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Exchange Rates 14.03.2023 analysis

U.S. authorities took emergency action on Sunday to boost confidence in the banking system after the collapse of Silicon Valley Bank (SVB) threatened to trigger a broader financial crisis. Regulators said that from Monday, customers of the failed bank would have access to all their deposits. And to give banks access to funds, they created a new mechanism.

Exchange Rates 14.03.2023 analysis

The collapse of the SVB triggered a massive rally in European and global bond markets.

On Monday, government bond yields fell in the eurozone as investors flocked to safe-haven assets.

The yield on two-year German bonds fell 34 basis points to 2.746%. This is the biggest one-day drop since 1995. Yields move inversely to prices.

And last week, the yield on 2-year bonds, which is very sensitive to ECB interest rate expectations, exceeded 3.3%.

There will likely be a slight rate hike by the European Central Bank (ECB) on Thursday. Expectations for the ECB's next decision changed sharply on Monday. Market pricing showed that trad

ECB April Preview: Quicker end to QE to help euro recover

ECB April Preview: Quicker end to QE to help euro recover

FXStreet News FXStreet News 13.04.2022 16:55
Euro has been struggling to find demand since the beginning of April. ECB is widely expected to leave key rates unchanged. A hawkish shift in ECB's policy outlook could trigger a steady rebound in EUR/USD. EUR/USD is already down more than 2% in April amid the apparent policy divergence between the Federal Reserve and the European Central Bank (ECB). The European economy is widely expected to suffer heavier damage from a protracted conflict between Russia and Ukraine than the US economy, and the Fed remains on track to hike its policy rate by 50 basis points in May. The shared currency needs the ECB to adopt a hawkish policy stance in order to stay resilient against the greenback. In March, the ECB left interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50% respectively. The bank further announced that monthly net purchases under the Asset Purchase Programme (APP), which were initially planned to end in the fourth quarter, will amount to €40 billion in April, €30 billion in May and €20 billion in June before ending in the third quarter. Related article: ECB Interest Rate Decision Is Coming! European Indices (DAX, CAC40) To Plunge Or Rise? What About Forex Pairs? The accounts of the ECB’s March meeting revealed earlier in the month that a large number of the governing council members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalization. Hawkish scenario The ECB could decide to adjust the monthly purchases to open the door for a rate hike in the second half of the year if needed. The bank might keep the purchases under APP unchanged at €40 billion in April but bring them down to €20 billion in May to conclude the program by June. Even if the policy statement refrains from offering hints on the timing of the first rate increase, such an action could be seen as a sign pointing to a June hike. In a less-hawkish stance, the bank may choose to leave the APP as it is but change the wording on the QE to say that it will be completed in June rather than in Q3. ECB President Christine Lagarde’s language on the timing of the rate hike will be key if the bank decides not to touch the APP. During the press conference in March, Lagarde noted that the rate hike would come “some time” after the end of QE. If Lagarde confirms that they will raise the policy rate right after they end the APP, this could also be seen as a hawkish change in forward guidance. Dovish scenario The ECB might downplay inflation concerns and choose to shift its focus to supporting the economy in the face of heightened uncertainty by leaving the policy settings and the language on the outlook unchanged. The euro is likely to come under heavy selling pressure if the bank reiterates that the APP will end in the third quarter as planned. That would push the timing of the first rate hike toward September and put the ECB way behind the curve in comparison to other major central banks. According to the CME Group FedWatch, markets are pricing in a more-than-60% probability of back-to-back 50 bps hikes in May and June. Conclusion The ECB is likely to respond to the euro’s weakness, aggressive tightening prospects of major central banks and hot inflation in the euro area by turning hawkish in April. For EUR/USD to stage a steady rebound, however, the bank may have to convince markets that they are preparing to hike the policy rate by June. On the other hand, there will be no reason to stop betting against the euro if the bank chooses to leave its policy settings and forward guidance unchanged. EUR/USD technical outlook EUR/USD closed the previous seven trading days below the 20-day SMA and the Relative Strength Index (RSI) indicator stays below 40, suggesting that bears continue to dominate the pair’s action. On the downside, 1.0800 (psychological level, March low) aligns as first support. With a daily close below that level on a dovish ECB, EUR/USD could target 1.0700 (psychological level) and 1.0630 (March 2020 low). Key resistance seems to have formed at 1.0900 (psychological level, static level). In case this level turns into support, a steady rebound toward 1.1000 (psychological level, 20-day SMA) and 1.1100 (static level, psychological level) could be witnessed.
ECB press conference brings more fog than clarity

