but remains under considerable pressure. Deposit flight is a risk for most banks, and especially for the smallest ones right now; significant flight has already been seen. Silicon Valley Bank, while not small, was nowhere near as systemic as Lehman’s was While we can hypothesize on what’s to come (and we will), let’s first look at the evidence coming from take-up of the Fed’s exceptional liquidity measures. Here, there is good news and bad news. Let’s take the bad first. Data released on Wednesday show that loans provided by the Fed to banks rose to US$354bn. That’s up from US$15bn before Silicon Valley Bank went down. It’s also historically high, comparing with a peak of US$440bn seen during the Great Financial Crisis. There are also some differences versus 2008. Back then, most of the loan support was through the Primary Dealer Credit Facility (which provided overnight liquidity to primary dealers) and the Money Market Mutual Fund Facility (basically helped money market funds meet some redemptions and boosted liquidity in the asset backed commercial paper market). Here the focus was on the functioning of the repo and money market funds. The very heartbeat of the system was in threat. A very different dynamic to today. Federal Reserve support almost as high as during the Great Financial Crisis (US$bn) Source: Macrobond, Federal Reserve, ING estimates   Fast forward to today, and the breakout of the US$354bn lent is very different. Some US$110bn has been provided through the discount window. This is the traditional means by which banks can access emergency liquidity. This had typically been provided at emergency terms too, but the Fed softened these and extended the available tenor. The volumes here are similar to the peaks seen during the Great Financial Crisis (peaked at US$117bn at end-October 2008). The good news is the latest number is in fact down from the US$153bn drawn in the previous week, which suggests a calming (even if that was a calming from the highest Discount window drawdown on record). The silver lining is that in the past week there was no perceptible increase in the use of emergency funding facilities At the same time, use of the new Bank Term Funding Program rose to US$54bn, up from US$12bn in the previous week (the first week of its existence). This facility is an alternative to the Discount window, the major differences being a 12-month tenor and better pricing terms. It’s a means to liquifying hold-to-maturity bond portfolios, and even sub-par priced bonds get liquidity back priced at par (the bond redemption value). Basically, the fall in the use of the Discount window was offset by a rise in the use of the Bank Term Funding facility. The silver lining is that in the past week there was no perceptible increase in the use of emergency funding facilities. Recourse to Discount Window and other facilities (US$bn) Source: Macrobond, Federal Reserve, ING estimates   Also, we know from official commentary that a large chunk of the use of these facilities was for First Republic Bank, and if that’s the case, it’s likely that the rest of the banking system were not big takers. Also, if we look at the provision of liquidity and other interactions at Regional Fed Banks, there was no material evidence of a rise in angst at a regional level. No material evidence of a rise in angst at a regional level Most of the rise was at the New York Fed and the San Francisco Fed in the previous week, which most likely was a direct consequence of Signature Bank in New York and Silicon Valley Bank and First Republic Bank on the West Coast. Breakout of Regional Fed interactions with local banks (US$bn) Source: Macrobond, Federal Reserve, ING estimates   A final important aspect to this is the loans provided as a corollary of the Federal Deposit Insurance Corporation provision of support, where all deposits at Signature Bank and Silicon Valley Bank were made whole. That now sums to US$179bn, which includes the US$36bn increase for the latest week.   On the asset side of bank balance sheets, the sub-par pricing of hold-to-maturity bond portfolios is no longer an issue, as they can be liquified at the Fed, at 100%. Mortgages can also be liquefied through exchanges with Freddie Mac and Fannie Mae, but valuations at the point of exchange is more open to interpretation. Liquidity is king right now, which makes things tough for the banks, as their job is to transform liquidity into 'assets' that are subject to illiquidity and / or price uncertainty. Right now, many small banks need that liquidity back, and there's the rub. It does not have to go wrong though, and looking at the hard evidence away from financial market vaguaries, evidence over the past week suggests that things are at least not taking a deep dive here in the US. That of course can change, but the latest week has in fact seen some stabilisation. Read this article on THINK TagsUS banking sector Federal Reseve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US consumer confidence improved in March despite concerns about bank failures and what it might mean for deposits. It supports a narrative of near-term spending strength, but higher borrowing costs and reduced access to credit are major headwinds while falling house prices and the potential restart of student loan repayments are additional challenges US consumer confidence strengthened in March despite unsettling news surrounding banks Consumers shrug off banking worries The Conference Board measure of US consumer confidence strengthened in March, rising to 104.2 from an upwardly revised 103.4 (consensus 101.0). The present situation index dropped from 153 to 151.1 while expectations rose from 70.4 to 73.0. This is a positive surprise given the unsettling news surrounding the banks and concerns about the safety of deposits within them. The decline in equity markets was also expected to drag the index weaker. Instead sentiment improved, which may be a function of lower fuel costs, the ongoing tight labour market and rising wages. This Conference Board's consumer confidence index has historically reflected labour market strength more than the University of Michigan measure, which seemingly is more sensitive to cost of living/inflation issues. Nonetheless, it is an encouraging sign that households are prepared to shrug off the bad news from the banks (the cut-off for survey responses was March 20, which was just over a week after Silicon Valley Bank failed). Assuming stability returns to the banking sector, the improvement in sentiment points to ongoing healthy consumer spending growth in the near term. But pressure on household finances will likely grow Longer term, the lagged response to higher borrowing costs together with the likelihood that credit availability will become more restricted due to the fallout from recent bank turmoil means we retain a cautious bias on the prospects for consumer spending in the second half of 2023. In this regard the current deliberations in the Supreme Court surrounding student loan repayments is also an important story. Before the pandemic struck the average monthly payment was nearly $400, so if the challenge to President Biden’s debt forgiveness plans succeeds and repayments restart from September, the hit to the household finances for millions of Americans would be very hard indeed. Falling house prices are another challenge We also had US house prices data earlier. The S&P Case Shiller house price index fell 0.4% month-on-month nationally in January, the seventh consecutive monthly fall. This leaves prices 2.6% higher than in January 2022. Out of the 20 major cities in the US, only Miami experienced a MoM price rise in January (0.09%). Every other city experienced a fall with Las Vegas, Seattle, San Francisco, Phoenix and Dallas all experiencing price falls of 1% or greater. In fact, San Francisco prices are currently 13% below their May 2022 peak while Seattle prices are down 11%. Cities on the Northern and Eastern side of the US are holding up better, with New York experiencing a 2.3% decline from the peak so far, Chicago and Cleveland down 1% and Atlanta down 1.7%. US house price index level, 2006=100 Source: Macrobond, ING Further price falls to come With mortgage rates having doubled over the past 12 months, resulting in mortgage applications halving, we expect the gradual downtrend in prices to continue. We see little reason for a turnaround in demand anytime soon given that this time last year a monthly repayment of $1750 would finance a $400,000 30Y fixed rate mortgage. Today a monthly mortgage payment of $1750, would only get you a mortgage of $280,000. Only a lack of housing supply prevents a more rapid correction in prices. Should the economy slow and unemployment start to rise the risk of more pronounced price declines will obviously increase. Moreover, to return the US to the long-term house price-to-income ratio for 4.2 times income, prices need to fall by around 20%. Read this article on THINK TagsUS Spending House prices Confidence 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

Treasuries were flat to cautiously sold on the short-end and capital flew into riskier assets as bank stress further waned on Wednesday.   The US 2-year yield consolidated above the 4% mark, gold retreated to $1955 per ounce this morning, whereas the S&P500 rallied 1.42%, pulled out the 50-DMA offers and closed above the 4000 mark. Nasdaq 100 rallied nearly 2% and entered bull market.  If you look at the equity markets today, you could hardly guess that there is still a bank stress going on underneath, which threatens credit availability and calls for a potential recession.   The falling yields, and more importantly the waning volatility on bonds help keeping the bulls in charge.   But it's important to remember that sentiment remains fragile after such a shaky month for banks; commercial bank deposits are trending lower, as higher-yielding savings alternatives like treasury bills and money market funds amass decent inflows. That's not only messing with the broad-based market pricing, but also blurs the central bank expectations.  And more importantly, if attention could finally shift to economic data, and economic data is not ideal, we could see the winds change rapidly direction in sovereign bonds pricing.   And when I talk about unideal economic data, I really think of a sticky inflation – which would require further rate hikes from the Federal Reserve (Fed), and other central banks.   US GDP and EZ CPI in focus  Due today, the US will reveal its latest GDP update. The expectation is that the US economy grew 2.7% in Q4 with a stable GDP price index at around 3.9%.   While higher-than-expected inflation indicator is bad, resilient growth could see a positive market reaction on thinking that... we are almost done with Fed rate hikes, and the economy is at a significantly better place compared to where we thought it would be by now.  If that's the case, the sovereign yields could continue to trend higher, without necessarily weighing on equity appetite.   A soft data, on the other hand, could further push the Fed hawks away, and boost equity appetite on softening Fed expectations.  But building long positions expecting recession is not the best strategy in the medium run.  In the Eurozone, March CPI data that will be coming in from this morning till Friday. And what makes the March numbers so special is that, from March, consumer prices of today will be compared only to the war months.   The latter is expected to have a significant cooling effect on the inflation data.   Read next: European indices - FTSE 100, DAX and CAC40 expected to open higher| FXMAG.COM The EZ inflation is expected to ease from 8.5% to 7.1% in March. BUT core inflation, which filters out energy and food prices, is expected to trend higher. The latter would keep the European Central Bank (ECB) hawks ready for a further rise toward 1.10 against the greenback.   In energy, tensions in Kurdish region of Iraq which leads to a 500'000 barrel decline in supply and the surprise 7.5-mio barrel decline in US crude inventories last week helped pushing the price of American crude to $74 per ounce. We are now back to the levels before the Silicon Valley Bank (SVB) collapse.  Yet, because the bank stress is not over just yet, and the impact on the real economy is yet to be seen, we could encounter a decent resistance into the $75/77 range, which shelter the 50 and 100-DMA.

Some relief that the Fed's emergency facilities were not further drawn upon in the past week is good. We're not out of the woods yet though, and further flight into money market funds point to some residual deposit flight from small banks. US PCE data today is set to remind us that the US is still a 5% inflation economy. Could be worse, but still not good enough Use of the Fed's emergency facilities holds steady, and money market inflows slow Borrowing at the discount window is down for the latest week, which is good. It's down to US$153bn, from US$164bn in the previous week. Given that this is regarded as an emergency window, falls here are positive, even if the absolute number is still quite high. This was offset by a practically equal and opposite rise in use of the Bank Term Funding Program, which rose to US$64bn, compared with US$54bn for the previous week. So overall use of the Fed's emergency liquidity facilities is overall flat to the previous week. No material wind down of use of emergency facilities, but importantly no evidence of increased panic Bottom line, no material wind down of use of emergency facilities, but importantly no evidence of increased panic, at least on this measure. Fed FDIC bridge loans were also flat on the previous week at US$180bn, which is less of a surprise, as there has been no material change here, given that no further deposits have required resolution. The Fed's foreign repo facility also eased lower in usage, from US$60bn to US$55bn. Overall decent data; no rise in level of angst. There has also been a US$66bn inflow to US money market funds in the past week. This can suggest ongoing deposit outflows from small banks. That said this week's money market inflow is less than the inflow seen in the previous week, which was US$118bn. Inflow volume to US money market funds has practically halved So the overall inflow volume to money market funds has practically halved, although there was less of a fall-off of flows into Government Funds, as Prime Funds (essentially non-government funds) saw another week of (mild) outflows. It seems that flows into Government Money Market Funds are an ongoing consequence of deposit outflows from small banks. And at least it's slowing. Market rates have not been up to much of late, but today's PCE data will be key. Market expectations for 0.3% month-on-month on headline and 0.4% MoM on core remain far too high for comfort. At least the Fed can get some solace from no material deterioration in the banking stresses, but the stress of inflation has not gone away. This is one of the reasons for market rates holding up recently, and for that 10yr to prefer to target the 3.5% area rather than breaking back down towards 3%. Fed balance sheet data shows a gradual shift to long-term funding support Source: Federal Reserve, ING Macro data moves back into focus, but with differing impact For EUR rates the CPI data starting with yesterday’s releases from Germany and Spain was a reminder that the European Central Bank is still not yet at target. As hikes get priced back in – the terminal rate notched up again towards 3.5% – we also witnessed a notable re-flattening of the 2s10s Bund curve which touched -40bp yesterday. The European Central Bank is still not yet at target Data will be the focus for the US in the upcoming week shortened by the Easter holidays. It will kick off with the ISM manufacturing on Monday, but attention will then switch to the labour market, starting with the JOLTS job openings (for February) on Tuesday, and culminating in the US non-farm payrolls on Good Friday. In between the market will also have to digest the ISM services. The question is to what degree the US market will be ready to lean into any robust data, given that it is already reckoning with an impending credit crunch which will likely make itself felt only gradually in the data. As for lingering banking stress, the still elevated reliance of the system on the Fed and further inflows into money market funds pointing to ongoing reshuffling of deposits will keep markets cautious of data that has yet to fully react to the turmoil. The front-end of yield curves (2s5s) can re-flatten temporarily on good data, especially in Europe Source: Refinitiv, ING USD markets' reaction is increasingly asymmetric to data US markets have been slower to adjust Fed pricing higher again as the worst of the turmoil has passed. The Fed is only seen pushing through one more hike at most. To be fair the Fed itself is not signalling more in its dot plot, but for the rest of the year the focus has pretty much shifted to rate cuts – 50bp from peak to year end are more than fully priced. Just ahead of the turmoil markets were eyeing maybe the possibility of one 25bp cut. US markets could be more reactive to any signs of deterioration With the focus having shifted that much to worries about the gradually unfolding real economic impact of the financial stress, we believe that reaction to this week’s data could be asymmetric. In the sense that going forward US markets could be more keen to jump on any signs of deterioration, while better data could easily be put aside as dated and not yet reflecting the additional tightening of financial conditions. Today's events and market view All eyes will be on today’s US PCE inflation. The relevant month on month core rate is seen decelerating to 0.4% from 0.6% previously. While pointing in the right direction this is still uncomfortably high and could set the stage for a final Fed hike. Barring any outsized surprises we think it should have limited impact beyond that, with the markets predisposed to the only gradually unfolding real economic impact of recent financial turbulence.    Read next: German inflation drops but there’s no sign of broader downward trends| FXMAG.COM On the back of the still relatively limited financial stress in the euro area, EUR curves have seen a more notable re-flattening already on the back of yesterday’s country inflation data. Today’s euro area CPI estimate is expected to show core inflation inching to a new record of 5.7% year-on-year. Given that they are acting against a different backdrop than the US, we see further room for underperformance of EUR rates. Also on today's calendar are US personal income and spending data as well as the final University of Michigan consumer confidence data for March. We will also get the eurozone unemployment rate, which is expected to stay at a low 6.6%. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