Will The European Central Bank’s (ECB) Interest Rate Decision Meet Market Expectations?

Kamila Szypuła Kamila Szypuła 22.10.2022 10:18
In the current situation, the ECB turns a blind eye to the risk of recession, but is very determined to bring down inflation and inflation expectations. To that end, it is hard to imagine how the ECB could not raise rates again. The economic outlook The economic situation is not looking very good in Europe and the euro area. Recent data showed a worsening picture of the situation. Many experts believe that the region may face a serious recession in the near future. Also the attempts by the ECB to raise the euro exchange rate through further tightening should continue to be ineffective in the near future. The economy is expected to stagnate in the first quarter of 2023. Very high energy prices reduce the purchasing power of the population's income. Moreover, Russia's unjustified aggression against Ukraine continues to undermine the confidence of entrepreneurs and consumers. The steady rise in prices in Europe is making households and businesses prepare for even greater pressure in the coming months. Previous date Economic difficulties have arisen since the start of the covid-19 pandemic. The persistent threats caused by the pandemic continue to pose a threat to the smooth transmission of monetary policy. Nevertheless, the European Central Bank did not manage to raise interest rates at that time and for a long time the rate was at 0.0%. The situation regarding interest rates changed after the second quarter of 2022. Inflation rose sharply, and other macroeconomic data were also not optimistic. For this reason, the ECB decided to raise rates by 50 bp. The first rate hike was expected to be milder, the forecast was at 0.25%. Another hike was also hawkish. And now the rate is 1.25%. It’s true that the ECB has consistently surprised on the hawkish side in the past few meetings, but the positive impact on the euro have been null. Source: investing.com What to expect? The economic background has hardly changed since September. Confidence indicators continue to decline, while data for the third quarter point to a very mild contraction in the eurozone economy. Needless to say, the outlook for the euro area economy is surrounded by an extremely high degree of uncertainty. Price pressures across the economy continued to strengthen and widen, and inflation may increase further in the near term. It is believed that the peak of inflation is close, but the economic situation will depend on the situation related to Russia's invasion of Ukraine. The Governing Council stands ready to adjust all instruments to ensure that inflation stabilizes at the 2% target. Finally, the ECB managed to lead the market expectations and next week's meeting may be the first without such a surprise. According to the minutes from the previous meeting, policy makers at the European Central Bank (ECB) were concerned that inflation might be stuck at a high level, so aggressive tightening was necessary. We can expect that this mood will also replicate at the next week's meeting. The September hike of the ECB by 75bp was expected by the markets, and now it expects that its next move in politics, planned for October 27, will be similar. Contrary to the preparations for the July and September meetings, there was no public controversy about the size of the rate hike. Source: investing.com, ecb.europa.eu
US Dollar Index May Confirm A Potential Bullish Trend Reversal