After the US regional banking crisis and the forced takeover of Credit Suisse sent shockwaves through global markets, concerns over the risk of contagion rippled across the financial sector. Fears may have subsided for now, but our Head of European Rates Strategy, Antoine Bouvet, says there are 3 key things that have changed for rates markets    US banking crisis: 3 things that have changed for rates From market expectations for central banks to shifts in European risk indicators, little remains unchanged for rates in the wake of the recent banking crisis in the US. But what exactly do those changes mean for financial markets – and where are we headed next? Read next: Italian inflation continues to fall as energy costs subside| FXMAG.COM   Read this article on THINK TagsUS Monetary policy Interest rates Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US non-farm payrolls (Mar) – 07/04 – the last US payrolls report saw yet another set of strong numbers with February jobs seeing a gain of 311k, while January was revised lower to 504k. The bigger question here is what a strong report will do to expectations around future rate rises The rise in the unemployment rate to 3.6% from 3.4% was treated as a slight negative, but it also coincided with a rise in the participation rate to 62.5%, which was the highest level since March 2020, and thus suggests that more US workers are returning to the workforce. We also saw a larger than expected increase in average hourly earnings to an annualised 4.6%, once again indicating some upward pressure in wages. With weekly jobless claims still averaging below 200k per week, and vacancies well above 10.8m it is quite apparent that despite recent concerns about the US economy, the jobs market remains resilient, despite recent high-profile announcements of job losses. The ADP employment numbers have also been shown to be solid rising to 242k in February, after slowing to 106k in January. As we look to this week's US non-farm payrolls numbers, expectations are for another 221k, with the unemployment rate set to remain steady at 3.6%, and wages set to increase 0.3% month on month. The bigger question here is what a strong report will do to expectations around future rate rises. Recent events have seen markets look at the prospect of a Fed pause due to concerns about financial stability.    Read next: Eurozone inflation drops as expected but core continues to rise| 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 added 236,000 jobs in March with the unemployment rate dropping to 3.5%. With next week's core inflation number likely to come in at 0.4% month-on-month the odds must favour a final 25bp Fed rate hike in May. However, economic challenges are mounting with higher borrowing costs and reduced credit flow heightening the chances of a hard landing The leisure sector continued to add jobs in March 236,000 The increase in March Non-farm payrolls   More jobs, less unemployment and high inflation point to 25bp hike in May US non-farm payrolls rose 236k in March, above the 230k consensus. There were 17k of downward revisions to the past two months of data while the increase in private sector payrolls was weaker than hoped, rising 189k versus expectations of a 218k increase. The details offer a mixed picture though. On the positive side the bulk of the jobs added were in full-time positions. Full-time versus part-time employment (millions) Source: Macrobond, ING   Up until last month all of the jobs added (on balance) over the previous 11 months were part-time with full-time employment having flat lined. Nonetheless, the job creating sectors remain government (+47k), leisure/hospitality (+72k) while private education/health continues its strong performance with a gain of 65k. On the negative side, construction, manufacturing, financial, retail trade and temporary help all lost jobs. Wages rose 0.3% MoM as expected, while the unemployment rate edged lower to 3.5%. As such the tight jobs market and decent job creation nudges up the probability of a 25bp rate hike on 3 May. Next Wednesday's CPI report is expected to show core CPI rising 0.4% MoM, more than double the 0.17% MoM rate needed over time to take the US back to 2% YoY inflation. If that happens it is difficult to see the Fed pausing in May barring the re-emergence of financial system stress. Banking stresses intensify the headwinds Nonetheless, employment data is a lagging indicator – the last data point to turn in a cycle – and the outlook is becoming increasingly challenging. The economy has experienced the most aggressive period of monetary policy tightening for 40 years while recent banking stresses are likely to disrupt the flow of credit to the economy. Add in the fact that business confidence (be it the Conference Board measure of CEO confidence or the National Federation of Independent Business' small business optimism index) is at recessionary levels and the housing market is in deep trouble and this is a toxic combination for job creation. Tighter lending conditions signal a big rise in unemployment in the second half of 2023 Source: Macrobond, ING   Indeed, even before the events at Silicon Valley Bank the January Federal Reserve Senior Loan Officer survey had shown banks were becoming more cautious with credit flow likely to be restricted. This will inevitably get worse, putting struggling companies and households under intensifying pressures. The chart above suggests we should be braced for unemployment to rise from late second quarter/early third onwards. Rising lay-offs and jobless claims are another warning sign This prognosis is also supported by the latest job lay-off and the revisions to initial claims data. There is always a delay between announcement of lay-offs and the actual job losses happening that results in a unemployment benefit claim. In addition, several states require all severance payments to have been finalised before a benefit claim can be lodged, which further extends the time frame. On top of that not everyone will immediately lodge a claim. The chart below suggests a big rise in initial jobless claims is coming imminently and this will translate into a rising unemployment rate, as already indicated by the Fed’s Senior Loan Officer survey. Surging lay-offs point to more pain to come (YoY% change) Source: Macrobond, ING Fed will reverse course as hard landing depresses inflation faster We are obviously worried about the outlook for the US jobs numbers, but the commentary from Fed officials indicates that they feel they have more work to do to ensure inflation pressures are eradicated. Market pricing currently has it at a 55:45 call for the Fed to hike rates 25bp on 3 May. Read next: National Bank of Poland press conference: No rate cuts in 2023| FXMAG.COM We think the Fed will indeed hike 25bp, but see the Fed rapidly reversing course later this year. The combination of higher borrowing costs, disrupted credit flow, weak business confidence and a crumbling housing market increase the chances of a hard landing for the economy, which will mean inflation pressures moderate more quickly. We see the potential for 50bp rate cuts at both the November and December FOMC meetings in such an environment. Read this article on THINK TagsUS Unemployment Payrolls Jobs Federal Reserve 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 rising interest rate environment was already weighing on the outlook for construction activity, but the recent stresses in the US and European banking sectors have added to fears that lenders will increasingly step back. The US looks especially vulnerable given the outsized role of small and regional banks We expect overall US construction value-added to fall 7.5% in 2023 Higher borrowing costs are already having an impact Central banks around the world have been hiking interest rates aggressively in response to the inflation threat. This has resulted in sharply higher borrowing costs for households and businesses, which has in turn weakened demand growth, particularly for both residential and commercial property. Transactions have slowed and property prices are under downward pressure, translating into weaker construction activity, most notably in the US. Construction value added (GDP measure) - constant prices 1Q 2020 = 100 Source: Macrobond, ING Banking stresses will restrict credit availability The recent banking turmoil is now adding to the downside risks for the construction sector. There is concern that the failure of Silicon Valley Bank and Signature Bank in the US and Switzerland’s Credit Suisse is symptomatic of broader stresses in the banking sector that could lead to a deterioration in the flow of credit to the economy, which is vital for many projects to go ahead. Even before these events, the Federal Reserve’s Senior Loan Officer survey noted a significant increase in the number of banks that were tightening their lending standards i.e. being far more cautious regarding who they lend to, how much they lend and at what rate. This is being seen across mortgage lending and corporate and industrial loans. The chart below shows that, as of the very beginning of 2023, banks were particularly nervous about their exposure to construction and non-residential property – the blue and orange lines moving higher show the proportion of banks that were restricting lending to the sector. We suspect that nervousness about lending is only going to have increased in the wake of recent events. US Senior Loan Officer survey: lending standards for property and construction related loans Source: Macrobond, ING US small banks are critical for commercial real estate and construction lending With the Federal Deposit Insurance Corporation (FDIC) only insuring deposits of up to $250,000 in the event of a bank failure, many wealthy individuals and corporate clients have been shifting their money out of small and regional banks and putting them in safer havens such as the big banks and government money market funds. This will inevitably make the impacted banks much more conservative in their lending practices, while heightened anxiety and the prospect of regulators taking a more proactive approach to dealing with banks will make the broader sector more cautious about lending. What makes this so problematic for the property market and construction sectors is that small banks account for such a high proportion of commercial bank lending to both residential and commercial property. As the chart below shows, banks with less than $250bn of assets account for two-thirds of the stock of all commercial lending to commercial property and more than a third of residential property lending by all banks. Stock of outstanding US commercial bank lending by small banks (% of total) Source: Macrobond, ING Tough times ahead for construction and real estate The non-bank sector (alternative lenders) have become an increasingly big player in the lending market (think Quicken Loans which owns Rocket Mortgage or Kabbage, for example). In fact, according to the Consumer Financial Protection Bureau, these types of lenders accounted for around two-thirds of mortgages originated. However, we doubt these lenders will avoid the stresses seen in the banking market and will likely be bracing for greater regulation in the wake of recent events. This is potentially a big hole for the large banks to fill. We doubt they will be able to do that even if they had the appetite. Given both property ownership and construction tend to be such highly leveraged industries, the combination of higher borrowing costs, reduced credit availability and the potential for price falls means the outlook for the sector is very challenging – with the US in a particularly exposed position. Residential outlook: downside risks everywhere The combination of ultra-loose monetary and fiscal policy as governments attempted to support their economies through the Covid-19 pandemic created the perfect conditions for property prices to boom. Cash-rich buyers that could also access cheap borrowing came face-to-face with a dearth of supply and prices jumped everywhere; including 42% increases in both the US and Canada, while the average price in Mexico is up 24%, according to the Federal Mortgage Company. Residential property prices (YoY%) Source: Macrobond, ING   The chart below shows that mortgage rates have jumped over the past year in response to central bank actions. In January 2022, borrowers could take out a $400,000 30Y fixed-rate mortgage and their monthly payment would be $1,750. Based on today’s US mortgage rates, if that person were to pay the same $1,750 monthly payment, they would typically only be able to borrow $280,000. Typical mortgage rates for a new home purchase (%) Source: Macrobond, ING   This means that affordability has been hit hard with demand for mortgages for new home purchases halving and property transactions collapsing. Existing home sales are down 30% from their October 2020 peak, while new home sales are down 38% from August 2020. While there has been a recent uptick in new home sales we see this more of a reflection of the lack of existing homes to buy – note the chart below showing the recent breakdown in the relationship between new home sales and mortgage applications for home purchases. US mortgage applications for home purchase and new home sales Source: Macrobond, ING   Building permits and housing starts follow a similar pattern to new home sales, but we are not hopeful that these recent improvements are sustainable. The chart below shows that tighter lending conditions invariably have a damaging impact on the economy with unemployment likely to rise through the second half of the year. Lending conditions will tighten further through the first half of this year, which will intensify pressure on struggling businesses throughout the economy and implies that the unemployment rate could rise substantially. Tighter US lending conditions points to surging unemployment Source: Macrobond, ING   The combination of higher borrowing costs, reduced access to credit, and the threat of rising unemployment means a greater chance of a hard landing for the US residential property market and the economy more broadly. Rising unemployment has historically been associated with rising default rates and therefore the rising supply of homes for sale, which will hurt the outlook for residential construction considerably. Falling property prices at a time when construction costs and labour remain elevated (price rises have at least slowed back to more normal rates of increase) also means squeezed profit margins, which is another disincentive for construction. Read next: This year’s Hungarian budget is manageable, but 2024 looks bleaker| FXMAG.COM We see housing starts, which averaged 1554k in 2022, slowing to around an annualised 1200k rate by the end of this year, before rising back to around 1400k by the end of 2024. This is based on the assumption that slowing inflation allows the Federal Reserve to reverse course later this year and start to cut interest rates, that this stimulus works and also lending conditions improve. The consensus forecast is currently 1271k and 1350k respectively. Canadian price and construction risks are mounting Canadian house prices are already down 11% from their peak in response to rising borrowing costs and housing affordability that is even more stretched than in the US. The average Canadian home price hit C$817,000 last year – nine times the average household income, making the US property market look almost cheap, where the median home price is a “mere” 5.5 times household income. There is a greater risk of forced sellers in Canada vis-a-vis the US though. The standard mortgage in Canada isn’t the 30-year fixed, as it is in the US, but a five-year mortgage amortised over 25 years, which means that more households are exposed to changes in interest rates via a mortgage rate reset once the five-year period is over. On the other hand, Canada is less exposed to the strains that have emerged in the US banking sector. The largest six banks in Canada provide around two-thirds of newly extended mortgages, according to the Canada Mortgage and Housing Corporation. Canada’s banking sector looks relatively healthy and so we are less concerned about banks pulling back in their willingness to lend. Moreover, the Canadian jobs market has outperformed that of the US with employment 4.3% above the pre-pandemic peak, whereas in the US it is only up 2% on February 2020 levels. Demand should be further supported by rapid population growth, which is currently the fastest in the G7 at 5.2% between 2016 and 2021 versus 2.6% in the US. Mexico’s population grew 5.6% over the same period. We do expect to see a slowdown in the Canadian economy, reflecting the lagged effects of monetary policy tightening, but healthy fundamentals and strong exposure to commodities provide some insulation. We look for Canadian housing starts to slow to 225,000 in 2023 from 2022’s 263,000 before rebounding to 270,000 in 2024. Mexico should be more resilient In Mexico, house price rises have been far less extreme than in the US and Canada. This is likely because the majority of Mexican homes are either bought with cash or self-built or inherited given the high proportion of multigenerational homes. The number of home purchases financed by a conventional mortgage from a private financial institution is less than 10% in Mexico versus 70% in the US. Consequently, low interest rates have less of a direct stimulus regarding Mexican residential property transactions and construction. Around two-thirds of Mexican homes are built with the household's own resources while 18% of people resort to a loan from Infonavit (the Mexican federal institute for worker's housing) with the remainder using family loans. Therefore the jobs market is a more important driver of Mexican residential real estate construction. Employment is at record levels domestically, while the number of Mexicans employed in the US also hit a new high, allowing worker remittances to hit $59bn in 2022 versus $51.6bn in 2021, already up from $40.5bn in 2020. Consequently, higher mortgage costs and reduced credit availability that will hit the US residential market hard are far less of a hindrance in Mexico. Nonetheless, the high cost of building supplies has acted as a brake while a weakening in the US jobs market and the strong Mexican peso may slow the growth of remittances back to Mexico. Our view is that while Mexican residential real estate is likely to be relatively insulated from the US’s troubles, it is not going to be completely immune to the headwinds coming from the States. We expect Mexican residential construction to fall by around 5% between 2022 and 2023, versus 15% plus declines in the US and Canada. Non-residential: governments in the driving seat as credit dries up Over the past 12 months, non-residential US construction strength has been able to offset weakness in residential construction, but we are doubtful that this will continue to be the case given funding issues arising from the banking turmoil. As already highlighted, banks were becoming increasingly cautious about funding both property purchases and construction activity and we see this situation deteriorating further. Office spaces are particularly vulnerable given small banks are so heavily exposed already, while persistently high vacancy rates are likely to mean prices remain under pressure. In a recession with rising unemployment, there is the likelihood that demand will fall further. US construction spending levels (Feb 2020 = 100) Source: Macrobond, ING   Furthermore, US CEO confidence has collapsed since early 2022 and small business optimism has fallen below pandemic lows. Both signal recession and in this environment the private sector will be increasingly focused on cost containment rather than business expansion and capital expenditure. Higher borrowing costs, reduced credit availability and very weak business sentiment suggest the private sector will not be an engine of growth. Indeed, capex intentions surveys offer a gloomy outlook. Given the economic and financial interlinkages, Canada and Mexico are experiencing similar phenomena and this leads us to be pessimistic about the outlook for North American non-residential construction through 2023 and the first half of 2024. This means that government-financed and supported construction is likely to be the sole growth contributor in the US. The chart below of US non-residential construction highlights that government construction is barely a quarter of the total, and with the plans announced this won’t be enough to prevent a contraction in overall US spending. US non-residential construction $tr Source: Macrobond, ING   The Infrastructure Investment and Jobs Act totals around $1.2tr of spending over the next five years. It contains substantial funding for projects that range from public transport to the power system, and from climate resiliency to emerging technologies that can accelerate the country’s energy transition. This has now been followed up with President Biden’s Inflation Reduction Act which sets aside $260bn for energy transition tax incentives with money allocated for nuclear energy, renewable energy, and home energy efficiency and improvements. However, the Act also includes significant tax revenue-raising measures and in any case the allocated expenditure is over several years. As such, the government sector is unlikely to offset to the steep decline in private sector construction activity and we look for overall US spending to be down 7% this year. Canada and Mexico set to follow the US's lead Infrastructure spending is also a key plank of the Canadian government’s growth strategy, having promised more than C$180bn of funding over the next 12 years. Projects include public transport links, and improving broadband and energy infrastructure. The recent Canadian budget affirmed the intent to continue with these projects with additional money for the clean energy transition and freshwater protection. Long term, we remain upbeat on the Canadian construction outlook given population growth and a heavy emphasis on commodities, but it is difficult to see Canada avoiding a similar diagnosis as the US non-residential construction sector. Weak sentiment, an uncertain economic outlook and high borrowing costs will weigh on private activity and offset any spending increases from the government sector. In Mexico, there have been positive headlines generated by automakers, including Tesla and BMW, committing to new facilities, but the general economic uncertainty is going to remain a headwind for construction activity. Private construction may not be as hard hit as in the US or even Canada given the trend for nearshoring production for the US – the hit from Covid on global supply chains and geopolitical concerns is incentivising investment and construction activity in Mexico away from more distant trade partners. However, there appears to be little support from the government sector given the reluctance to increase debt levels. Moreover, concerns regarding government interference and the weakening of independent regulatory bodies and the associated worries surrounding transparency and accountability are also likely to be a hindrance for non-residential construction. Conclusion: US construction to underperform Central banks around the world are trying to get a grip on inflation. They all acknowledge that for this to happen borrowing costs need to rise and economic activity slow. Highly leveraged sectors such as property and construction are therefore going to struggle. The banking stresses mean that borrowers are not only going to have to pay more but are also going to be restricted in terms of the amount they can borrow as caution among lenders is heightened. The problem is particularly acute in the US, but there is a ripple effect in Canada and Mexico. With consumer and business confidence at recessionary levels, this paints a gloomy picture for the sector as a whole. The hope is that inflation will fall quickly through the second half of the year and this will open the door to interest rate cuts before year-end. We look for Canadian and US policy interest rates to head to 3% next year and this easing of monetary conditions and a gradual return of confidence in the banking system can allow for a more positive outlook in late 2024 into 2025. We expect overall US construction value added to fall 7.5% in 2023, with falls of 4.5% for Canada and 3% for Mexico (all in constant prices). Stimulus may allow for stabilisation in 2024, but meaningful growth may not happen until 2025. Forecasts for construction constant priced value added (YoY%) Source: Macrobond, ING Read this article on THINK TagsUS Real estate Mexico Construction Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US inflation slowed to 5% from 6% YoY, but the monthly increases in non-food and energy prices continue to run hotter than desired, giving the Fed justification to hike interest rates again in May, Nonetheless, higher borrowing costs and reduced credit availability mean the risks of a hard landing are on the rise and this will get inflation down quickly Lower gasoline prices led to a slowdown in inflation in March     Persistent core inflation means May rate hike still probable US consumer price inflation rose 0.1% month-on-month in March, below the 0.2% rate expected, but core CPI (ex food & energy) continues to run hot, rising 0.4% MoM, which was in line with expectations. That means the annual rate of core inflation rose to 5.6% from 5.5% despite the headline rate dropping from 6% to 5%. Moreover, at 0.4% MoM (0.385% to three decimal places) we are still running at more than double the 0.17% MoM rate needed to be averaged over time to bring the annual rate of core inflation back to the 2% target. Consequently, the odds still favour the Fed hiking rates a further 25bp at the 3 May Federal Open Market Committee (FOMC) meeting. The details show a 3.5% MoM drop in energy prices, led by a 4.6% drop in gasoline. Food prices were flat on the month while transportation prices fell 0.5%. Airline fares remain a big upward contributor, rising 4% MoM, but most other components showed evidence of a slowing trend in the rate of price increases. Read next: Hungarian inflation proves stickier than expected| FXMAG.COM Importantly, we saw a reduced contribution from housing with shelter up 0.6% MoM and owners' equivalent rent up 0.5%. These are slower than the 0.7% or 0.8% prints recorded over the past year, which is significant because housing costs carry the biggest weighting within the basket of goods and services used to calculate inflation. But inflation will slow as economic conditions deteriorate Despite the strength in today’s core inflation measure, we expect inflation to slow rapidly through the second half of 2023 as the decline in house prices, which is contributing to a flat lining in new housing rent agreements, feeds through into the CPI. US house price falls to eventually slow shelter CPI Source: Macrobond, ING   Higher financing costs are dampening demand in many other key components, most notably the new and used vehicle sectors. These two components also have a heavy weight in the inflation basket and further price falls look likely which will make overall inflation slow more quickly. Higher borrowing costs are now being accompanied by a rapid tightening in lending conditions due to recent banking stresses. Banks will become increasingly cautious in their lending behaviour, which will restrict access to credit and put up its cost, further weighing on the economy and eroding corporate pricing power. Weakening corporate price plans mean lower inflation Source: Macrobond, ING   This was again evident in the latest National Federation of Independent Businesses survey on the economy. The proportion of companies that said they raised prices over the previous three months dropped to 37% in March, the lowest reading since April 2021 (having hit 66% in March 2022). More importantly, the proportion of companies looking to raise prices over the coming three months is at 26% versus 52% twelve months ago. As the chart below shows, this has a good lead quality on core CPI and suggests sub 3% inflation may be possible by year-end.  25bp hike in May, but cuts will come Inflation continues to run ahead of the 0.17% MoM rate required to bring inflation to 2% year-on-year over time, but we are heading in the right direction. Even so the Federal Reserve remains nervous and appears inclined to hike rates 25bp again at the 3 May FOMC meeting. We think that will mark the peak for the Fed funds rate. The combination of higher borrowing costs and the tightening of lending conditions that will inevitably result from the fallout of the recent banking stresses heightens the risk of a hard economic landing. This will make it even more likely that inflation returns to the 2% target by early next year. The Fed’s dual mandate of price stability and maximizing employment gives them greater flexibility than most other central banks. Assuming we are correct that inflation slows rapidly through the second half of the year and the unemployment rate starts to rise, we see the potential for the Fed to cut rates by 100bp before the end of the year. Read this article on THINK TagsUS Interest rates Inflation Federal Reserve 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

Last night's Fed minutes didn't tell us much more than what we already knew from the post-meeting statement and Powell's press conference, with European markets finishing the day higher, while US markets slipped back. Banking turmoil and Fed The recent banking turmoil appears to have tempered the reaction function of many Fed officials in terms of how many more hikes are needed to keep a lid on prices, while the risks of a modest recession have increased, according to Fed staffers. The primary focus for now still remains on inflation which is still too high and sticky, and a labour market that is proving increasingly resilient. Yesterday's inflation numbers did little to suggest that another 25bps hike wasn't forthcoming even as headline CPI for March fell to 5% from 6%, rising less than expected on a monthly basis by 0.1%. The better-than-expected number initially helped to push 2-year yields sharply lower, however, this proved to be short-lived, given that on the core measure, prices rose on an annual basis to 5.6% from 5.5% in a move that on the balance of probabilities now is expected to see the Fed hike rates again by another 25bps at the next meeting in May. The bipolar reaction of bond markets serves to highlight the high levels of uncertainty there are about the future path of interest rates. There is certainly some optimism that prices are heading in the right direction and that inflation is slowing, however, there is also plenty of room for wishful thinking as markets continue to price in the prospect of rate cuts by year-end. This outcome still seems improbable given how long it has taken thus far for US CPI to come down from its peaks last year at 9.1% in June. On the core measure, we've remained steady at 5.6% for all of this year, and are only 1% below the peaks seen in September last year. Read next: Did you know that Warren Buffet has more than a 5% stake in Mitsui, Itochu, Mrubeni, Sumitomo and Mitsubishi?| FXMAG.COM Against this sort of stodginess in core prices, it's hard to imagine inflation falling quickly enough to justify the sort of rapid repricing which would prompt the Fed to start cutting rates only a matter of months after their last rate hike. It's especially hard to countenance when core CPI is still above the current Fed funds rate, and also well above the Fed's 2% target. On the plus side, we are seeing evidence that forward-looking indicators are heading in the right direction with today's March US PPI numbers expected to show a further slowing of price pressures. The recent prices paid numbers on the ISM last week showed a reduction in inflation pressures and these should be borne out in a fall to PPI final demand from 4.6% to 3%, while core PPI is expected to slow from 4.4% to 3.4%. Weekly jobless claims are also expected to be in focus after the surprise revisions higher that we saw come in throughout the month of March. Last week saw claims rise to 228k, while the previous week's number of 198k was revised up to 246k. The two previous weeks were also revised upwards by 56k and 38k respectively, reflecting a sharp reassessment of how the US labour market has been performing over the past few weeks. This is expected to continue this week with 235k claims expected. While higher than originally thought a couple of weeks ago, the claims numbers will need to go a lot higher before the Fed becomes concerned about rising unemployment.     Having seen the UK economy revised up to 0.1% GDP growth in Q4, thus avoiding the ignominy of a technical recession, the economic data since the end of last year has shown much greater resilience than many had feared at the end of last year. This has been particularly notable in the services sector, which after a weak Q4 has seen recent monthly PMI numbers recover strongly in February and March. Consumer spending has also picked up sharply with a lot of the recent retail updates showing that while consumers do have money to spend, they are spending it more judiciously. In January the UK economy grew by 0.3%, despite sky-high inflation, as consumer spending rebounded with retail sales gaining 0.9%. This was followed by a 1.2% gain in February, although sales volumes have lagged due to higher prices. Against such a backdrop, another positive GDP number for February could well go some way to increasing the odds of a positive Q1 GDP print for 2023, with expectations of a 0.1% gain, although index of services could act as a drag after a strong January of 0.5%. Construction output is also expected to rebound by 1% in February after a sharp -1.7% decline in January. At around the same time as the UK GDP numbers German CPI inflation is expected to be confirmed at 7.8% for March. In an encouraging development for the global economy earlier today the latest China trade numbers showed that the Chinese economy started to gain momentum in March, as exports surged by 14.8%, the first rise since September, while imports declined a less than expected -1.4%, suggesting that domestic demand was starting to recover after months of lockdowns. Despite this encouraging development, Asia markets had a mixed session, and this looks set to translate into a mixed open, with the CAC40 set to get off to a strong start after LVMH released a strong set of Q1 sales numbers after the close last night. Forex EUR/USD – pushed up towards the 1.1000 area yesterday, with the 1.1030 area as the next key resistance. Found support at the 1.0830 area at the start of the week, with key support just below that at 1.0780. GBP/USD – the main resistance on the cable sits at the high of last week at 1.2530. Strong support currently at 1.2270, with further gains towards 1.2660 still preferred while above 1.2250.   EUR/GBP – looks set for a retest of the 50-day SMA and trend line resistance at 0.8850, from the highs this year at 0.8970. Currently have trend line support at 0.8740 from the August lows at 0.8350. USD/JPY – still has cloud resistance at 134.50 which remains a barrier to further gains. Currently has cloud support at 132.50. FTSE100 is expected to open 12 points lower at 7,812 DAX is expected to open unchanged at 15,703 CAC40 is expected to open 38 points higher at 7,435