Without US Support, Currency Interventions Are Doomed To Failure

InstaForex Analysis InstaForex Analysis 23.10.2022 09:44
What doesn't kill makes us stronger. No matter what the Federal Reserve's rival central banks try to rein in the US dollar, it still blooms. It would seem that high inflation-induced rate hikes in other countries outside the US should have cooled the ardor of the bulls on the USD index. It wasn't there! One piece of information about the acceleration of consumer prices in New Zealand, Britain and Canada was enough for the greenback to launch a new attack. The same can be said about foreign exchange interventions. In conditions of low external demand and the highest inflation in decades, the interest in reverse currency wars, thereby strengthening rather than weakening the national currency, is understandable. As well as the dissatisfaction of governments with the fall of its exchange rate. Alas, intervention in the life of Forex does not help. Large-scale long positions on the yen managed to stop the USDJPY pair at 146 for just a few days, after which it rose to 151. At the same time, the experience of foreign exchange interventions with USDJPY in 1998 and 2011, with EURUSD in 2000, with GBPUSD in 1992 was also negative. A coordinated intervention is required, like the Plaza Accord in 1985. Dollar pairs react to coordinated intervention The problem is that the conditions then and now are significantly different. In those years, the Fed defeated high inflation and could afford the weakening of the US dollar. Today, the central bank still has a lot to do before consumer prices begin to move confidently towards the target. In addition, Finance Minister Janet Yellen notes that market-determined exchange rates are the best regime for the US dollar. Its strengthening is the result of differences in economic policies and the shocks that countries face. Without US support, currency interventions are doomed to failure. You don't need to go far for an example. Japan threw money to the wind, trying to support the yen diving into the abyss. Its interference in the life of Forex only made the situation worse. Gold and foreign exchange reserves were used to sell USDJPY. It was necessary to get rid of US Treasury bonds, which led to an increase in their yields and further strengthened the dollar. Dynamics of US Treasury Bond yields Rates on 10-year securities have reached the highest level since 2007. The situation resembles the events of those years, and investors are beginning to argue that only an increase in profitability to 5-5.25% will allow the indicator to reach a plateau. Until this happens, the US dollar will continue to sweep away everything in its path. No matter how hard its opponents try, raising rates or using currency interventions. Only the European Central Bank is able to suspend the fall of EURUSD. Its meeting is rightly regarded as a key event of the economic calendar in the last full week of October. Technically, the EURUSD peak continues on the daily chart. We hold the short positions formed from the 0.9845 and 0.9815 levels and increase them on the breakout of support at 0.97. The initial target is the 0.95 mark.     Relevance up to 15:00 2022-10-26 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. Read more: https://www.instaforex.eu/forex_analysis/324997
The Outlook Of EUR/USD Pair For Long And Short Position

The Eurozone Economy Is Facing A Deep Recession

InstaForex Analysis InstaForex Analysis 23.10.2022 09:49
The USD/JPY pair was storming the 151.00 mark (we wrote about this in our previous review), gold is falling in price, and the dollar continues to advance. When this article was written the DXY dollar index was near 113.34, remaining in the upper part of the range formed between the local support and resistance levels of 114.74 and 109.96. At the same time, the general upward dynamics of the dollar remains, pushing the DXY index towards more than 20-year highs near 120.00, 121.00. The breakdown of the local round resistance levels of 114.00, 115.00 will be a signal that the DXY index will return to growth. On Thursday, the dollar received support from statistics on the labor market: in its weekly report, the US Department of Labor reported a decrease in the number of initial applications for unemployment benefits (for the week of October 14) to 214,000 thousand (from 226,000 a week earlier ), which is better than economists' expectations of an increase to 230,000. The state of the labor market (together with data on GDP and inflation) is a key indicator for the Federal Reserve in determining the parameters of its monetary policy. The drop in the indicator (the number of initial and secondary claims for unemployment benefits) and its low value is a sign of a recovery in the labor market and has a short-term positive impact on the USD. There were no important macro statistics for the US on Friday. It will appear next week (for more details, see Key economic events of the week 10/24/2022 – 10/30/2022). Also next week, meetings of the three largest world central banks will be held at once: Japan, Canada, the eurozone. As for the latter, its leaders are, in general, set up for another interest rate hike. As expected, at a meeting on Thursday, European Central Bank leaders will again raise the level of key interest rates, by 0.50% or even 0.75%. According to the final estimate, annual inflation in the eurozone in September amounted to 9.9% (below the first estimate of 10.0%). Core annual CPI rose by +4.8%, which is in line with the forecast and the previous 4.8%. According to Eurostat, annual inflation fell in six of the bloc's member states, remained stable in one and rose in twenty. A recent media poll of economists showed that they expect the ECB to raise its deposit and refinancing rates by 75 bps (deposits to 1.50% and the refinancing rate to 2.00%) at the October 27 meeting to contain inflation exceeding the target level by five times. By the end of the year, deposit and refinancing rates are forecast to be 2.00% and 2.50%, respectively. At the same time, the ECB is in a difficult situation as the eurozone economy is facing a recession, with the probability of its onset within a year, and the nature of the recession can be deep and long, given the military conflict in Ukraine and confusion in the European energy market. Despite information from the previous EU leaders' summit, which "managed to reach a common agreement on energy security" with the prospect of creating a cartel of European gas buyers that would deal with the purchase and subsequent distribution, the shortage of gas and oil in Europe will continue to drive inflation. Whether the ECB, which is moving so far with cautious steps, will be able to cope with it is a question that remains open. As for the EUR/USD pair, at the time when this article was written on Friday morning, it was trading near the 0.9740 mark, in the area of a stable bear market. From a fundamental point of view, we should expect at least a strong bearish momentum in the EUR/USD pair, and at a high, a further fall of the pair towards 20-year lows, when it was trading near 0.8700, 0.8600. In general, the downward dynamics of EUR/USD remains.   Relevance up to 13:00 2022-10-26 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. Read more: https://www.instaforex.eu/forex_analysis/324985
ISM Business Surveys Signal Economic Softening and Recession Risks Ahead