European markets underwent another positive session yesterday, driven by outperformance from the luxury sector, with the CAC 40 closing at new record highs, while the DAX and FTSE100 also eked out some modest gains. Another big fall in US inflation, this time in headline PPI for March as well as core prices is fuelling optimism that we could start to see a similar effect filter down into the CPI numbers in the coming months, thus bringing us closer to possible rate cuts later this year. This may well be true, however with the US labour market still holding up reasonably well it's hard to imagine the Federal Reserve will be in any rush to cut rates while the US economy continues to hold up reasonably well on the jobs front. This looks set to translate into a positive European open later this morning. Nonetheless, this optimism about a Fed pivot helped to drive US equity markets higher on the day, led by the Nasdaq 100, while the S&P500 posted its best close in two months, though it was notable that we didn't see a commensurate decline in US bond yields. Weekly jobless claims did edge higher to 239k, but continuing claims declined to 1.81m, in a sign that hiring patterns remain fairly robust. We'll also be getting a key look into how consumer sentiment has fared in March in the wake of the banking turmoil, with the latest US retail sales numbers, along with the latest Q1 updates from JPMorgan Chase, Citigroup, and Wells Fargo. After a strong start to the year US retail sales stalled in February slipping -0.4%, in the aftermath of the 3.2% surge seen in January. Personal spending also saw a similar slowdown in the same months, slowing from 2% in January to 0.2% in February. With all the concerns over bank runs in the US during March and consumers shifting their funds from smaller US banks to the biggest ones, consumer confidence managed to hold up pretty well. That doesn't necessarily mean that we'll see a similar pickup in retail sales. Read next: Canadian dollar: Next week, all eyes will be on the inflation data, which is expected to cool down further to as low as four percent| FXMAG.COM Expectations are for another weak reading of -0.4%, however, the caveat in that regard is that the US labour market continues to hold up well, while gasoline prices slipped to a 15-month low. This may help support spending in other areas of the US economy. The bigger test, however, will be in how the US banks fared in Q1 and more importantly, how lending to US businesses and consumers held up during what was a turbulent quarter for the sector. When JPMorgan Chase reported at the end of its last fiscal year, the bank set aside a rather large reserve build of $1.4bn, as a result of a big increase in credit costs to $2.3bn on the back of a deterioration in the economic outlook, with the bank saying that they have a baseline assumption of a mild recession. These concerns can only have risen further in light of recent events with the main focus on this US bank earnings season on how much the recent turmoil has hit the sectors profit numbers, not only in terms of the impact of loan demand, whether it be in mortgages or credit card lending, but also in terms of deposit inflow. A lot of SVB's clients moved their funds to JPMorgan and other US banks on the back of the collapse. Forex EUR/USD – pushed up through the 1.1030 area and to its highest levels this year, and on course for its highest levels in over a year. Now has support at the 1.0970 area, and below that at the 1.0830 area at the start of the week. GBP/USD – having broken above the highs of last week at 1.2530 we could see further gains towards 1.2660. While support at the 1.2270 level holds the bias remains toward the upside.   EUR/GBP – broken above the 50-day SMA and looks set to test trend line resistance at 0.8850, from the highs this year at 0.8970. Currently have trend line support at 0.8740 from the August lows at 0.8350. USD/JPY – while cloud resistance at 134.50 holds we could see a return to the April lows at 130.60. FTSE100 is expected to open 16 points higher at 7,859 DAX is expected to open 44 points higher at 15,773 CAC40 is expected to open 25 points higher at 7,505

Summary:  The inflation vs. recession debate continues to heat for the global markets even as a sense of calm is prevailing on banking stress. This week’s inflation data out from the US did not materially change the expectations of the Fed path as sticky core pressures remained the highlight. Risks on inflation remain tilted to the upside for H2 with activity levels in China improving and commodity prices surging higher again. That makes us question whether the pricing of rate cuts for this year may be too aggressive. Sticky US inflation despite mixed headline figures This week we had a host of inflation prints out from the US, but there was not much to absorb in terms of policy implications. The March CPI report was cooler on the headline and disinflation trends were also noted on the core and supercore measures. However, the supercore measure, which is preferred by Chair Powell as well, still trends somewhere in the 4-6% range, highlighting the stickiness and showing little conviction that inflation is on the way to fall below the Fed’s 2% target. The PPI report last night cooled both on headline and core measures, and negative M/M prints cheered markets as Fed rate cuts continue to be priced in for later in the year. However, February prints for PPI were revised higher for both the headline and core, suggesting it may be too early to put inflation fears behind. While it is reassuring to see disinflation trends continuing, the pace has been quite muted. Meanwhile, upside risks to inflation have not gone away. Average retail gasoline prices in the US are up 8% since the end of February and crude oil prices have also trended higher since the surprise OPEC cut. Banking crisis concerns have also eased, suggesting demand concerns could come back, and also get aided by China recovery gathering steam as indicated by PMI, credit and trade data this month. Meanwhile, labor markets continue to remain tight despite some recent signs of cooling, suggesting wage pressures have room to run. Can the Fed really cut rates this year? Markets are currently expecting a Goldilocks situation where inflation continues to cool and recession isn’t looking too bad either. This suggests equities can continue to trade sideways to higher and there will be little in the way down for the US dollar. But what happens when one of these assumptions take a turn for the worse? Read next: It seems that less-than-expected Ether hodlers want to unstake| FXMAG.COM Market expectations are currently pricing in one more rate hike from the Fed but 200bps of rate cuts in the next two years. So the risk of an inflation shock is far greater than that of a recession shock, and that is also the one which is more likely. Even if a swing higher in inflation doesn’t bring the market to price in more rate hikes in light of the financial sector risks, we believe the expectations of rate cuts this year is aggressive. So the risk/reward remains tilted towards a hawkish shift in Fed expectations, provided the bank stress does not deteriorate. Equity investors looking ahead at a potential Q1 earnings drag Bank earnings kick off today, and will be in focus to get a sense of how much tighter lending standards could get. We expect the deposit flight into big banks (from smaller regional banks) to offset some of the credit tightening concerns. Meanwhile, consumer and corporates are still flush with enough cash and less dependent on debt, which suggests the economy is somewhat more resilient to a credit crunch in the current cycle. Still, even as concerns of an economic recession remain subdued, equity investors will need to stay cautious of a potential drag from the upcoming earnings season. As inflation eases, companies are losing their pricing power, but wage pressures haven’t yet eased proportionally. This means there could be revenue misses, but more concerns are still on margin pressures. FactSet estimates Q1 earnings for S&P 500 companies could decline by 6.8%, the steepest decline since Q2 2020. If this was to materialize, it will be the second consecutive quarter of negative earnings growth signalling an earnings recession. Bloomberg consensus expectations are calling for a ~8% slide in EPS for S&P500 companies with most declines coming from healthcare, materials, IT and consumer staples while energy and utilities companies are still expected to post positive earnings growth. Singapore’s MAS pausing too soon? The Monetary Authority of Singapore, in a surprise decision, kept its policy settings unchanged at the April meeting after five rounds of tightening measures. The MAS did not change the slope, mid-point, or width of the SGD NEER policy band as it expects core inflation to ease materially by end 2023 while still noting that fresh shocks to global commodity prices could impart additional inflation pressures but they may be balanced by a sharper-than-expected downturn in advanced economies. Unlike some of the major central banks that have paused so far, the MAS did not openly signal that more tightening could come later on. Instead, growth risks seemed to weigh more heavily for Singapore’s central bank, which was a surprise given China reopening tailwinds are now starting to magnify as well. Still, what is getting clear is that central banks are ready to pause and let the effects of tightening flow through the system, rather than facing risks of a recession. Source: Macro Insights: Too soon to take inflation concerns off the table | Saxo Group (home.saxo)

This week saw US CPI declining nine month in a row. Thanks to David Kindley from Orbex, we can have a detailed look at the release. FXMAG.COM: Could you please comment on the US CPI after it's released? David Kindley (Orbex): The US Consumer Price Index (CPI) dropped for the ninth consecutive month in March to its lowest level since May 2021. Specifically, consumer prices overall increased 5% year over year, down from 6% in February and from a 40-year high of 9.1% last June, according to the latest release by the US Labor Department. Core inflation is still at a much higher level than the Federal Reserve’s target inflation rate of 2% David Kindley (Orbex): The report signaled that inflation continues to slow with consumer prices barely rising in March and gasoline prices dropping. That being said, core inflation is still at a much higher level than the Federal Reserve’s target inflation rate of 2%. Read next: EM Sovereigns: IMF remains cautious on World Economic Outlook| FXMAG.COM David Kindley (Orbex): While there are forward-looking signs that suggest inflation will slow further in the coming months, market consensus is that the Fed is still likely to increase key rates by another 25 basis points at its May 2-3 policy meeting. Should the Fed decide not to raise rates at their upcoming meeting, stock markets are likely to edge higher as this would signal an end to the Fed’s aggressive hiking cycle. For reference, the Fed has hiked its policy rate by 475 basis points since last March from a near-zero level to the current 5.00% rate.

Fed hawkishness indicates officials feel the need to do more to ensure inflation returns to target in a timely fashion, especially with consumer spending and jobs growth performing well in the first quarter. Recession risks are mounting and inflation pressures are moderating, which we think will result in the Fed reversing course in the fourth quarter  Federal Reserve Source: Shutterstock Retail sales confirm strong first quarter consumer spending story US retail sales fell 1% month-on-month in March, a worse outcome than the 0.5% drop expected. The trend is not great with four declines in the past five months (with a 3.1% jump in January the solitary gain). However, there was an upward revision to February (to -0.2% from -0.4%) while the 'control group', which strips out some of the more volatile components and historically better tracks broader consumer spending patterns, was not as bad as feared, falling 0.3% rather than by -0.5% as the consensus had expected. US retail sales components Feb 2020 = 100 Source: Macrobond, ING   Consequently, the three-month annualised growth rate for the retail sales control group (which strips out food, gasoline, building materials and auto dealers) is now running at 9.5% on a three-month annualised basis and 5.7% year-on-year. Combined with the hot core CPI MoM print (+0.4%) and the firm jobs story through the first quarter, it should keep the Fed in the mindset of hiking 25bp in early May. That certainly seems to be the message from the Fed speakers this morning. Fed Governor Chris Waller commented that core inflation has not shown much improvement and is still too high, meaning that the Fed’s job is not yet done. Indeed the recent data flow 'validate' the Fed’s decision to have hiked in March although he did at least acknowledge that the tightening of credit conditions in the wake of recent stresses reduces the workload of the Fed. Voting member Austan Goolsbee then warned that the Fed has "got to stop inflation". The combination of firm first quarter consumer spending and key voting Federal Open Market Committee members seemingly backing the case for more action means we are now pretty much 21bp priced for May versus 18bp earlier in the day. We do expect the Fed to raise rates by 25bp on 3 May. But headwinds are intensifying and inflation pressures are easing We think that will be the last hike though given the headwinds facing the consumer sector are intensifying and inflation pressures are easing. Indeed, rising job lay-off announcements, higher borrowing costs and tighter lending conditions (which will hit credit card spending and car loans in particular) plus falling house prices are never a good combination for consumer spending. This still accounts for around 70% of all economic activity in the US. Read next: The UK data that will make-or-break a May rate hike| FXMAG.COM Additionally, while industrial production was firmer than expected in March, rising 0.4% MoM versus the 0.2% consensus and February's growth was revised up 0.2 percentage points to +0.2% MoM growth, the details paint a weaker picture. Both manufacturing and mining output fell 0.5% MoM with all the strength in utilities, which jumped 8.4%. This will inevitable correct lower over the next couple of months as weather patterns stabilise. Manufacturing output is now 1.1% lower than in March 2022 and with the ISM remaining in contraction territory the outlook for the sector doesn't look good. Import prices are falling rapidly, implying downside risk for PPI and CPI Source: Macrobond, ING   Meanwhile import prices fell 0.6% MoM, lower than the -0.1% predicted with YoY import price inflation now -4.6%. The chart above suggests PPI could soon slow to below 2% YoY with a sub 3% CPI print before year-end a possibility. As such the combination of weaker activity and the prospect of rapid falls in inflation mean we continue to look for aggressive rate cuts, potentially amounting to 100bp, before the end of the year. Read this article on THINK TagsUS Retail sales Manufacturing Inflation Federal Reserve 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 US Federal Reserve could soon deliver the last hike of the current cycle. While 10Y yields have seen their peak already, it will need the imminent prospect of rate cuts to re-steepen the curves. We think cuts will come before the year ends, but the Fed is still pushing a higher-for-longer narrative keeping re-steepening reflexes at bay The Federal Reserve   Markets are expecting the Federal Reserve to hike one more time at the upcoming May meeting. It is widely assumed that this will also be the last time the Fed will increase rates, thus concluding the current tightening cycle. This warrants a closer look at how market rates have behaved around previous similar turning points. Below we illustrate market patterns around the end of the past four tightening cycles starting in 1994 through to 2015. The Fed could start cutting earlier and more substantially than markets currently price Every tightening cycle had its unique set of circumstances and a lot hinges on the ‘landing’ of the economy that the Fed achieves. A softer landing means that policy rates can remain at the peak level for a more prolonged time, such as happened in 1994-95 or 2004-06. Looking at the current cycle, markets fully discount a first 25bp cut six months from the peak, implying a relatively short period of stable rates. Our economists think the Fed could start cutting even earlier and more substantially than markets currently have priced.   Fed tightening cycles since 1994, including the current one Source: FRED, Refinitiv, ING 10Y yields are already looking downward from here Outright 10Y Treasury yields usually peak before or at the latest with the final Fed hike. They trended lower to turn around only after the first couple of cuts have been completed. For the current cycle, we are relatively confident that the peak since the banking turmoil has added the prospect of a credit crunch to the equation. Inflation trending lower, plus a flight from riskier assets, are the common factors weighing on longer-term rates post the Fed peak. Our own forecast sees 10Y UST yields falling toward 3% by the end of this year with the Fed itself seen lowering key rates to the same level by mid-2024. A pick up in 10Y rates thereafter should then largely come with brightening economic prospects. 10Y UST yields usually peak before or at Fed tightening cycle highs Source: Refinitiv, ING The re-steepening of the 2s10s curve usually only picks up once rate cuts are imminent For the yield curve, illustrated with the 2s10s UST curve, reaching the peak in the policy rate has usually marked the end of the more pronounced curve flattening dynamic. In the initial months, the curve proved quite stable. While the front part of the curve 2s5s in many instances still trended flatter, this was compensated by the 5s10s segment starting to steepen. Read next: Sticky UK inflation data helps unlock May rate hike| FXMAG.COM In other words, the 5-year part of the curve outperformed in anticipation that cuts would eventually follow a period of stable rates. Only once the prospect of rate cuts became more imminent, leading the 2-year rate to also follow lower, did the 2s10s curve start to display a steepening dynamic. The common observation is that flattening, if it occurs, is limited and largely temporary. 2s10s UST: past the policy peak, re-steepening dynamics only pick up closer to actual rate cuts Source: Refinitiv, ING The Fed pushing a higher-for-longer strategy prevents near term re-steepening dynamic A key takeaway for the UST curve is that it is more the prospect of interest rate cuts that re-steepen the curve rather than the end of hikes – we currently have the first rate cuts pencilled in for the fourth quarter of this year. The higher-for-longer scenario that the Fed is currently pushing on the back of signs that the banking turmoil might blow over raises the risks that the central bank might not cut anytime soon. This would at the least prolong the period until we see the re-steepening dynamic taking hold. But as mentioned before, material curve flattening at this stage of the cycle is rare and usually not persistent.   Looking at current valuations going into the Fed’s next policy phase, the 2s10s curve remains historically flat/inverted to begin with, even after the snap re-steepening in the wake of the latest banking turmoil. That arguably leaves more room for the curve to re-steepen going forward and suggests that setting steepeners as the Fed peaks are a low-risk strategy. The real issue that market participants face is the high running cost of funding the curve-steepening strategy, especially if gains from the actual re-steepening take time to realise. That is also one reason why we see longer periods of relative curve stability. Read this article on THINK TagsRates strategy Rates Federal Reserve 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