Geopolitics And The Euro (EUR) Situation Are Expected To Deteriorate

InstaForex Analysis InstaForex Analysis 23.10.2022 09:57
Long-term perspective. The EUR/USD currency pair gained 140 points during the current week. We can say that this is one of the best weeks for the euro in recent times, although this growth is very difficult to consider on a 24-hour TF. But on this TF, a global downward trend immediately catches the eye, within which strong corrections are still rare. However, it would be correct to say there are none. As we have already said, over the past 1.5–2 years, the euro currency has shown corrections of a maximum of 400–450 points. And the whole downward trend already exceeds 2500 points. And, of course, it is worth noting that it has been three weeks since the price last updated its 20-year lows, and the pair is still close to these lows. The beginning of an upward trend does not even "smell." Thus, the technical picture does not change. Therefore, it can be assumed that the fundamental and geopolitical backgrounds do not change either. And this is not just an assumption. It is an objective reality since the "foundation" now remains the same as it was a month ago, two months ago, and three months ago. The Fed is also raising interest rates aggressively and is prepared to do so "to the bitter end." The ECB is also simply raising the rate and is already thinking about reducing it because many EU countries may be unable to cope with tight monetary policy. The Fed rate has long been higher than the ECB rate, and the gap between their values may only increase in the coming months. When the Fed ends the rate hike cycle, a "high rate period" will begin, during which monetary policy will not change. Thus, the Fed's monetary policy may remain much tougher than the ECB for another year or two or three. Naturally, this state of affairs will support the dollar. It may not grow all this time, but it will be extremely difficult for the European currency to show tangible growth. COT analysis. COT reports on the euro currency in 2022 can be entered into the textbook as a vivid example. For half the year, they showed a frank "bullish" mood of professional players, but at the same time, the European currency was steadily falling. Then they showed a "bearish" mood for several months, and the euro currency also steadily fell. The net position of non-profit traders is bullish again, and the euro continues to fall. This is happening, as we have already said, because the demand for the US dollar remains very high against the backdrop of a difficult geopolitical situation. Therefore, even if the demand for the euro currency is growing, the high demand for the dollar does not allow the euro currency itself to grow. During the reporting week, the number of buy-contracts from the non-commercial group increased by 6.5 thousand, and the number of shorts decreased by 4 thousand. Accordingly, the net position increased by about 10.5 thousand contracts. This fact does not matter much since the euro remains "at the bottom" anyway. Professional traders still prefer the dollar to the euro currency at this time. The number of buy contracts is higher than sell contracts for non-commercial traders by 48 thousand, but the European currency cannot extract any dividends from this. Thus, the net position of the "non-commercial" group can continue to grow, but it does not change anything. If we look at the general indicators of open longs and shorts for all categories of traders, then sales are 22 thousand more (586k vs. 564k). Thus, according to this indicator, everything is logical. Analysis of fundamental events. There is nothing to note in the European Union this week except for the banal inflation report, which was released in the second assessment for September. Traders expected an increase of 10.0%, but in reality, prices rose only by 9.9% y/y. However, the epithet "only" hardly applies to an ever-growing index. We cannot say that traders were upset about this or, on the contrary, happy. This indicator does not change anything because it cannot affect the ECB's plans in a cardinal way. The European regulator cannot look at the current inflation and decide to raise the rate at each next meeting by 1% to deal with high price growth and not just pretend. There was practically no geopolitical news this week either. Perhaps that is why the euro currency has avoided a new fall. But again, there is no difference since it continues to be near its 20-year lows. Trading plan for the week of October 24–28: 1) In the 24-hour timeframe, the pair resumed their movement to the south. Almost all factors still support the long-term growth of the US dollar. The price is below the Ichimoku cloud and the critical line, so purchases are irrelevant now. It would be best if you waited at least for consolidation above the Senkou Span B line and only considered long positions. 2) The euro/dollar pair sales are still more relevant now. The price formally went above the critical line, but it did not go higher, but the line itself declined, so we expect the fall to continue with a target below the 0.9582 level (161.8% Fibonacci). In the future, if the fundamental background for the euro currency does not improve and geopolitics continues to deteriorate, the euro currency may fall even lower. Explanations of the illustrations: Price levels of support and resistance (resistance/support), Fibonacci levels – target levels when opening purchases or sales. Take Profit levels can be placed near them. Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5). Indicator 1 on the COT charts is the net position size of each category of traders. Indicator 2 on the COT charts is the net position size for the "Non-commercial" group.   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/325028
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