Can the Fed balance its objective of fighting inflation—and help save banks in turmoil? Stephen Dover, head of Franklin Templeton Institute, opines. Originally published in Stephen Dover’s LinkedIn Newsletter Global Market Perspectives. Follow Stephen Dover on LinkedIn where he posts his thoughts and comments as well as his Global Market Perspectives newsletter.> Can central banks simultaneously provide liquidity to banks suffering sharp deposit withdrawals while also slowing money and credit creation by raising interest rates? In essence, can central banks quantitatively tighten and quantitatively ease at the same time? The actions of the Federal Reserve (Fed) in recent weeks raise these questions. Since the Silicon Valley Bank (SVB) failure, the Fed’s balance sheet has swelled by over US$290 billion1 as the central bank acted as a “lender of last resort” to US banks teetering on the edge of failure. The increase in the Fed’s balance sheet via loans to troubled banks unwound nearly half of its 2022 balance sheet contraction (quantitative tightening). For investors, the question arises: Can the Fed save banks and achieve its inflation objective at the same time? Must it choose between competing aims? The answer is yes, the Fed can do both. No trade-off is required. In what follows, we explain why and how—but we add a caveat. Just because the Fed can multitask does not guarantee that it will multitask well. Central banking is always more art than science, and the Fed has a challenging job ahead of it. Monetary policy versus crisis management There are several keys to understanding how the Fed can address two challenges simultaneously. Quantitative easing (QE) is a monetary policy strategy central banks use, when appropriate, to purchase securities (i.e., bonds), to boost commercial bank reserves and their capacity to lend. Quantitative easing also has a second impact; namely via direct purchases, it lowers longer-term interest rates. Both mechanisms stimulate economic activity. The opposite process, called quantitative tightening (QT), takes place when central banks unwind their balance sheets by selling bonds, which reduces commercial bank reserves (and hence lending capacity) and pushes up longer-term interest rates. Read next: Earnings season: Tesla stock price slipped after yesterday's news. The best selling car in Q1 was Model Y| FXMAG.COM When banks such as SVB experience bank runs, their depositors are shifting their preference (in real time and very fast) from bank deposits to either cash or to bank deposits with safer banks. To prevent a disorderly bank failure, the Fed will make loans to banks suffering large depositor withdrawals. But those loans don’t create excess reserves or fresh lending opportunities. Rather, loans from the Fed replenish diminished reserves just as they replace deposits on the liability side of banks’ balance sheets. These actions don’t increase the money supply or loanable reserves, nor do they lead to a fall in economy-wide interest rates. Of course, some depositors are merely switching deposits from failing banks to healthy ones, theoretically enabling those healthier banks to make more loans. But two factors will offset that impact. First, troubled banks requiring loans from the Fed to stay afloat will also cut their lending. The Fed also can simultaneously lend to struggling banks while selling bonds to healthy banks, withdrawing some of the Fed’s reserves and lending capacity. The Fed is not operationally or in any other way constrained from acting to prevent disorderly bank failures while also adjusting policy to meet its dual mandate of stable prices and maximum employment. Presently, the Fed—despite the actions taken to stabilize a few troubled US banks—continues to sell its holdings of US Treasuries and mortgaged-backed securities (MBS) at a rate of US$95 billion per month. Its actions to prevent a disorderly collapse of various commercial banks has had no impact on its pursuit of QT. The net result is fewer bank reserves in aggregate, a tightening of credit conditions and—as we saw at the conclusion of the most recent Federal Open Market Committee meeting—a willingness (and ability) to keep hiking interest rates. Here are some of the implications of the latest Fed actions: The Fed can have its cake and eat it too. While the massive increase in the Fed balance sheet reserves provides additional liquidity to select banks, its actions are not akin to QE. The Fed is responding to specific increases in money demand and portfolio shifts from deposits to cash at a few banks by making loans, not buying securities. And those banks are being wound down or sold off; they are not expanding their lending capacity. Meanwhile, the Fed is otherwise withdrawing bank reserves via asset sales (QT) and is hiking interest rates. The discount window does not involve a new money injection. Banks that borrow at the Fed’s discount window must deposit collateral in exchange for a loan. As a result, the Fed is exchanging less-liquid assets for more liquid ones—bonds for cash. This increases bank reserves only for banks that are experiencing reserve losses. And when properly conducted, is not increasing system-wide liquidity or lending. That is even more likely if, as can be expected, those troubled banks are forced to shrink their operations. Banks are given access to liquidity. The new facility the Fed has established, the Bank Term Funding Program (BTFP), is designed to help troubled banks meet depositor and creditor demands without having to sell assets (i.e., their bond portfolios) at a loss. In doing so, the Fed is lending at par against bonds that may be worth less than par, which could be seen as a sign of easing. But that measure should not be seen in isolation. To begin, it is a facility for banks facing funding problems, which are ones unlikely to be increasing their stock of illiquid loans. Second, The Fed can absorb whatever additional system-wide liquidity BTFP creates through the sale  of bonds to the remainder of the banking sector via open market operations. Long-term rates are probably not affected. Because open market operations can offset emergency lending facilities in monetary policy terms, the impact of the Fed’s actions should not have a material impact on interest rates, lending, spending or broader asset prices. The fact that nominal interest rates have fallen since the travails of SVB is not, therefore, due to a change in the Fed’s monetary policy stance, but rather reflects the probability that banking stresses will do some of the Fed’s work for it; namely, it will lead to some additional tightening of credit conditions as all banks adopt a more cautious approach toward their clients. QT continues. QT is a monetary-policy tool, whereas emerging lending facilities are intended to alleviate specific strains in the banking system. The pace of QT remains unchanged, as close observers of the Fed recognize. For example, according to the median forecast from the Survey of Primary Dealers, the Fed's balance sheet is expected to fall from 35% to 25% of nominal US gross domestic product by the end of next year.2 How important is deposit reallocation? As noted, some of the shift of depositors out of at-risk banks found a new home in large banks, which are perceived to be “too big to fail.” Those banks clearly have higher deposits and reserves, placing them in a position to increase lending or securities purchases. Some might think the result is akin therefore to monetary stimulus. In all likelihood, that is wrong. The Fed is aware of deposit reallocation and has the tools to address it. Via bond sales, it can absorb any excess liquidity and, in doing so, it can raise interest rates. The Fed forcefully demonstrated that ability by hiking rates 25 basis points in March, even though jitters in the banking system had not fully abated.3 In sum, we can say two things with equal conviction. First, there is nothing that prevents the Fed from saving banks and simultaneously pursuing its monetary policy objective of tightening to fight inflation. The Fed has enough instruments to do both. Second, just because it can do both does not ensure that it will be successful in achieving its aims. Other banking or financial ructions could yet emerge. Many observers view the situation in US commercial real estate with trepidation, as a potential flashpoint for the next crisis. Equally, the Fed could still get it wrong on the economy. It might overtighten and produce an unnecessarily deep recession, or it might not tighten enough and end up having to battle endemic inflation. The good news is the Fed has the tools to meet the challenge. The question is, will it use them to good effect? Stephen Dover, CFAChief Market Strategist,Franklin Templeton Institute Endnotes Source: US Balance Sheet & Flows of MFI Sector, Federal Reserve Banks, Assets, Total, All Banks, USD, Macrobond. Source: Bloomberg Intelligence. March 28, 2023. Source: “The Bank Panic Will Challenge the Fed, but Its Inflation Fight Isn't Over,” Barron's. March 27, 2023.   WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in lower-rated bonds include higher risk of default and loss of principal. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. In general, an investor is paid a higher yield to assume a greater degree of credit risk. The risks associated with higher-yielding, lower-rated debt securities include higher risk of default and loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Source: Quick Thoughts: The Fed—quantitative tightening or quantitative easing? | Franklin Templeton

Despite tougher rules for tax credits, US electric vehicle sales (including plug-in hybrids) are expected to grow to 1.4mn in 2023, accounting for 10% of total light-duty vehicle sales. This puts the US EV market in a better position to achieve the 2030 ‘step-up scenario’ we’ve outlined, but it will take time to form a mature domestic EV value chain US EV-sales are catching up on the back of support We argued in our previous article that while the uptake of electric vehicles (EVs) in the US has been slow, times are changing. Indeed, the Biden administration has passed the landmark Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), which allocates federal spending to improve EV charging infrastructure and offers considerable tax credits, respectively. This new policy environment is encouraging automakers to raise the level of EV ambition, triggering extra demand from consumers, and facilitating higher long-term EV growth in the US, despite challenges from cost, infrastructure, and supply chains. On the back of the support framework, we have seen the US catching up in electrification with EV sales (full electric + plug-in hybrid) accelerating to 7% of total light-duty vehicle sales in 2022.  Strict qualifying rules for tax credits The landmark Inflation Reduction Act will invest about $12bn in clean vehicle credits, extending the EV tax credits of up to $7,500 per vehicle. However, there are strict requirements for an EV to qualify for the full tax credit. These include price caps on EVs, income caps on customers, a rule that the final assembly of EVs must be in North America, as well as a series of requirements on battery and materials origins: EVs selected on price, income, assembly and sourcing Retail price cannot exceed $80,000 for an electric van, SUV, or pickup truck, and $55,000 for any other type of EV. EV buyers' gross annual income cannot exceed $150,000 for a single taxpayer, $225,000 for a head of household, and $300,000 for a married couple filing jointly. Qualifying EVs' final assembly must be in North America. 50% of the value of the battery components must be manufactured or assembled in North America. 40% of the value of the critical minerals needs to be extracted or processed in the US or a country with which it has a free trade agreement (FTA), or be recycled in North America. Source: US Treasury New qualification rules put locally-built models at the forefront In late March 2023, the Treasury released battery and material sourcing guidelines for EV credit eligibility under the IRA. The guideline specifies that starting 18 April 2023, to qualify for full tax credits, 50% of the value of the battery components must be manufactured or assembled in North America, and 40% of the value of the critical minerals needs to be extracted or processed in the US, or a country with which it has a free trade agreement (FTA; discussed later), or be recycled in North America. Alternatively, if an EV model meets the price, income, and final assembly requirements, but is only able to meet one of the two sourcing criteria, then the consumer will only be able to claim half ($3,750) of the total credit. EV tax credit budget provides sales and industrial traction The IRA is set to give a boost to the development of the US EV manufacturing industry. If the $12bn tax credit spending does stay in place, a maximum of 1.6mn eligible EVs can get the highest amount of credits. This should drive the scale-up of EV sales and production in the following years, as well as the introduction of new (more affordable) models. The tax credits won’t be enough to secure long-lasting support but the total cost of ownership of EVs is expected to come down in the run-up to 2030 and the subsidies create a foundation for further growth. Prominent American EV-producing brands benefit in the short run The new rules provide further clarity on the implementation of EV policy following rules announced earlier this year on price caps and the categorisation of EVs. Admittedly, the new guidelines will result in a much smaller number of EVs eligible for the highest level of credits, with some qualifying for half. The new rules will put the qualifying models in a more attractive position. The most prominent Tesla models (Y and 3) can qualify for the full tax credits; so can GM (Chevrolet) on multiple models using its own Ultium batteries (applying nickel-cobalt-manganese-aluminum chemistry). For Ford, the F150 lightning fully qualifies. Although the VW ID.4 is able to qualify for full tax credits, many other EV models from European (e.g. VW and BMW), Korean (e.g. Kia, Hyundai), Japanese (Toyota) and Chinese brands (e.g. BYD) are currently not able to. This will put temporary downward pressure on US EV sales in the short run. Auto manufacturers that will not be eligible may have to reconsider commercial strategies in the short run to stay competitive. Read next: FX Daily: European FX showing some resilience| FXMAG.COM Tesla still dominant, traditional manufacturers to gain ground The full electric US market is clearly still dominated by Tesla, but its market share slipped from some 75% in 2022 to just under 65% in 2022 as full electric models from other brands like Ford ramped up EV production. Given the composition of the total light vehicle market and the available subsidies, other manufacturers including Ford, GM and VW are likely to keep gaining market share, especially when plug-in hybrid EVs are included. In a response to the increased competition, Tesla has cut its base prices more than once to continue its strong volume growth.       Tesla still by far the largest in full electric, but Ford, GM and VW are gaining ground New full electric light vehicles (full electric) sales shares in the US (2022) Source: InsideEVs, ING Research GM still overall market leader in light-duty vehicles followed by Toyota and Ford New light vehicle sales shares in the US (2022) Source: S&P/IHS, ING Research Car manufacturers plan to adapt supply chains EV manufacturers looking to qualify for the tax credits will need to reroute supply chains, which is not an easy task. But recent commentary and announcements suggest several manufacturers are incentivised by the subsidy framework. Among them also major US market player Toyota, which is trying to catch up in electrification. This means they need to form new business partnerships with new suppliers. It also means the US will not only need to rely more on exports from existing free trade partners such as Chile, Australia, and Canada, but also from more free trade partnerships, especially with countries with ample critical mineral reserves (China currently dominates global mineral processing but not mining). The US has recently achieved a free trade agreement (FTA) with Japan; it is also making progress in striking a similar deal with the EU.    As for the battery component requirement, it is true that China supplied a massive 75% of global production in 2021, but EV manufacturers can still meet this requirement by assembling the batteries in North America. That is why we are seeing manufacturers such as Tesla, BMW, VW, GM, Hyundai, Stellantis, Ford, and Honda investing in building battery manufacturing capacity. They are also ramping up EV production in North America to meet the final assembly requirement. In the US, 70% of EV sales were assembled or produced domestically in 2020—this number is lower than those in China (98%), Japan (79%), and Europe (76%). On the back of incentivised domestic production, the ratio in the US can quickly increase in the next years. China still has a dominant position in the EV (battery) supply chain Share of China in the global EV battery supply chain (2021) Source: IEA, BNEF, ING Research Subsidies remain important to support electrification For consumers, some EV models may not be as tempting without tax incentives. A more fundamental challenge is the stickiness of consumer preferences. According to a recent poll conducted by the Associated Press and the University of Chicago on US consumers, just 19% of the respondents indicated that they are ‘very likely’ or ‘extremely likely’ to buy an EV, with 22% saying they are ‘somewhat likely’ to do so. A lowered level of tax credits could mean a slower switch to EV purchasing. And importantly, EV costs are generally still not on par with those of internal combustion engines, and tax incentives have historically helped supercharge demand. In the US, the average price of an EV is $58,000, compared to an average of $46,000 for vehicles in general. This means more affordable models will have to be introduced to the market for wider adoption. On a positive note, with at least some tax credits available, we should see a shift in the profiles of EV buyers. EVs are traditionally sought by premium buyers, and there are adoption hurdles in charging infrastructure and driving range. But the tax credits can open EV purchasing opportunities to more people across more demographic and income groups. Car leasing is gaining popularity and will be a work around for subsidies One way to work around the requirements is through EV leasing, as leased cars are not subject to the sourcing or price limits. This way, EV producers will be able to access tax credits more easily and also give consumers an opportunity to try out EVs before they commit to buying one. Today, an increasing number of customers are choosing to lease an EV, and we expect this trend to continue in the future. Meanwhile, it is worth remembering that while leasing companies can pass the credits on to customers through lower prices, it is not guaranteed that they will do so. Resilient EV outlook for 2023: further growth to 10% of sales expected The sourcing requirements under the IRA could hit EV sales initially. However, the range of models qualifying is less restrictive than initially expected and we expect sales to catch up over the course of the year. The picture for 2023 is still positive, also because customers can claim for partial tax credits under the IRA. The fact that EV makers such as Tesla have been slashing prices will also probably encourage more consumers to buy EVs. The waiting list for the Ford F150 lightning is a sign demand is there.  With the positive momentum so far, we estimate that US passenger EV sales will rise to some 1.45mn for 2023, a 48% year-on-year jump which is the same as the increase in 2022. One considerable improvement will be the percentage of EV sales in total light-weight vehicles—we are maintaining our projection that US new EV sales will account for 10% in 2023, up from 7% last year. US EV sales forecast: heading to 10% of total sales Development of sales volume of EVs (BEB + PHEV) and share in total sales Source: BNEF, IEA, US Bureau of Economic analysis, ING Research 'Step-up' US EV scenario for 2030 more achievable The outlook for 2023, as well as other recent developments in the EV industry, suggest that the US is now in a better position to achieve the ‘step-up’ scenario we outlined, where the share of new EV sales (full electric + plug-in hybrid electric) reaches 50% by 2030. Company targets and policy support create a 'step up' environment  Companies in automotive, logistics, and retail industries are setting up ambitious electrification goals. Ford, for example, aims to produce 600,000 EVs globally this year, much of which targets the North American market. GM plans to sell 1mn EVs by mid-decade. All this will increase US EV manufacturing capacity and bring US EV supply closer to demand. We will see a more resilient US EV supply chain, as the IRA has already spurred $45bn of announced private-sector investment in the entire value chain with more to be expected. It is also crucial for EV manufacturers to plan early on, since establishing new supply partnerships takes time and the availability and prices of critical materials can fluctuate significantly. The Biden administration is proposing restrictive regulations to boost EV production, in addition to pure incentives. The US Environmental Protection Agency has announced tough limits on automotive tailpipe pollution; the rule is forecast to drive up the share of EV sales to two-thirds by 2032. Investment is being directed at improving the charging infrastructure. The IIJA is allocating $15bn to build more EV charging stations and electrify buses and ferries in the US. This investment is not overly generous, but it can still enhance consumer confidence. Companies are also making efforts. Walmart is adding 1,300 EV stations in the US by 2030; Mercedes-Benz plans to build 2,500 high-powered EV chargers across the US by 2027.   Despite the strict sourcing requirements for tax credits, the IRA can still incentivise more EV demand. In the long-term, the US is set to become a leader in the EV race, with enhanced domestic manufacturing capacity and a more mature supply chain. This will then have a supercharging effect on the US market, lead to better economics of EVs, and encourage more consumers to switch to buying one. Risks from the 2024 elections One clear risk that could affect our outlook for the US EV market in 2030 is the US 2024 elections. If Republicans take control of Congress, and if a Republican president is elected, the IRA risks being repealed, and the absence of tax credits would hurt US EV production and sales. Nevertheless, it is also possible that even if the IRA were to be repealed, there could still be bipartisan policy to support the EV industry. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

US Q1 GDP – 27/04 – having seen the US consumer recover strongly in January with a retail sales surge of 3.2%, the edge has come off a little in recent months as consumer spending slowed in February and March, by -0.2% and -1% respectively. The instability caused by the banking turmoil will also have affected economic output at the end of the quarter, although we probably won't know the full extent of that until we get later revisions. The strong labour market and resilience in wage growth seen in the first part of the quarter are likely to offer a strong personal consumption component. Expectations are for the US economy to slow slightly from 2.6% in Q4 to 2%, while personal consumption is expected to rebound strongly from the 1% seen in Q4. Bank of Japan rate decision – 28/04 – with the recent weakness in the Japanese yen, and it being the first meeting as central bank governor for Kazuo Ueda all eyes will be on the Bank of Japan this week to see whether Ueda lays out the ground for a possible tweak to the bank's current yield curve control policy. In comments earlier this month, Ueda was careful not to say too much that was different from his predecessor Kuroda. At his first press conference, Ueda stuck with the script of his predecessor by saying the current policy remained appropriate under current economic conditions.  With national core CPI in Japan currently at 3.8% and a 40-year high, it could be argued that a shift in policy is close, and could come by the end of Q2. On the flip side of that headline, CPI has slowed sharply from 4.3% in January to 3.2% in March, which is likely to offer encouragement to the doves, although the resilience of core prices, like elsewhere is a little concerning, and is likely to be a cause for concern.       Germany Q1 GDP – 28/04 – there is a distinct possibility that the German economy could slide into recession when the latest Q1 GDP numbers are released. Having contracted by -0.4% in Q4 we haven't seen a significant improvement in manufacturing PMIs over the quarter despite lower energy prices. If anything, economic activity has subsided with the March PMI sliding to 44.7 and its lowest level since 2020. Services sector activity has offered more encouragement with three readings above 50 over the quarter, although retail sales spending has been negative, sliding -0.3% and -0.4% in January and February.    Read next: This week the US Q1 GDP is released. On Friday, Bank of Japan may shock the markets tweaking its yield curve control policy| FXMAG.COM Associated British Foods H1 23 – 25/04 – seen some strong gains since the 10-year lows seen back in October last year, pushing to one-year highs back in February. The rebound in the share price has been long overdue but still remains below the levels we saw pre-pandemic. All of the retail sector has faced challenges over the past 3 years but ABF's diverse business model has seen the company decent numbers across all of its businesses. In February the Primark owner upgraded its full-year outlook on all of its businesses including Primark. Adjusted operating profit and earnings are expected to be broadly in line with the previous year, despite higher costs. Total sales in the Primark business are expected to be 16% ahead of the same period last year which was disrupted by the tail end of Omicron restrictions in the Netherlands and Austria. The operating profit margin is expected to be above 8%, compared to last year's H1 margin of 11.7%. UK sales are expected to rise by 15%, while European and US sales growth is also expected to improve, by 18% and 12% respectively.   Sainsbury FY 23 – 27/04 – despite the intense competition facing food retailers Sainsbury share price has been on a decent run since the record lows we saw back in October.  When Sainsbury reported just after Christmas Q3 total sales rose by 5.2%, with grocery seeing a rise of 5.6%. Christmas grocery sales saw an acceleration to 7.1%. On a like-for-like quarterly basis, sales rose by 5.9%, with the Argos business generating a decent uplift as shoppers eschewed the flakiness of a strike-ridden Royal Mail service, by doing their grocery and Christmas shopping all at once. Guidance for a full-year underlying profit before tax was kept unchanged at the upper end of the guidance range of £630m to £690m, despite concerns over price and margin pressures, which continue to act as headwinds. At the end of March according to the latest Kantar survey, Sainsbury saw 12-week sales growth of 6.9%, which while behind Aldi and Lidl compared very favourably to its other peers. At the end of January, it was revealed that Bestway Group had taken a 3.45% stake in the business and suggested it could take a larger stake. While this has helped push the share price to its highest levels in over a year the obstacles to a bid remain high in that Bestway would need to convince Sainsbury's other two big shareholders, the Qatar Investment Authority as well as Daniel Kretinsky's Vesa Investment fund that they have a credible plan to take the business forward. One upside is that Bestway's position as a wholesaler could offer synergies for Sainsbury in any future relationship, given that Tesco already owns Booker.          

In the previous week we asked Axel Rudolph to comment on the US PMIs, here's what we got. Axel Rudolph FSTA, Financial Analyst at IG, said: 'US Flash, that is to say preliminary, PMI for April came in at a better-than-expected 50.4 versus a downwardly revised 49.2 in March and a forecast 49. The April PMI thus hit its highest level since September 2002 and, together with a better-than-expected flash services PMI for April, shows that the US economy is once again expanding, having contracted over the past half year or so. Flash services PMI hit 53.7 in April, its third consecutive reading above 50, meaning that it is also expanding, versus a forecast 51.5 and a downwardly revised 52.6 in March. Flash services PMI hit 53.7 in April, its third consecutive reading above 50, meaning that it is also expanding, versus a forecast 51.5 and a downwardly revised 52.6 in March   Axel Rudolph: The solid data plays into the hands of those market participants who believe that due to the underlying health of the US economy the Federal Reserve needs to keep raising its fed funds rate to at least 5% and keep these higher for longer, putting stock markets under pressure.' Read next: IG analyst to FXMAG.COM: In my opinion commodity prices already reflect higher oil prices| FXMAG.COM

FXMAG.COM: For now market consensus points to a 25bp rate hike, what’s behind such a scenario?  In order to understand the strong consensus for a 25bp rate hike we may look at the possible reasoning behind such a decision and combine it with the method of exclusion to confirm our rationale. The Federal Reserve has indicated that its key priority is to drive down the inflation represented by the personal consumption expenditures (PCE) price index and, to a lesser extent, the consumer price index (CPI) while keeping the unemployment rate reasonably low. We can have a closer look at these measures to understand how well the current policy has been working. Historically, the PCE price index has been lower than the CPI one due to the different weights and groups of goods and services. As an example and reference point, from January 1995 to May 2013, CPI in the US was registered at 2.4% while PCE was 2.0% - largely in line with the target of 2.0%. In recent months, however, both indices have lowered from their highest levels in 2022 but are still considerably higher than this target. The core PCE price index's highest point was reached in February 2022 at 5.3% and it has been highly persistent despite the rising interest rate environment. If we assume the inflation target of 2.0% and the latest PCE price index of 4.6% in February, the Fed has managed to drive the inflation down only by 0.7 percentage points or 21% of the whole way to go. CPI, on the other hand, has seen a stronger decline since its highest number of 9.1% in June 2022. With the latest available CPI data of 5.0% and using it as the gauge for inflation we may consider that the Fed is more than halfway to returning inflation to its target of 2.0%. Considering the above facts, while also recognizing that Fed decisions may take longer to realize in the real economy, it may be likely that the point where no further interest rate hikes are needed may not yet be reached. Looking at the unemployment rate in the US, in January 2023 it fully recovered to the pre-pandemic level and reached its lowest level in more than 50 years at 3.4%. The latest available reading of the unemployment rate in March showed just a 0.1% percentage point increase from the historical low suggesting that the Fed may still see some room to allow the unemployment rate to increase in exchange for driving the inflation down to its target. Read next: It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy | FXMAG.COM We should also recognize that interest rate decisions are closely related to the national currency and its strength against other currencies. Taking into account that other major economies, such as the eurozone and the UK are lagging in terms of raising interest rates (they started raising interest rates later than the US and their key interest rates are currently lower than those of the US) as well as less successful in fighting inflation (latest CPI reading showed that inflation in the UK is still above 10%), it is possible that the ECB and BoE may have to continue raising interest rates also after the US commences its rate hiking cycle. This may result in the US Dollar losing strength against currencies in those economies where interest rates are still being raised. If we assume that the Fed is not willing to let the US Dollar slip further against other currencies, it may be motivated to keep interest rates higher for longer. Combining all the above reasonings in favor of the continuation of raising interest rates with the fact that in the previous two meetings FOMC elected to raise interest rates by 25 bp, a reasonable scenario for the May 3 meeting would be to continue the trend and raise the interest rates by the same amount to 5.00% - 5.25%. A higher increase may send a too bearish signal to the economy provoking a sell-off in the financial markets. And considering that the inflation is going in the right direction, there may be no sufficient reasoning for the Fed to reverse the trend of 25 bp interest rate hikes to larger ones. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. The personal opinion of the author does not represent and should not be constructed as a statement, or investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.18% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

US housing transactions and prices have surprised in the early part of the year as warmer weather lifted demand. Amid a dearth of supply, prices are being supported, but higher borrowing costs and tighter lending conditions suggest the outlook remains tough Source: Shutterstock Warmer weather boosts demand US home prices rose surprisingly in February, up 0.06% month-on-month versus the -0.4% expected according to S&P Case Shiller data released today. Western cities remain under pressure with Seattle, Portland, San Francisco and Las Vegas all down the bottom of the city comparison with MoM falls between -0.3% and -1.5%. Los Angeles, however, bucked the trend by rising 0.6%. In year-on-year terms, Seattle (-9.3%) and San Francisco (-10%) are at the bottom of the table with Miami (+10.8%) and Tampa (+7.7%) sitting at the top. The warm weather in January appears to have lifted housing activity, most probably bringing forward buyer interest from the Spring rather than creating a whole new set of buyers. Amidst a dearth of supply, this generated the first positive MoM house price index change since June 2022. New home sales benefit from a lack of existing homes on the market Meanwhile, new home sales jumped 9.6%MoM in March to 683,000 – well above the consensus prediction of 632,000. This is especially surprising given the steep decline in mortgage applications for home purchases. The historical relationship between the two series suggests that new home sales should be closer to 300,000 than 700,000. There isn’t a huge amount of evidence suggesting a sudden surge in all cash purchases, so we can only really rationalise it as a function of the lack of existing homes on the market for sale. This leaves potential buyers little option but to to buy newly constructed homes. New home sales are stronger than mortgage applications imply they should be Source: Macrobond, ING Challenges remain for US housing Nonetheless, the doubling of mortgage rates over the past 16 months and tightening of bank lending standards – which recent bank stresses are likely to make even worse – means that demand will start to soften again. In January 2022, borrowers could take out a $400,000 30Y fixed-rate mortgage and their monthly payment would be $1,750. Based on today’s US mortgage rates, if that person were to pay the same $1,750 monthly payment, they would typically only be able to borrow $280,000. Read next: Rates Spark: Bonds are back...in their range| FXMAG.COM Moreover, with house price to income ratios above where we were at the peak of the 2006 housing bubble, the affordability metrics continue to point to downside risks for transactions and prices. Should the US economy experience a hard landing and the start of a rise in unemployment, this would threaten a rise in default rates and an increase in the supply of homes for sale. Falling property prices at a time when construction costs and labour remain elevated also means squeezed profit margins, which is another disincentive for construction. Read this article on THINK TagsUS Housing Home sales 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

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

There is no doubt concern about First Republic. But it remains an idiosyncratic issue, marshalled as junior to the bigger issue of elevated inflation. Yesterday's US core PCE of 4.9% confirms there is still a job for the Fed to do. In the eurozone, country inflation should give the market a pretty good clue of whether a 50bp hike is likely at next week’s meeting US core PCE pressure will remind the Fed it still has a job to do on inflation The nudge higher in market rates yesterday reflected the move higher in core PCE to 4.9% for the first quarter of 2023. It’s clearly not great, and supports the view that the US remains a 5% inflation economy. Core PCE has, in fact, been in the “5%” area since mid-2021! The market discount from inflation breakevens points to the US becoming a 2% to 2.5% inflation economy in the quarters ahead, but it’s taking time. The 2yr breakeven inflation rate is now 2.2%, up a tad post the number. This is still a breakeven that the Fed should like, and to realise this, inflation must be expected to fall below it (in order to average at 2.2% over the coming two years). The biggest driver of growth in 1Q was the consumer But what looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters. This is why the market paid little heed to the below-consensus GDP growth numbers. But then again, at 1.1%, while technically in recession territory, growth has certainly not collapsed. And, importantly, the biggest driver of growth in 1Q was the consumer. That said, the tightening in financial conditions should see the balance tip towards greater weakness in the months and quarters ahead, and that will be a cataylst for the 10yr Treasury yield to finally make its way down toward 3%. We've been clear on one thing in recent months. At 3%, the 10yr Treasury yield woud be very low. Think beyond the hikes, to cuts, and to where the Fed is likely to cut to. The market thinks that's around 3%, or slightly lower. We don't disagree. But if that is indeed the case, there would need to be a curve in pace at that point. Having the Fed bottom out on cuts and not to have a curve worth 100s of basis points at that point would be unprecedented. Really the 10yr should be pitched at least at 4% if the Fed bottoms at 3%. Hence, any break below 3% for the 10yr in the quarters ahead should be fleeting. That is unless the expectation builds for bigger cuts; emergency- style ones. Not our view given what we know. Inflation has to fall sharply for breakevens to be right Source: Refinitiv, ING Today's inflation prints should the seal the deal between 25bp or 50bp ECB hike We would argue that, as far as rates are concerned, April inflation is the last piece of the jigsaw missing for markets to make up their mind about next week’s European Central Bank meeting. The debate is currently between a 25bp and a 50bp hike, the former being our and the market’s base case. In our opinion, only a significant upside surprise could lead the market to think the hawks have enough of a case to convince their colleagues to vote for a 50bp hike. Eurozone inflation will only be published next Tuesday, two days before the ECB meeting. By this afternoon, however, we think markets will have a pretty good idea, as inflation for countries worth around 60% of the eurozone-wide print will be published today. The debate is currently between a 25bp and a 50bp hike, the former being our and the market’s base case The other important piece of information will be the ECB’s Bank Lending Survey (BLS). The minutes of the March meeting were rife with uncertainty about the speed and extent of the transmission of monetary tightening into the real economy. Bank lending is a key channel of policy transmission, and data on that topic is sparse. The reason we think the BLS, also due to be updated on Tuesday, doesn’t rank as highly as inflation in investors’ minds is that we think the bar is high for it to be used as an argument by the hawks for a 50bp hike. The last release in January already noted declining demand for loans and tighter lending standards and recent stress in the financial sector means that even an improvement wouldn’t allow the ECB to sound the all-clear. As financial fears recede, hopefully permanently, markets are pricing a one in five probability of a 50bp hike at the April ECB meeting. This probability is unlikely to go all the way down to zero before Tuesday but the odds of it rising would be reduced if today’s eurozone member state inflation doesn’t accelerate. Today's inflation will go a long way to shaping ECB hike expectations Source: Refinitiv, ING Today's events and market view French, Spanish and German CPI releases today, worth together almost 60% of the eurozone HICP index, will give markets a fairly good idea of what the eurozone-wide inflation number due on Tuesday will look like. We think April inflation is the most important data publication before next week’s ECB meeting, but this is not all. Today will also see the release of the advance eurozone 1Q GDP, German unemployment, and Italian industrial sales. Read next: Improvement in eurozone economic sentiment starts to level off| FXMAG.COM The economic calendar is no less crowded in the US with most of the attention being understandably on the Fed’s preferred inflation measure, the core PCE for the month of March. The 1Q advance GDP report published yesterday suggested an upside surprise might be in store for March PCE, and Treasuries reacted accordingly. Other releases include personal income and spending, and the employment cost index for 4Q 2022, a well-regarded but not very timely measure of wage pressure. At today's policy meeting, the Bank of Japan left policy unchanged but chose to remove its rates forward guidance, which contained an implicit easing bias. The step, although tentative, could be seen by markets as a sign the bank is edging towards a modification of its yield curve control policy - effectively a 0.5% cap on 10Y JGB yields - possibly as soon as its June meeting. However, the length of the policy review announced by the BoJ today - 18 months - suggests Governor Kazuo Ueda and his team will think of policy changes over longer time frames. The subsequent rally in JGBs is another factor supporting European bonds at the open. Read this article on THINK TagsRates Daily 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 Federal Reserve has raised interest rates by 25bp and signalled the threshold for justifying future rate increases is now higher than it was. With lending conditions rapidly tightening in the wake of recent bank stresses, we think this will mark the peak for interest rates with recessionary forces set to prompt interest rate cuts later this year Fed Chair Powell announces a 25 basis point rate hike at the 3 May meeting Fed hikes one last time No real surprises with the Federal Open Market Committee unanimously voting for a 25bp interest rate increase, taking the Fed funds target range to 5-5.25%. We can’t say that the Federal Reserve has dropped its tightening bias completely, but the statement is more balanced than it was in March. Back then it suggested that "some additional policy tightening may be appropriate". This has been dropped with the statement merely stating “In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments”. The press conference talks of the potential for a pause at a future meeting, but Powell also suggests they are “prepared to do more” rate hikes if necessary. Nonetheless, he acknowledges that "policy is tight" with real rates "meaningfully above what many people would assess as the neutral rate". Either way the language shift via omission of “some additional policy tightening may be appropriate” is important and signals that the bar to justify future rate rises is now higher. Rather surprisingly Fed Chair Powell states in the press conference that banking conditions have “broadly improved” since March when Silicon Valley bank and Signature Bank failed. This seems a little strange given what has happened to First Republic in recent days. Nonetheless, the statement acknowledges that "tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation". That last point on inflation is critical. Indeed, the Fed will have seen the latest Senior Loan Officers’ survey and it isn’t likely to have been pretty if the yesterday’s ECB Bank Survey was anything to go by (the Fed’s survey likely to be formally published next week). The recent banking stresses are going to tighten lending standards markedly and that will act as a major brake on economic activity, significantly reducing the need for any further interest rate increases. Tighter lending conditions heighten the chances of recession Chair Powell spoke of plenty of risks to the outlook and we think today’s interest rate hike marks the peak for the Fed funds target range with the Fed set to leave interest rates unchanged at the 14 June FOMC meeting given recessionary forces are building, job lay-off announcements are mounting and inflation is slowing. This will coincide with new forecasts from Fed officials including an update of their dot plot chart for the projected path of the Fed funds rate. At this point we suspect it will suggest no change through year-end with potentially 75-100 basis points of cuts pencilled in by the Fed for next year. Powell again acknowledged that his personal forecast is for modest growth, not recession even though the Fed staff forecasts remains for a “mild recession”. Historically, the Fed doesn’t leave it long before cutting rates – over the past 50 years the average period of time between the last rate hike cycle and the first rate cut has only been six months. This implies that if May is indeed the last rate hike in a typical cycle, we should expect a cut by around November. Read next: The Czech National Bank is sounding more hawkish| FXMAG.COM However, the March FOMC minutes warned that “historical recessions related to financial market problems tend to be more severe and persistent than average recessions”. Given the stresses in the banking sector and the rapidly tightening lending conditions we fear this could be the trigger for a painful economic downturn. The chart below shows that when banks tighten their lending standards, unemployment always rises. What turns struggling business into failed business is when the bank pulls the plug the company runs out of options. Job losses are the inevitable consequence. Tighter lending conditions always prompts higher unemployment Source: Macrobond, ING Rate cuts possible in the fourth quarter of 2023 Fears over the US debt ceiling impasse and the potential for financial market and system pain before politicians come to a deal to prevent default adds to a sense that there are darkening clouds over the economic outlook that could necessitate a swift change in position from the Federal Reserve. The market is currently pricing the potential for rate cuts as soon as September, but we doubt that the Fed will respond quite as quickly given inflation is still likely to be around 4% by that point, double the 2% target rate. Nonetheless, the Federal Reserve has a dual mandate of maximising employment as well as achieving 2% inflation over time. Policy optimisation for the Fed’s two targets implies it doesn’t need to see inflation hitting 2% before cutting interest rates if unemployment is starting to rise and it is confident inflation will slow. We think the Fed will wait until the fourth quarter, but will end up cutting interest rates more aggressively, at least in the early stages. We forecast 50bp rate cuts at both the November and December FOMC meetings with the Fed funds rate getting down to 3% by mid-2024. Market breakeven inflation rates support a Fed pause here, and indeed support future cuts The impact reaction to the FOMC outcome was more downward pressure on market rates, driven by lower real rates, as breakeven inflation rates have edged higher. But that morphed into upward pressure on market rates, dominated by rises in breakeven inflation. This is an interesting reaction, suggesting a rise in market inflation concern remains in the period ahead. At the same time, the 10yr breakeven inflation rate at 2.2% is at a very tolerable level, impliedly discounting a return to 2% inflation. Its even more striking when you look at the 2yr breakeven, which is now at 2.05% and looking like it could dip below 2% if it keeps up the pace of decline seen in recent weeks. These breakeven trends support the Fed pause, and indeed provide room for eventual cuts, should delivered inflation actually trend towards the breakeven expectations. We also note that all rates are up 25bp, including the rate on the reverse repo facility, now at 5.05%. Also the rate on the standing repo facility is up to 5.25%. And the rate on excess reserve is up to 5.15%. So no surprises there. All bands have been kept intact right through the rate hiking cycle. The Fed has concentrated on getting all rates higher throughout the process as opposed to any finessing of the different rates that it employs to manage other aspects of policy. Meanwhile, some US$3trn remains in bank excess reserves at the Fed and over US$2trn continues to go back to the Fed on the reverse repo facility. These are measures of the ongoing elevated size of the Fed’s balance sheet. The Fed’s reversal policy here also remains as was, as it continues to allow some $US60bn of Treasuries and $US35bn of mortgage backed securities to roll off their balance sheet on a monthly basis. That also tightens conditions. No material directional impulse from this outcome. We continue to view 3% as a medium-term level that market rates can aspire to getting towards. The 10yr yield should get there first, while the 2yr will be constrained by Federal Reserve reluctance to nod towards cuts too soon. The 5yr area of the curve should remain quite rich in the months ahead, as the inversion on the 2/5yr segment remains deep. That will change later in the year though as the 2yr finally becomes untethered from the fund rate as cuts are more clear and imminent. FX Markets: That's all folks The dollar initially softened on the release on the FOMC statement, which removed the key phrase over the need for further rate hikes. That the dollar did not fall further probably owes to the fact that this new Fed stance was largely expected, and it looked like investors had gone into the meeting slightly short dollars, especially against the euro. Equally the FX market has continued to take its cue from the short end of the US yield curve – which is largely unchanged after the statement’s release. Where does that leave FX markets? For this year’s broad dollar trend to accelerate we probably need to see much clearer signs of weakening US activity data – especially in the labour market – and also the disinflation story to gain momentum. This looks more a story for the second half than for the next couple of months. We are comfortable with our baseline forecasts that the dollar does most of its selling-off in the second half of the year and have a conservative forecast of 1.15 for EUR/USD and an aggressive forecast for USD/JPY a 120 for year-end. Should US rates continued to be trapped in ranges over coming months, interest rate and FX volatility would fall further and we would expect to hear more about the carry trade. Here the Hungarian forint and Mexican peso have the highest risk-adjusted yields and especially the Mexican peso could continue to advance now that the Fed has adopted a meeting-by-meeting approach to policy changes. The wild card here, however, is the simmering US banking crisis and whether events so far merely slow the economy (dollar bearish) or spark contagion (yen and Swiss franc bullish). At the same time US debt ceiling negotiations look like they will go down to the wire and still threaten to upset risk assets over coming months. We do think then that defensive currency plays may do well over coming months and feel a currency like the Japanese yen can perform well on the crosses – especially against the commodity exporters whose chief exports are suffering on global demand trends. Read this article on THINK TagsUS Recession Powell Inflation FOMC Federal Reserve 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

Jobs growth beat expectations in April with wages jumping and unemployment hitting new lows. Yet, significant downward historical revisions still point to a softening jobs trend and with lead indicators and tightening lending conditions adding to the downside risks, we unfortunately expect unemployment to end the year higher than it is today Health employment has been one of the strongest growth engines for jobs in the past six months 253,000 April increase in non-farm payrolls   Labour market is more resilient than expected The April labour report shows a strong headline US payrolls figure, but major revisions really cloud the narrative on this. Non-farm payrolls rose 253k versus the 185k consensus, but there were a net 149k of downward revisions to the past couple of months spread pretty evenly between February and March. Private payrolls rose 230k versus the 160k consensus, but this "beat" was completely offset by a 66k downward revision to March (123k versus 189k initially reported). The details show April was yet another solid month for private education & health employment (+77k). This sector has really been the strongest growth engine for jobs over the past six months, averaging around 80k per month. Government was very firm again (+23k) while professional and business services was also good, rising 43k with manufacturing and construction adding jobs after seeing employment fall last month. Temporary help employment fell 23,000, which was the third consecutive monthly fall. Read next: Hungary’s retail sales and industrial output continue to tumble| FXMAG.COM The wage story is stronger with average hourly earnings up 0.5% month-on-month versus the 0.3% consensus, resulting in the year-on-year rate of wage growth rising to 4.4% from 4.3%. This follows three consecutive 0.3% MoM prints and will keep some of the more hawkish Federal Open Market Committee (FOMC) members nervous about inflation pressures emanating from the labour market. Rounding out the numbers we see the unemployment rate dipping to 3.4% from 3.5% to match the cycle low seen in January. But challenges are mounting It is difficult to come up with a firm conclusion after these numbers, but we would make the point that labour market data is the most lagging of all the data and you do tend to get somewhat contradictory signals at turning points. Certainly the lead indicators for the US economy are not pretty and the chart we keep referring to is the one showing banks tightening lending standards which always results in unemployment moving higher – banks pulling credit lines turns struggling businesses into failing businesses and unemployment climbs. Tighter lending conditions mean unemployment will climb Source: Macrobond, ING   We should get the Senior Loan Officer Survey for first quarter 2023 released next week and we are certain it will show banks are becoming more cautious on their lending practices given the Fed referenced this post the FOMC announcement. Recent bank stresses mean that things will be even worse today and deteriorating further in coming months. Unfortunately this leaves us to conclude that payrolls growth will continue to soften and unemployment will end the year higher than it is today. Read this article on THINK TagsWages US Unemployment Jobs Federal Reserve 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

There is a thread running between the three crises being felt in the US right now. The inflation crisis was borne from the pandemic, a politically toxic one. The looming debt ceiling crisis stems from politicking that is more aggravated than ever. And the third crisis is a banking one, in part brought on by a Fed reacting to the inflation crisis. Where now? Three Billboards Outside Ebbing, Missouri We have big issues in play. They have evolved slowely but surely. The coming months will prove to be a make or break period. As the baton of power was handed over from Trump to Biden during the pandemic years we had the seeds of inflation sown as an induced boom met with a lack of ability to get hands on stuff. The inflation crisis was borne. The pandemic itself did little to calm the extreme heat that had built in politics pre and post Trump; in fact it has only become more intense since. Hence the looming debt ceiling crisis. And then, shifting gears from zero rates to 5% ones and from massive liquidity injections to taking them away always risked a reaction somewhere. The crisis in banking is not all down to this, but it’s also clearly not un-related. The inflation crisis brought this on. And looking forward, the last thing we really need now is a material threat to the system coming from politics and debt ceiling stubbornness. So what is the market discount as we look forward? Mixed – we assess. Banking crisis development as measured by the Regional Bank Index and FRA / OIS – risky but tolerable There are a number of indicators that we can track to help assess where we are and where we are likely to get to. Let’s start with the banking story, and the small and regional bank stress on deposits in particular. Here the US Regional Bank Index tracks sentiment. It was at 120 a couple of months back. It’s now at 80. In the rear view mirror the pandemic took it down to 60. Before that, the Great Financial Crisis saw it dip to 40. That’s the potential doom leap, from 80 to 40 ahead. The question is, will it? Bank discount is troubling, but not discounting collapse of the system or anything like that So far the answer is probably not. We look here at the 3mth FRA / OIS spread for guidance. It essentially measures the premium that banks impliedly need to pay over risk free rates in forward space. Currently the 3mth FRA / OIS spread is at about 40bp. It spiked to 60bp when Silicon Valley Bank went down. Having journeyed back down to the low 20’s bp, the crescendo in the First Republic story saw it re-edge higher. As the Great Financial Crisis broke some 15 year ago the FRA/OIS spread quickly got up to 70bp, and then gapped to over 150bp. We’re nowhere near that. The simple reference of neutrality would be the 20’s bp. We are practically double this right now. Troubling, but not discounting a collapse of the system or anything like that. Read next: Asia Morning Bites - 08.05.2023| FXMAG.COM Inflation crisis resolution as measure by market breakeven inflation rates – reasonably optimistic The genesis of bank stresses in part reflects the switch in the stance of Fed policy to tightening on mounting inflation concern. Such concern has eased but has not gone away – latest core PCE readings still identify the US as a “5% inflation” economy. But there is some good news coming from market inflation break-evens, as derived from the difference between conventional Treasury yields and real yields on inflation protected securities. These inflation break-evens not only have 2% handles right along the curve, but moreover are far closer to a big figure 2% than 3%. Inflation breakevens have a low 2% handle – that calms things if delivered In fact, the 2yr breakeven has just this week dipped below 2%. If that’s what gets delivered, the Fed’s hiking job is done and dusted, and indeed the ground is laid to rationalise future cuts. While interest rate cuts likely coincide with higher consumer delinquencies and corporate defaults, and there is a feedback loop to the stresses in the banking system, where pressure in the commercial real estate sector remains under immediate scrutiny. This would become further acute should these inflation expectations not be realised, making in more difficult for the Fed to execute those cushioning cuts. Debt ceiling crisis as measure by US sovereign Credit Default Swaps – Concerning but fixable And as we navigate this course, we face into a debt ceiling dilemma laced with political menace that is so intense as to risk a default. Just one missed interest rate payment would imply a default. Market concern on this front is quite elevated, with 5yr Credit Default Swaps now in the 75bp area. This is the highest since the Great Financial Crisis, and is at the widest spread over core eurozone, ever. While there is no cross default in Treasuries, where one defaulted bond pulls the rest into a defaulted state, there would still be a material tarnishing of the Treasury product even if just one interest payment were missed. One default on one bond does not have to be catastrophic – but it could be Many players would not want to take on the risk of having a defaulted bond on their books, and the collateral value of Treasuries would come under scrutiny. One default should not take down the system if holders are immediately made whole through a swift resolution of the debt ceiling. But at this same time things could unravel quite quickly and uncontrollably. In essence the entire global financial system is at threat. Note though that while US CDS is indeed elevated, it’s also far from discounting an actual default, it’s just playing the (mild) probability of default.   There is sequence here that is untenable – Inflation remains high, Banking stresses intensify and US Default risks becomes real. That combination, especially the latter two, cannot be allowed to happen. If they do, forget the inflation concern, the Fed has no choice but to attempt a system rescue. The sequence that’s more likely is the one that is broadly discounted in the market – Inflation gets back toward 2%, Banking stresses ease (apart from maybe one or two further causalities), and the US does not default. This combination still brings US rates (right along the curve) down to 3%, or briefly through. But it does not cause rates to go through a GFC-type collapse. In the end though, should any one of these three go wrong, there is a path to a far more painful outcome. That painful outcome could take rates crashing below 3%. In the extreme they go back to zero. We don’t think that happens. Nor does the market discount. But the uncontrollables make the path ahead a difficult one. There is also a route here to materially higher market rates, and that would be through a default on debt. As unlikely as that is, if it did happen it would likely be followed by a subsequent crash lower in market rates as system stresses dominate in the aftermath of a debt resolution. None of these extremes are expected to happen. But they do make for a potentially troubling cocktail ahead. Net net they add downward pressure to market rates. Read this article on THINK TagsUS inflation US debt ceiling 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

Friday's US jobs data was nowhere sad. The US economy added 253K new nonfarm jobs in April, beating analyst expectations for the 13th straight month! The unemployment rate unexpectedly fell to 3.4%, a multi-decade low, and wages grew 0.5% on a monthly basis, and 4.4% on a yearly basis. Both, higher than expected.  Strong jobs data reversed expectation of a Federal Reserve (Fed) rate cut in July. The expectation that the Fed would cut rates fell from 85bp to near 79bp after the data, and we even saw a slim expectation that the Fed could hike the rates again in June, of 10%.   The US 2-year yield rebounded from last week's lows, but stayed below the 4% mark, as the dollar index remained offered at session highs, on the unresolved US debt ceiling debate, and despite some relief on regional banks front.   US President Biden will meet some congressional leaders on Wednesday but will unlikely compromise on spending. US treasury Secretary Yellen urges Congress to lift the debt ceiling, as the government could run out of money by June 1st and that Biden taking unilateral action would provoke a constitutional crisis.   On the data front...  We have two CPI reports and one more jobs data to go before the Fed's next decision.  The next US CPI report is due this Wednesday. The expectation is that the US core inflation may have eased from 5.6% to 5.5% in April, headline figure may have steadied around 5% but the monthly headline figure may have ticked from 0.1% to 0.4% due to the jump in energy prices after OPEC cut production. Any upside surprise in inflation figures would bring the Fed hawks back to the market and help scale back the Fed cut expectations.   In the FX   The US dollar remains under a decent selling pressure. The debt ceiling and the ongoing stress in US regional banks help keep the Fed doves in charge of the market despite economic data calling for a tight hand from the Fed.   Read next: Apple's overal sales decreased for the second quarter in a row, but iPhone sales turned out to be better than expected| FXMAG.COM As a result, the EURUSD – which dropped below the 1.10 mark after the strong US jobs data, quickly rebounded and remains bid above the 1.10 mark in Asia this morning. Sentiment remains upbeat for the euro bulls although there is a solid resistance into the 1.11 mark.  Cable tests the ceiling of a long-term down-trending channel, as economists and markets can't agree on what the Bank of England (BoE) should do, or what it WILL do.   Economists bet for one more rate hike from the BoE and pause, whereas the interest rate markets price in a 25bp hike this Thursday, followed by one, and possibly two more rate hikes until September – which would push the British policy rate to the 5% psychological mark.   Given how scary UK inflation looks, the BoE should continue hiking the rates. Even though BoE Governor Bailey thinks that price pressure will drastically cool later this year, he should consider the risk that... they might not.   As such, expectations between the BoE and the Fed are diverging in favour of the latter, and that should keep Cable on a path toward further gains.   S&P500 had a good quarter, after all.  The S&P500 closed with a 1.85% gain on Friday, as US regional banks closed a turbulent week with a decent rally. PacWest shares rallied more than 80%, Western Alliance jumped nearly 50% and SPDR's regional bank index was up by more than 6% on Friday.   Zooming out, overall, 85% of the companies in the S&P 500 have reported results for Q1. According to FactSet, 79% of them revealed earnings above estimates, which also helped keep the S&P500 afloat despite the fuming regional bank stocks.   US crude jumps, gains could remain capped into $75pb   US crude jumped nearly 4% on Friday, along with the US equities, and is bid above $71pb this morning.   We are now far below the price level when OPEC announced cutting production to boost prices.   Consequently, the OPEC boost to oil prices remained short-lived. The latter means 1. market is strongly concerned about the deteriorating growth outlook that weighs on oil demand outlook, and  2. OPEC could surprise with another production cut announcement to keep the price pressure on the upside.   In the absence of such a surprise, upside potential in US crude will likely remain capped near $75/76, region that shelters the 50 and 100-DMA.  

If the Fed pauses, will that revive risk assets? Tom Nelson and Miles Sampson of Franklin Templeton Investment Solutions weigh in on the investment implications of the latest US central bank actions. Fed pause amidst economic uncertainty? The Federal Reserve (Fed) hiked interest rates 25 basis points at its May policy meeting, taking the upper end of its target to 5.25%. The Fed also indicated that it may pause rate hikes as it observes how the economy is reacting to its ongoing policy moves. We agree with the Fed that the outlook is uncertain: weak manufacturing, regional bank turmoil and declining corporate profitability are coinciding with a resilient labor market and consumer spending. Our view is that there is a high probability that US growth will continue to weaken and enter recession later this year. We continue to rely on leading economic indicators, where the growth rate is at a negative level that has historically coincided with US recessions. Exhibit 1: Leading Economic Indicators at Recessionary Levels US Economic Indicators: Leading vs. Coincident IndexesJanuary 1960–March 2023 Sources: The Conference Board, Macrobond. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. Important data provider notices and terms available at www.franklintempletondatasources.com. Multi-asset implications of a Fed pause Despite the economic uncertainty, a natural question arises: Can a Fed pause propel risk assets higher? Looking back on 2022, it’s fair to say that increasingly restrictive monetary policy caused much of the weak asset performance. Shouldn’t risky assets rally if “peak Fed” is in place? Historically, we have seen a rally across asset classes following a peak in the fed funds rate. Many assets—Treasuries, corporate credit and equities—have done well. Notably, equities, which should outperform less risky assets over time, perform slightly worse than both. Exhibit 2: Most Assets Have Rallied Around Peak Fed Funds Rate Asset Performance Around Peak Fed Funds RateAugust 1971–December 2019 Sources: Federal Reserve Bank of New York, Federal Reserve, S&P Dow Jones Indices, US Department of Treasury, US Bureau of Labor Statistics, Institute of Supply Management, Macrobond. Important data provider notices and terms available at www.franklintempletondatasources.com. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. Digging further, our hunch is that not all Fed pauses are created equal. Some occur with varying levels of growth and inflation and at different stages of the business cycle. We focus on the business cycle and use the yield curve as a method to further classify Fed pauses. We also look at Fed pauses that were eventually followed by recessions in the next year. What we find confirms our hunch—the later we are in the business cycle, as highlighted by an inverted yield curve, the worse equity performance has been. If a recession eventually follows a Fed pause, equity performance tends to be outright negative.  Exhibit 3: Peak Fed Funds Rates Occur in Varying Macro Environments Peak Fed Funds Rates and the Macro Environment * This is a hypothetical date, as it is currently unknown if the Fed will pause, and it is only listed here for comparison purposes. Source: FTIS assumptions, Macrobond. Dating peak Fed Funds rates can be subjective, especially during the 1970s and early 1980s when Fed policy was volatile. Our selected periods attempt to best capture peak fed funds rates while limiting overlap between periods. Important data provider notices and terms available at www.franklintempletondatasources.com. Read next: It seems that China may even exceed 5% real gross domestic product this year| FXMAG.COM Exhibit 4: Business Cycle Factors Can Overwhelm Fed Policy S&P 500 Performance Around Peak Fed Funds RateAugust 1971–December 2019 Sources: Federal Reserve Bank of New York, Federal Reserve, S&P Dow Jones Indices, US Department of Treasury, US Bureau of Labor Statistics, Institute of Supply Management, Macrobond. Important data provider notices and terms available at www.franklintempletondatasources.com. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. Portfolio implications We often debate whether growth or policy is a more important factor for risky asset performance. Over the past few years, it has felt like interest rates and Fed policy have been powerful drivers. The analysis above suggests that a Fed pause will not save the day for risky assets like equities, and that it is more prudent to be allocated to safer assets, like Treasuries and cash. We pay careful consideration to where we are in the business cycle and when our forecast of recession risk is high; these considerations further the case against equities. If the United States enters a recession, weak growth is likely to trump any policy easing. We remain positioned defensively in our portfolios, favoring assets like Treasuries and cash over equities. Within equities and credit, we currently prefer higher- quality assets. WHAT ARE THE RISKS? All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. The positioning of a specific portfolio may differ from the information presented herein due to various factors, including, but not limited to, allocations from the core portfolio and specific investment objectives, guidelines, strategy and restrictions of a portfolio. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in lower-rated bonds include higher risk of default and loss of principal. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. In general, an investor is paid a higher yield to assume a greater degree of credit risk. The risks associated with higher-yielding, lower-rated debt securities include higher risk of default and loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Source: Fed pause won’t save the day | Franklin Templeton

For the second month, the Dollar Index finds support from declines in the 101 area. Dollar bulls are defending critical levels in the major currency pairs, which could significantly increase the psychological pressure on the US currency. The resolution of this situation is likely to come from politics and macroeconomic data. The Dollar Index has been hovering around the 101.30 level for the past four weeks. Attempts to break above 102 have been met with increased selling, but the sellers aren’t picking up the declines below 101 either. The 101 area of the Dollar Index appears to be more important than the round 100 level, as the Dollar’s rally in the first half of 2020 was halted near this level, apart from a brief spike on the unexpected first lockdowns. The same level 13 months ago triggered an acceleration of dollar inflows and became a game-changing switch in the currency market. The new switch promises to be as important as last year’s, so it will unlikely be quick and easy. Moreover, this change is not necessarily going to happen. Between 2006 and 2014, the 88 areas of the DXY was a similar historical resistance. It then became an insurmountable support from which the Dollar was called upon in the recessions of 2018 and 2021. The more localised picture remains on the sell side of the Dollar. The DXY reversed its decline at the end of September last year on signals that the Fed would slow the pace of rate hikes and pause soon. The rally from February to March was based on hawkish inflation data and expectations that the final rate would be higher than initially expected. The banking problems nailed the Dollar to support at 101 as markets put an imminent reversal of a rate cut back on the agenda. Last week’s employment data and the Fed’s decision did not change market expectations meaningfully. However, tomorrow’s inflation data for April may do so. Reading well below 5% YoY would allow the Fed to talk more about outperforming inflation and stop raising rates. On the other hand, a sudden acceleration will lead to a pullback in the Dollar as the markets anticipate more rate hikes in June.

In the absence of UK markets, European markets got off to a slow start to the new week finishing more or less unchanged from their Friday close, and a very solid US jobs report. US markets also got off to an indifferent start to the week, after a strong finish on Friday, with the focus now shifting to Wednesday's April CPI report, and a sense that for all the expectation that last week's Federal Reserve rate hike might be the last, the strength of the US economy might mean that there may be one left to come. If Friday's jobs report told us anything, it told us that for all the concerns about US regional banks, the US labour market remains tight and that there is still inflationary pressure within the underlying economy. To that end, US 2-year yields rallied from lows of 3.65% on Thursday, to rally back above 4% again yesterday. The US dollar got an initial lift in the wake of Friday's payrolls report but struggled to hang on to most of its gains, remaining to all intents and purposes rangebound near to its recent lows. Not only did Friday's jobs numbers show a US economy that is still creating jobs at a decent clip, with 253k jobs added, comfortably beating expectations, but they also saw the unemployment rate fall to 3.4%, even as wages went up to 4.4%. While some have suggested that the report was overshadowed by a negative -149k adjustment to the previous 2 months, which may have taken some of the gloss over the broader numbers, they don't support the idea that the US economy is struggling, particularly when there are still over 9.5m vacancies. What the numbers do suggest is that the US labour market remains resilient and pushes back on the idea of rate cuts in the short term, although it is undeniable that financial conditions are starting to tighten considerably, due to the recent banking stresses, as yesterday's Federal Reserve financial stability report showed.   In the short term this suggests the outlook, while challenging, just about remains positive for the wider global economy, as does the continued reopening of the Chinese economy after months of Covid-19 restrictions.   Recent earnings data, particularly from the luxury sector, appears to have shown that demand for certain goods within China has rebounded quite strongly. In an encouraging development for the global economy last month, the March China trade numbers showed that the Chinese economy started to gain momentum in the aftermath of Chinese New Year, as exports surged by 14.8%, the first rise since September, while imports declined a less than expected -1.4%. These numbers suggested that domestic demand was starting to recover after months of lockdowns, and recent PMI data appears to have borne that out. The wider question is whether this trend is sustainable or simply a case of catch-up demand or rebound spending. Exports for April were expected to slow to 8%, but came in at 8.5%, while imports were expected to come in flat, and declined by 7.9%, although some of that may be down to lower prices in some areas, rather than lower volumes. European markets look set to open slightly higher.   EUR/USD – slipped back to the bottom end of the recent range on Friday but 1.0940 remained intact, with the recent highs just below 1.1100 continuing to cap the upside. A break above 1.1120 is needed to signal further gains towards 1.1200. The bottom of the range remains at the 1.0940 level. Below 1.0940 retargets the 1.0870 level. GBP/USD – pushed up to a new 12-month high at 1.2669 yesterday with next resistance at 1.2756 which is 61.8% retracement of the 1.4250/1.0340 down move. Support now at 1.2530.   EUR/GBP – has retested the recent lows at 0.8710, with a break below the 0.8700 area potentially opening up the risk of a move towards the 0.8640 area. We need to see a recovery back above 0.8760 to stabilise and signal a return to the 0.8820 area. USD/JPY – slipped back to the 133.50 area last week and are currently squeezing higher again with next resistance at 136.20. A move back above 136.20 retargets the 200-day SMA at 137.10 FTSE100 is expected to open 25 points higher at 7,803 DAX is expected to open 19 points higher at 15,971 CAC40 is expected to open 6 points lower at 7,435

The Federal Reserve reports that banks are becoming increasingly restrictive in terms of their lending behaviour, compounding the recessionary risks coming from rapidly higher borrowing costs. The data suggests a sharp slowdown in lending growth is coming with upside risks to unemployment Banks increasingly wary of lending The Federal Reserve’s Senior Loan Officer Survey shows banks continued to tighten lending standards across the board in the first quarter i.e. being increasingly selective on to whom they lend, how much they lend and at what interest rate. The report stated that “tightening was most widely reported for premiums charged on riskier loans, spreads of loan rates over the cost of funds, and costs of credit lines”, adding that there was also a reduction in “the maximum size of credit lines, loan covenants, and collateralization requirements to firms of all sizes". A net 46% of banks tightened lending standards to large and medium sized firms with a net 46.7% of banks tightening standards for small firms while 62.3% increased spreads of loan rates over the banks’ cost of funds. For commercial real estate it was even more acute with a net 73.8% of banks tightening standards for CRE loans for construction and land development while 66.7% tightened standards on loans for nonfarm nonresidential property. This is a hugely important story as potential borrowers are already feeling the effects of 500bp of Federal Reserve interest rate hikes, the most rapid and aggressive phase of monetary policy tightening experienced in more than 40 years. With banks tightening lending standards so aggressively this combination of higher borrowing costs and reduced credit availability is typically toxic for economic growth. The chart below shows the proportion of banks tightening lending standards to medium and large firms versus overall lending growth in the US. It indicates we should be braced for a very rapid downturn in lending broadly across the US economy. Tighter lending standards points to a sharp slowdown in lending growth Source: Macrobond, ING Demand for credit is falling too with concerns about the jobs outlook Already we are seeing loan demand dry up. The SLOS survey also showed that the net proportion of banks seeing stronger demand for loans is -55.6% for large and medium sized firms and -53.3% for small firms. These are the lowest readings since the Global Financial Crisis. With the Conference Board measure of US CEO confidence and the National Federation of Independent Business small business optimism survey both at recession levels, these borrowing intention numbers highlight the defensive mindset in America right now that points to less capex and hiring in coming months. Read next: Disappointing German March macro data increase risk of technical recession| FXMAG.COM This report therefore suggests recessionary forces are building in the economy and we continue to refer to the chart below that shows when banks tighten lending standards, unemployment always rises. What turns struggling business into failed business is when the bank pulls the plug the company runs out of options. Job losses are the inevitable consequence. Tighter lending conditions also lead to rising unemployment Source: Macrobond, ING Rising recession risk makes rate cuts look likely later in the year Unfortunately we are not hopeful of a rapid turnaround in the situation. Regional banks remain in the spotlight with deposit flight and the prospect of greater regulatory oversight set to make them more cautious in their lending behaviour. We do not think the large banks will fully fill the gap. Given small and regional banks account for more than 40% of all commercial bank lending, this is a worrying situation, made even worse with the knowledge that they account for around 70% of all commercial real estate lending, which is under pressure given low office occupancy rates and the significant amount of borrowing that needs to be refinanced over the next 18 months. The upshot is that a heightened chance of recession means a greater chance that inflation falls more quickly and the Fed can eventually respond by moving monetary policy to a more neutral setting. The market is currently pricing around 20bp of Federal Reserve interest rate cuts by September and 66bp by December. We think September is likely to be too soon but will end up cutting interest rates more aggressively, at least in the early stages. We forecast 50bp rate cuts at both the November and December Federal Open Market Committee meetings with the Fed funds rate getting down to 3% by mid-2024. Read this article on THINK TagsUS SLOS Recession Lending conditions Federal Reserve 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

It's been a subdued start to the week for markets in Europe with little in the way of overall direction, although we have seen a slightly negative bias, along with a slightly firmer US dollar ahead, as markets look towards today's US CPI report for April. Having seen a positive non-farm payrolls report at the end of last week, we've seen a push back on a widely held expectation that once the Federal Reserve finishes its current rate hiking cycle, rate cuts probably wouldn't be too far behind, especially given market concerns about US regional banks. The economic numbers we have seen over the past few days, particularly when it comes to the US labour market would suggest that the likelihood of that further out into the distance, pushing the US dollar higher, along with US yields. Against that backdrop US markets also drifted lower, with the Nasdaq 100 leading the declines, as the momentum that saw such a strong finish on Friday continued to diminish. For most of the last few weeks US equity markets have been rangebound, along with US 2-year yields as investors try and play out what is the more likely scenario about the timing or otherwise of a US recession. The tone around yesterday's trading wasn't helped by comments from the New York Fed's John Williams who reminded markets that the Fed hadn't explicitly said that no more rate hikes were coming, saying that there was no baseline scenario of rate cuts this year, and that rates would continue to rise if inflation didn't continue to slow at the required speed. With the Federal Reserve having raised rates again last week by 25bps today's April CPI numbers are the next key benchmark feeding into whether the next meeting will see the Federal Reserve hit the pause button and keep rates unchanged after several meetings of consecutive hikes. While headline CPI fell to 5% in March from 6% in February, the picture for core prices did little to offer encouragement that inflation would continue to fall sharply, and it is in this area which the Fed is keen for markets to focus their attention on. On the core measure in March, prices rose on an annual basis to 5.6% from 5.5%, putting core inflation above headline inflation for the first time since January 2021. Read next: US 2-year yields rallied from lows of 3.65% on Thursday, to rally back above 4% again yesterday| FXMAG.COM It is this stickiness in core prices as well as the resilience in the US jobs market that is making the Fed's job so difficult, even allowing for the fact we've seen the US central bank hike rates at every meeting over the last 12 months. Of course, if we start to see core prices plateau at the current level that might give weight to the argument that prices are close to peaking. The expectation for today's inflation report is for headline CPI to remain steady at 5%, while core prices are forecast to slip back from 5.6% to 5.5%. Even if we don't see a sharply weaker number today, we still have the May inflation and jobs numbers between now and the next Fed meeting, and there are grounds for optimism when it comes to lower prices given how US core PPI has been behaving in recent months, falling to 3.4% in March, having been as high as 9.6% a year ago. Forex EUR/USD – found support at the 1.0940 area again yesterday, with the recent highs just below 1.1100 continuing to cap the upside. A break above 1.1120 is needed to signal further gains towards 1.1200. A break below 1.0940 retargets the 1.0870 level. GBP/USD – pushed up to a new 12-month high at 1.2669 earlier this week with next resistance at 1.2756 which is 61.8% retracement of the 1.4250/1.0340 down move. Support now at 1.2530.   EUR/GBP – has broken below the 0.8710, area with the break below the 0.8700 area and the 200-day SMA, now opening the risk of a move towards the 0.8640 area. We need to see a recovery back above 0.8760 to stabilise and signal a return to the 0.8820 area. USD/JPY – after rebounding from the 133.50 area last week we could well squeeze all the way back to the next resistance at 136.20. A move back above 136.20 retargets the 200-day SMA at 137.10 FTSE100 is expected to open 2 points lower at 7,762 DAX is expected to open unchanged at 15,955 CAC40 is expected to open unchanged at 7,397

Another 0.4% MoM print for core CPI means that inflation is still running far too hot for the Federal Reserve to relax. Nonetheless, there are some signs that service sector price pressures are moderating so a June Fed pause look likely. With corporate pricing power flagging and shelter costs topping out, we could see core CPI in the 2-3% range by year-end  With housing rents topping out, inflation should come down Inflation is tracking too high, but that could soon change So both the headline and core US CPI month-on-month prints came in at 0.4% in April, as expected. Favourable rounding means that the annual rate of headline inflation slows to 4.9% from 5% (consensus 5%), while the annual rate of core inflation drops to 5.5% from 5.6% as predicted. Remember we peaked at 9.1% for headline inflation in June last year and 6.6% for core inflation in September, so we continue to move in the right direction. However, MoM CPI prints of 0.4% are well above the 0.17% MoM rate we need to average over time to bring the annual rate of inflation down to 2%, hence the Fed won’t be incentivised to sound dovish just yet. Nonetheless, the encouraging story in the details is that services ex-energy, ex-housing appears to be softening with used cars the biggest upside driver of MoM inflation (rising 4.4% MoM). The Fed has made a big play of focusing on the services ex-energy and housing as this is where the tight labour market could keep upward pressure on wages and it is in these sorts of services where that is most likely to feed through into pricing. A quick number crunch suggests it came in at around the 0.2% MoM rate, which as mentioned previously, is a key metric that would allow the Fed to relax more about inflation. Weakening corporate pricing power points to core CPI returning to 2.5% by year-end Source: Macrobond, ING Slowing shelter and weakening corporate pricing power to be the big themes in the second half of 2023 In terms of the outlook, while we don't think the Fed will need to see 2% annual inflation achieved before considering rate cuts, we do need to be consistently hitting 0.2% or 0.1% MoM. That is possible, we think, late in the third quarter into the fourth quarter given the clear topping out in housing rents, which should be increasingly reflected in the shelter CPI components as we head into the third quarter (shelter is over 40% of the core CPI basket), and weakening corporate pricing power. Read next: Another month of contracting industrial production in Italy| FXMAG.COM Indeed, yesterday's National Federation of Independent Business survey of price plans for US businesses recorded another sharp slowdown – a five-point decline in the proportion of companies expecting to raise prices in the coming three months, with the index back at historical long-run averages – with the index consistent with core CPI dropping to around 2.5% year-on-year by year-end. That may be a little optimistic, but if unemployment is starting to rise at the same time as 0.2% MoM core CPI prints, the Fed's dual mandate of price stability and maximum employment can justify moving interest rates lower from restrictive levels. If, as we fear, the combination of lagged effects of 500bp of Fed rate hikes and significantly reduced credit availability, as highlighted by the Fed’s Senior Loan Officers’ survey on Monday, do slow the economy sharply and unemployment starts to rise, the momentum will increasingly swing towards rate cuts. Right now markets are pricing a 25bp cut as soon as September. That may be a little early, but we think November and December are looking decent bets for the Fed moving policy to a more neutral setting. Read this article on THINK TagsUS Inflation Federal Reserve 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

FXMAG.COM team asked Nour Hammoury to share his view on the US inflation data. Let's hear from Squared Financial Chief Market Analyst. Nour Hammoury (Squared Financial): The US inflation data is sending a clear message to the Fed, and the market is reacting positively. Year-over-year core inflation has slowed down to 5.5% from 5.6%, marking the second lowest reading since November 2021. In addition, year-over-year CPI has slowed down to 4.9%, the lowest reading since April 2021. In short, there is no inflation pressure, and inflation is on the right track, although it may be sticky as expected. The end of Fed rate hike cycle? Nour Hammoury (Squared Financial): These outcomes confirm the end of the Federal Reserve's rate hike cycle, and the market believes that the Fed will cut rates at least once before the end of the year. Going forward, it's all about timing: how long will the Federal Reserve be able to hold the current Fed Fund Rate at the current levels? According to the bond market, not for long.However, a trending market phase is highly possible in the coming weeks as we gather more evidence that the economy is cooling down, while inflation continues to ease further. The only concern right now is the debt ceiling. If there is no deal anytime soon, the US credit rating is at risk, which is something that no one would like to see. Read next: Canadian dollar: Next week, all eyes will be on the inflation data, which is expected to cool down further to as low as four percent| FXMAG.COM

US consumer inflation slowed to 4.9%, just below the expected 5.0% and unchanged from the previous month. The initial market impulse was to sell the dollar and buy equities as the slowdown in price growth brings the end of the rate hike phase and the Fed’s dovish stance closer. However, the strong market move had no chance of being sustained as it was too early to celebrate victory over inflation. Moreover, there are increasing signs that an inflationary spiral is taking hold. Monthly price increases are still below the 2% target, with total price increases over the past six months close to 1.8%, or 2.4%, excluding food and energy. The slowdown in the annual rate is mainly due to the high base effect, but the monthly rate does not allow for a monetary policy reversal to be considered as an actual plan for the coming months. Moreover, the latest economic data points to the strength of the economy, which does not allow for the expectation that weaker demand will allow price pressures to cool. The source of disinflation is more likely to be lower import and commodity prices, but this is not a sufficient reason to cut interest rates. Read next: The fall in crude prices and the removal of almost all travel restrictions can support passenger traffic and bring it back to pre-pandemic levels | FXMAG.COM

BoE likely to raise rates by 25 bp US to release PPI and unemployment claims later today GBP/USD is trading at 1.2587 in Europe, down 0.30% on the day. BoE expected to raise rates by 25 bp The Bank of England is expected to raise rates today for a 12th consecutive time, with a 25-basis point hike. This would bring the benchmark cash rate to 4.50%. The BoE can’t be faulted for not being aggressive, but it failed to react to rising inflation fast enough and has found itself playing catch-up with inflation. In March, CPI dipped but remained in double digits, at 10.1%. This has led to a severe cost-of-living crisis and the BoE has little choice but to continue raising rates until it is clear that inflation is on a downswing. The BoE remains optimistic and projected in February that inflation would fall to 3% within 12 months. This may be a bit of a stretch but I expect inflation to fall more quickly as the rate hikes make themselves felt and cool economic activity. The rate hike itself is unlikely to move the dial on the pound, but Bank statement and updated economic forecasts, especially with regard to inflation, could result in a market reaction. US inflation dips lower The US inflation report for April showed a small drop, with headline CPI falling from 5.0% to 4.9%. Still, the financial markets were pleased and the US dollar lost ground. Investors appeared to focus on one particular indicator that declined (CPI Core Services Ex-Housing) while ignoring that Core CPI was almost unchanged at 5.5%. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM The markets are widely expecting a pause in June, with a 91% probability, according to the CME Group. With the core rate remaining sticky, I am doubtful that the Fed is considering any rate cuts at this stage, although the markets have mostly priced in a cut in September. GBP/USD Technical GBP/USD tested support at 1.2573 earlier in the day. The next support level is 1.2475 1.2676 and 1.2789 are the next resistance lines Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. GBP/USD edges lower ahead of BoE meeting - MarketPulseMarketPulse

Summary:  In today's podcast, we note the market's choppy, but in the end positive embrace of the slightly softer US CPI data point yesterday as US treasury yields eased. On that note, we suggest that a crisis is almost needed to justify the market's forward expectations for the Fed, as pricing of significant easing starting later this year intensified yesterday. Could the debt ceiling issue drive that possible crisis scenario? Elsewhere, we preview today's Bank of England meeting and wonder whether the recent sterling surge means this will drive a "sell-the-fact" moment, as seemingly everything that tries to get moving ends up mean reverting (former EUR strength now erased, former JPY weakness now partially erased, etc..) We also talk Disney's woeful streaming results and much more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Read next: Tomorrow Societe Generale, Allianz and Richemont reveal their earnings. Iranium in an uptrend| FXMAG.COM Follow Saxo Market Call on your favorite podcast app: Apple Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Mean reversion continues: sterling next? | Saxo Group (home.saxo)

Stephen Dover, Head of Franklin Templeton Institute, shares the views of the company’s investment leaders regarding the likely path for interest rates as well as how investors can best position themselves in this uncertain environment. There is a disconnect between the Fed’s message regarding taking a pause in hiking interest rates this year and the market’s expectations of rate cuts. Stephen Dover, Head of Franklin Templeton Institute, shares the views of the company’s investment leaders regarding the likely path for interest rates as well as how investors can best position themselves in this uncertain environment.    There is a wide disconnect between the Federal Reserve’s (Fed’s) message and what the futures market is pricing in for the likely path of interest rates. How will the gap be narrowed? How should investors position around these potential scenarios? I looked for answers on both the drivers and impact of the future path of interest rates on fixed income markets in a conversation with Mark Lindbloom, Portfolio Manager, Western Asset Management; Rick Klein, Head of Multisector and Quantitative Strategies, Franklin Templeton Fixed Income; and Bill Zox, High Yield Portfolio Manager, Brandywine Global. Below are my key takeaways from the discussion: The market and the Fed have differing views on when rates will be cut. The futures market expects rates to decline rapidly starting in June, with 50 basis points (bps) of cuts in 2023 and 150 bps of cuts in 2024, to reach 3.25% by the end of 2024.1 The Fed has said it will not cut rates in 2023, and the dot plots imply that rates will peak at 5.25% and fade to 4.25% by the end of 2024.  Our panelists believe that after the Fed’s last rate hike of 25 bps in May to 5.25%, it will pause any rate changes through 2023, and begin to cut in 2024. Current interest-rate spreads across fixed income markets imply that either inflation drops quickly, or the Fed eases quickly in response to a “hard landing.” Volatility was at record levels in the first quarter and will likely remain elevated. This will create opportunities for active managers. Our portfolio managers suggest a focus on quality, a slight shortening of duration, and a tilt toward investment-grade credit. Within this quality theme, opportunities are also presenting themselves in mortgage-backed securities, long-duration municipal bonds and short-duration high-yield bonds. High-yield debt can be used as a replacement for equity exposure, as the added protection of higher-starting yields in a slowing economic environment offers a better risk/reward profile.  Read next: Fed pause may not save the day for risky assets like equities| FXMAG.COM Achieving optimal portfolio allocations in the current environment requires remaining nimble and tactical, given the wide range of potential economic outcomes. The uncertainty is providing opportunities to capture yields and spreads across the fixed income markets at what we consider attractive valuations.    Stephen Dover, CFAChief Market Strategist,Franklin Templeton Institute Endnote Source: CME Group, with analysis by the Franklin Templeton Institute.    WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Investments in lower-rated bonds include higher risk of default and loss of principal. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. High yields reflect the higher credit risk associated with these lower-rated securities and, in some cases, the lower market prices for these instruments. Source: Quick Thoughts: Preparing for a pause | Franklin Templeton

The US import price index came in much better than expected, with a decline of 4.8% y/y in April against expectations of -6.3% y/y. Last month the index rose by 0.4%, the biggest increase since May 2022. This index's development will significantly impact CPI inflation in the coming months The US is a huge importer, so this index's development will significantly impact CPI inflation in the coming months. This index's annual rate of increase began to fall sharply from April last year. It takes another three months for PPI to start declining and CPI to record a peak. Perhaps imported inflation is the first early signal of how brutal the fight against inflation will be in the coming months. Investors and traders should remember that the Fed's target is 2%. Inflation has slowed from 9.1% to 4.9%, but monthly price growth must still be on track. Read next: Bank of England hiked the rate. British pound gave back its initial rise yesterday | FXMAG.COM In short, the consumer and import price indices released this week support the idea that the fight against inflation in the US is not over and that a prolonged pause (our main scenario) and another hike may be needed before a long rate plateau.

Last week saw modest losses for European markets in a week where there was little in the way of conviction in any of the moves. It was a similar story for US markets, which also saw modest losses, over concerns about slowing global demand, which also weighed on commodity prices, notably copper which hit their lowest levels this year, while oil prices finished lower for the 4th week in a row. This weakness appears to be being driven by concerns over a lack of demand in the Chinese economy where we saw factory gate prices decline for the 6th month in a row, and where there appears to be increasing evidence of a deflationary impulse.   Sentiment hasn't been helped by the political theatre around the US debt ceiling which has dominated the discourse in the media, and where discussions have been pushed into this week. While the risks around this are well-rehearsed it could be argued that the risks appear somewhat overstated given how regularly we've seen this scenario play out over the last few years on a regular "rinse and repeat" basis before a late compromise is sealed. Read next: Copper prices hit lowest level this year. Crude oil decreased second day in a row. BoE went for a 25bp hike| FXMAG.COM Nonetheless the uncertainty being generated by events in Washington is prompting a more defensive bias, amongst investors, while the US dollar got a boost from the latest University of Michigan survey which saw consumer 5–10-year inflation expectations jump to a 12-year high at 3.2%. This comes across as contrary to what has been happening to wider US inflation over the last few months, which has been slowing rapidly, especially on the PPI measure, where we sank to 2.3% last week and the lowest level since January 2021, while both US 2 year and 10-year yields both finished higher on the week. The recent slide in US yields since the last Fed meeting was mostly predicated on the belief that rate cuts wouldn't be too far behind. There now appears to be a growing realisation that this may not be the case with a number of Fed policymakers pushing back on that narrative. Last week we had Federal Reserve Governor Philip Jefferson express concern over the stickiness over core inflation saying that progress here had been "discouraging", while another Fed governor Michelle Bowman argued that there wasn't enough evidence that inflation was coming down sustainably and she wanted to see more data before deciding whether a rate pause was justified. Given that both are voting members on the FOMC rate setting committee their views undermine the current market expectation that rate cuts are only a matter of a couple of meetings away. Minneapolis Fed President Neel Kashkari speaks today Later today we're due to hear from Minneapolis Fed President Neel Kashkari who is expected to reiterate the comments he made a few days ago, when he said that an extended period of high interest rates is likely to be needed if inflation stays high. As we look ahead to today's European open, the late slide in US markets is likely to see a mixed open, with the main focus this week on the US debt ceiling negotiations,  EU Q1 GDP, UK wages and April retail sales numbers from the US and China.    Forex EUR/USD – appears to be breaking lower, heading towards the 1.0830 area, with a break below 1.0820 opening up the potential for further losses and support at 1.0770. Rebounds likely to find resistance at the 1.0940 area. GBP/USD – last week's losses could well signal further weakness towards the 1.2280 area in the short term, where we also have trend line support from the October lows. Initial support currently at the 1.2430 area. Resistance currently at 1.2530.   EUR/GBP – the rebound from the 0.8660 area has run into resistance at the 200-day SMA. A move back through 0.8760 could see a return to the 0.8820 area. USD/JPY – last week's rebound off the 50-day SMA has seen the US dollar rebound with the potential we could see a move back to the 200-day SMA at 137.00. FTSE100 is expected to open 6 points higher at 7,760 DAX is expected to open 10 points higher at 15,923 CAC40 is expected to open unchanged at 7,414

Janet Yellen warns The ongoing issue on the US debt ceiling continues to grip markets. On Monday, Treasury Secretary Janet Yellen reiterated her warnings that a default could occur as early as June 1 if there is no agreement made. A bipartisan political center and the Congressional Budget Office supported these statements. There is also a risk that if a deal is not reached by June 1, US President Joe Biden will invoke the 14th Amendment. The US President Biden cuts his trip to Asia Biden, who initially has plans to visit Papua New Guinea and Australia after the G7 meeting, announced that he will cut his trip and return to the States directly. This plan is likely what influenced the optimistic tone and statements by all parties immediately after the second debt ceiling meeting concluded. House Speaker Kevin McCarthy even said that a deal could be reached this week even though both sides are still far apart. He explained that a two-part agreement could be made. The first part is a short-term extension, after which more extensive negotiations can take place later. Read next: Technical look: Euro against US dollar - what can we expect from the pair?| FXMAG.COM Senate Majority Leader Chuck Schumer agrees with this view, adding that several more officials could join the discussions. Later, the White House announced that the President would assign two of his main advisors to negotiate a debt deal with Republicans. The foundation of this newly found optimism to avoid a US default lies in a short-term extension. Since Republican and Democrat ideologies remain so far apart, a short-term extension is the only way to reach an agreement by the end of the week. After all, it is a kind of bilateral negotiation, consisting of short-term solutions, followed by more detailed negotiations. Relevance up to 10:00 2023-05-18 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/343404

The crypto market capitalisation rose 0.55% over the past 24 hours to 1.134 trillion. Late Wednesday afternoon, another attempt was made to break above 1.14 trillion, following the US stock market rally on the government debt ceiling news. However, it has so far failed to stay in this territory. Bitcoin is up 0.7% at $27.2K, staying within the recovery trend that has been in place since the 12th. However, this recovery is painfully slow, and local resistance at $27.5K, which has been supporting since late March, remains in place. According to Santiment, large Bitcoin holders continue accumulating BTC - over the past five weeks, cryptocurrency holdings have increased by nearly 85,000 BTC ($2.3 billion). Santiment believes Bitcoin is now in a consolidation phase before a new surge. The UK Parliament has proposed regulating cryptocurrencies as gambling The stock and cryptocurrency markets will collapse if the US defaults, says Mike McGlone, senior strategist at Bloomberg Intelligence. He is bearish on cryptocurrencies but bullish on gold. Lightning Labs, the developer of the Lightning Network, announced the release of Taproot Assets Protocol v 0.2, which avoids potential delays in transaction processing due to congestion on the Bitcoin network. The UK Parliament has proposed regulating cryptocurrencies as gambling. Crypto assets can potentially be used for fraud and money laundering, posing a high risk to consumers and the economy. Read next: US construction declines, but it's not yet alarming| FXMAG.COM Tether's issuance team has decided to invest up to 15% of its net profits in Bitcoin monthly to diversify its reserves. It has already invested $1.5 billion in BTC. The bulk of USDT's collateral is still in short-term US Treasuries. According to a Bloomberg survey, only 31 of the top 60 cryptocurrency companies have successfully undergone external financial audits or confirmed reserves. Many auditors are reluctant to work with cryptocurrency companies or need more expertise.

US home sales remain subdued thanks to elevated borrowing costs, high prices and a lack of supply. New home sales should continue to outperform existing ones in this environment, but price risks remain skewed to the downside. Commercial real estate woes are the bigger concern as office vacancies and higher refinancing risks point to rising loan losses Commercial real estate woes are a concern as office vacancies and higher refinancing risks point to rising loan losses Existing home sales remain under pressure from affordability issues and a lack of options Existing home sales fell 3.4% in April to an annualised 4.28mn versus expectations of a 4.3m outcome. Sales had been as high as 6.3mn as recently as January 2022. Higher borrowing costs and a general lack of affordability after prices rose nearly 50% through the pandemic have constrained demand, but we also have to recognise there is a lack of supply out there, which is also contributing to lower transaction numbers. The more than doubling of mortgage rates over the past 18 months means many homeowners who would like to move are effectively locked in by the cheap financing they secured on their current property. New home sales have consequently been performing more strongly despite the drop in mortgage applications for home purchases – the buyers that are out there simply don’t have much to choose from. New home sales are outperforming existing home sales as mortgage applications point to weakening demand Source: Macrobond, ING   Affordability will remain a key constraint that points to downside risks for transactions. The latest weekly Mortgage Bankers Association data showed that the typical mortgage for a new home taken out last week was a 30Y fixed rate product with a size of $440,400 at a rate of 6.57%, giving a monthly mortgage payment of $2804, a record high. Twelve months ago this was $1750 per month. Consequently, if you are considering buying a home today, you are looking at an annual mortgage cost of around $33,650 on average which, given a median pre-tax US household income of a little under $75,000, points to ongoing weak demand unless prices fall substantially or borrowing costs plunge. Higher borrowing costs and elevated prices have led monthly mortgage payments to surge Source: Macrobond, ING If unemployment turns then rising supply could mean accelerating price falls Should the US economy experience a hard landing and the start of a rise in unemployment, this would threaten a rise in default rates and an increase in the supply of homes for sale. In this scenario, falling demand and rising supply mean falling property prices would be the likely outcome. House price-to-income ratios remain extremely elevated, and for them to return to long-run averages, we would likely need to see prices fall by around 20-25% in the absence of any rise in incomes. Construction of new homes would inevitably fall as well. Commerical real estate is where the bigger problems lie Unfortunately, it isn’t only the residential sector that looks vulnerable. Last week the Federal Reserve warned of the risks facing the commercial real estate sector since the sharp jump in interest rates over the past 14 months “increases the risk” that commercial real estate loans will be difficult to refinance. A recent report from another bank suggested that up to $1.5bn of these loans need to be refinanced by 2025. With office occupancy nationally running at 45% according to data from Kastle and many offices in need of updating and investment, there is the very real risk that defaults rise – A PIMCO fund has defaulted on $1.7bn of office-related loans this year and Brookfield has defaulted on more than $750mn of debt tied to Los Angeles office blocks. What makes this so problematic for the property market and construction sectors is that small banks account for such a high proportion of commercial bank lending to both residential and commercial property. As the chart below shows, banks with less than $250bn of assets account for two-thirds of the stock of all commercial lending to commercial property and more than a third of residential property lending by all banks. Small and regional banks account for the majority of commercial real estate lending Source: Macrobond, ING Small banks will come under increasing pressure, threatening weaker credit growth throughout the economy With these small and regional banks already being squeezed by deposit flight and facing the prospect of more intense regulatory oversight in the wake of recent high profile failures, loan losses on commercial real estate will only heighten the pressure on these banks. The Fed’s viewpoint is that “the magnitude of a correction in property values could be sizable and therefore could lead to credit losses by holders of C.R.E. debt.” With the Fed’s Senior Loan Officer survey indicating credit conditions are rapidly tightening across the board and particularly for commercial real estate lending, this implies a sharp downturn in lending for the sector, meaning refinancing could be immensely challenging and create a downward spiral for prices that will suck construction spending sharply lower. Tighter lending conditions point to a steep downturn in lending on commercial real estate, making refinancing challenging Source: Macrobond, ING   This will have knock-on effects for other lending markets, with banks increasingly reluctant to lend across the board. This is hugely significant as what turns struggling businesses into failing businesses is when credit availability evaporates. Given small and regional banks account for more than 40% of all lending in the US, with a particular focus on small businesses outside of major cities, this is a troubling situation. Large banks are unlikely to be able to fill the gap and the risk is that unemployment climbs. In such an environment, the market pricing of significant and rapid interest rate cuts from the Federal Reserve from later in the year appears justified. Read this article on THINK Tags US Lending Home sales Construction Commercial real estate 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

Gold (XAU/USD) has dropped by -5.6% from its recent 52-week high of US$2,067. Factors that caused the recent drop could be the bounce seen in the US dollar and the unwinding of long hedges linked to the US debt ceiling negotiations. 50-day moving average is now acting as a key intermediate resistance at US$1,991. The bullish momentum of the shiny metal, Gold (XAU/USD) seems to have dissipated in recent weeks after it printed a fresh 52-week high of US$2,067 on 4 May 2023 and staged a decline of -5.6% to hit a low of US$1,952 on last Thursday, 18 May. Even though on Friday, 19 May, the price actions of Gold managed to stage a rebound of +1% to close the US session at US$1,977.90 but it is still below its 20 and 50-day moving averages that are acting as resistances at around US$2,008 and USS$1,991 respectively at this time of the writing. The recent price weakness of Gold is indirectly related to the recent rebound seen in the US dollar where the US Dollar Index has managed to stage a weekly rebound of +1.40% for the week of 8 May, its highest weekly gain since the week of 19 September 2022. Also, there were news reports that stated there were potential breakthroughs in the US debt ceiling limit extension negotiation talks between the Biden Administration and the House Republicans that could trigger some form of hedges positions unwinding on Gold that was taken earlier as long hedges if the US government fails to extend its debt ceiling limit on 1 June. Let’s now decipher the latest price movement of Gold from a technical analysis perspective. Gold (XAU/USD) Technical Analysis – Short-term corrective decline within a major uptrend Fig 1:  Gold (XAU/USD) trend as of 22 May 2023 (Source: TradingView, click to enlarge chart) Since its 4 May 2023 swing high of US$2,067, Gold (XAU/USD), a whisker away from its current all-time high of US$2,075 printed on 7 August 2020, has reversed down from its major ascending channel upper limit/resistance and traded below the 50-day moving average since 18 May 2023. These observations suggest that a short-term corrective decline is likely to be in play for Gold within a major uptrend phase that is still intact since the 3 November 2022 low of US$1,616. As depicted on the 1-hour chart, the price actions of Gold have evolved into a minor descending channel since its 10 May 2023 minor swing high of US$2,048 with its channel resistance coincides with the 50-day moving average resistance at around US$1,991. Read next: RBA Meeting Minutes - policymakers were concerned about weak productivity growth that would trigger inflation risk| FXMAG.COM In addition, the 1-hour RSI has retreated from a corresponding resistance at the 68% level (close to the overbought region of 70% & above) which indicates that short-term downside momentum remains intact. The near-term supports rest at US$1,950, the former swing high area of 01/02 February 2023, and US$1,940, defined by the lower limit of the minor descending channel and a cluster of Fibonacci extension levels. On the flip side, a clearance with an hourly close above US$1,991 short-term pivotal resistance negates the bearish tone for the next intermediate resistance that is coming in at US$2,021 (minor congestion zone of 12/15 May 2023 & the 61.8% Fibonacci retracement of the recent slide from 4 May 2023 high to 18 May 2023 low). Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Gold Technical: A potential short-term downtrend in play - MarketPulseMarketPulse

US markets made an impressive surge last week, taking the S&P500 to 4200, a crucial turning point. It is worth preparing for an upside stop or correction before the index steadily moves to the next level. The S&P500 index has stopped near the 4200 level many times in the last two years. There was a pause on the way up from April to June 2021; then, it became significant support in March and May 2022; and over the last twelve months, it has been the resistance level. At the start of May and in trading on Friday, the S&P500 retreated from this level again. The appropriate info trigger is required to take a major tactical level, but the lack of progress in the debt ceiling negotiations on Friday formed the mood for profit-taking. Although S&P500 doesn’t look overbought after last week’s rise, on the daily timeframes, the Nasdaq100 reversed on Friday just after touching the overbought zone in RSI. The high-tech index was experiencing a rally on the AI theme, but even more, investors were attracted by the financial performance of technology heavyweights. They have been vulnerable to rate hikes in previous years but have performed impressively during the current reporting season. But that rally is ending, and profit-taking in the Nasdaq100 looks to be reason enough for a local correction in the broad market. The US debt ceiling drama is starting to look more and more like the most dramatic scenario we saw in 2011, where the market lost around 20% from the peak to the bottom. Interestingly, it peaked near the original ceiling date (now 1 June). However, investors and traders should be aware that due to tax receipts and other measures of the US Treasury, there is time for discussions until mid-August. And lawmakers appeared to get the most out of this time, trying to score points before next year’s presidential election. Read next: According to Lookonchain, crypto whales could soon start selling Bitcoin | FXMAG.COM On the technical analysis side, the S&P500 index has the potential to correct to the 4100 area without breaking its medium-term rising trend. The 50-day moving average passes through here. In a more extreme case, the pullback might occur towards the area of 4000, where the 200 SMA is located. In addition, this level carries a specific psychological load. The level of 3800 is achievable if the economy experiences a sharp decline in addition to the debt ceiling drama. It is doubtful that the S&P500 would lose 20% and bounce back to 3350 on the sovereign debt story, as this level would not have the same devastating effect again.

We've recently reached out to Joe Jeffries from Eightcap, to ask him for a short summary of Fed Chair speech. Let's find out what has been said. Fed Chair Powell's comments, US inflation still remains too high. Due to the banking crisis, the Fed may not have to increase the funding rate as high as first thought. Pressure on lending can lead to softening economic growth, highering and prices. Lower prices can help take pressure off inflation. Again we see mixed signals. On the one hand, pressure might be coming off naturally due to the banking issues, but they have also advised that rates will continue to higher if inflation fails to fall as required. Overall this could set up a pause in June unless data contradicts the current situation. Fed's Kashkari is open to a rate pause next month. Hopefully, this week's minutes give us a few more details.  Read next: Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?| FXMAG.COM

The minutes to the 3 May FOMC meeting when it hiked rates by 25bp echo the comments we have been hearing from officials. "Some" members clearly think there is more work to do to constrain inflation, but "several" think they may have already done enough. The market pricing of a 30% chance of a June hike seems fair, but volatility looks set to continue Source: Shutterstock "Some" versus "several" debate seemingly favours a June pause The minutes to the May Federal Open Market Committee meeting show that there is a split as to whether there will be the need to raise interest rates further. Some members felt that based on the newsflow to date, getting inflation back to target “could continue to be unacceptably slow”, which would mean “additional policy firming would likely be warranted at future meetings”. However, “Several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary”. Our interpretation is that “several” probably exceeds “some”, but the key take-away is that “Many participants focused on the need to retain optionality after this meeting" – i.e. data dependency. In terms of the economic backdrop, inflation remained “unacceptably high” although “participants judged that risks to the outlook for economic activity were weighted to the downside”. Federal Reserve staff continue to forecast that “the effects of the expected further tightening in bank credit conditions, amid already tight financial conditions, would lead to a mild recession starting later this year, followed by a moderately paced recovery”. It was unsurprising to see the Fed acknowledging that a “timely” increase in the US debt ceiling is “essential “avoid the risk of severely adverse dislocations in the financial system and the broader economy”. Their concerns will be higher now. Comments from officials suggest the debate remains similarly balanced The tone of the minutes reflects the balance of the Fed comments we have subsequently heard. Fed Chair Powell appears to be in the camp leaning towards a pause. In response to a question from Nick Timiraos at The Wall Street Journal during the FOMC press conference on whether policy is now “sufficiently restrictive”, Chair Powell responded “Policy is tight, you see that in interest-rate sensitive activities and you are beginning to see it more and more in other activities. And if you put the credit tightening and the quantitative tightening on top of that, I think we may not be far off, we’re possibly even at that level.” Read next: Eurozone PMI dropped in May due to manufacturing contraction| FXMAG.COM However, the hawks are still pushing for more action with non-voter James Bullard favouring potentially two more 25bp rate hikes and voting member Neel Kashkari and Fed Governor Chris Waller suggesting it is premature to declare that the tightening cycle is over. Others though are more open to the idea of a pause given the 500bp of hikes enacted since March last year has been the most aggressive and rapid period of monetary policy tightening for 40 years. With monetary policy operating with long lags before it really has an impact on the economy there are several FOMC members making the case, similarly to Jerome Powell, that they are considering skipping the June meeting and will reconsider the situation in July. We still favour the next move being a rate cut, but the timing is difficult The market has significantly repriced the outlook for Fed policy. Just two weeks ago they were looking at rates having peaked and a first 25bp rate cut coming in September with nearly 100bp of cuts by the January 2024 FOMC meeting. Now there is a 30% chance of a 25bp hike and a 65% chance by the July FOMC meeting. Cuts are still priced before year end, but no-where near to the same extent. What happens next will come down to the data and events, such as inflation, jobs, the debt ceiling showdown and what is happening with the state of the banking sector and the impact on the flow of credit. Our central view is that tighter lending conditions will do the Fed’s work for it and further rate rises aren’t necessary. However, we acknowledge that many at the Fed want to see clear evidence that inflation is destined to head back to 2%. We think June will see a “skip” outcome, which will then be extended with rates now at their peak. We then have a 50bp rate cut in November and December with the Fed funds rate down to 3% in the second quarter of 2024. This is certainly more aggressive than the market pricing and economist consensus. It reflects our concern that the effects of tighter lending conditions are underplayed and the resulting economic slowdown will dampen inflation more rapidly than the market does. We readily accept that the risks are skewed towards this economic pain being felt later than we predict with relatively strong household and corporate balance sheets mitigating some of the headwinds. Read this article on THINK Tags US Recession Interest rates Inflation Federal Reserve 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