The British Pound To US Dollar (GBP/USD) Pair Maintained A Long-Term Towntrend

InstaForex Analysis InstaForex Analysis 23.10.2022 09:59
Long-term perspective. The GBP/USD currency pair has increased by 40 points during the current week and remained above the critical line on the 24-hour TF. Thus, certain chances of a new upward trend are also preserved. We have already said earlier that the pound has more reasons for growth - technical. At least because it overcame the Kijun-sen line sharply and strongly moved away from its absolute lows. However, this is a double-edged sword. The last fall in the pound sterling might not have happened if not for the tax initiatives of former British Prime Minister Liz Truss. In general, her resignation turned out to be very unexpected since, at the beginning of the week, in an interview with Bloomberg, she said she was going to fight and did not intend to leave her post. We did not believe that she would leave voluntarily, and even so quickly, and we still could not announce a vote of no confidence in her in the near future. Thus, most likely, political pressure was exerted on her. However, all this is history and generally not interesting. Now I wonder who will become the new prime minister. And good old Boris Johnson can become one, as he is currently leading in the amount of support from the Conservatives, according to opinion polls. From the same conservatives who dismissed him a few months ago. The political pun in the Kingdom continues. We need to wait for new elections, but the situation will not change dramatically for the pound sterling. Politics is, of course, interesting and important. As we have seen, the Prime Minister's short-sighted decision can collapse the financial markets. However, Johnson is unlikely to make the same mistake as Truss. And even more so, Rishi Sunak, who served as finance minister under Johnson, will not allow it. But in any case, the pound still has big problems with the grounds for growth. Technically, it can show an upward movement, but will one "technique" be enough for market participants? COT analysis. The latest COT report on the British pound showed a new strengthening of the "bearish" mood. During the week, the non-commercial group closed 8,600 buy contracts and opened 3,400 sell contracts. Thus, the net position of non-commercial traders fell by 12.9 thousand, which is quite a lot for the pound. The net position indicator has been growing slightly in recent weeks, but this is not the first time it has been growing. Still, the mood of major players remains "pronounced bearish," and the pound sterling maintains a downward trend in the medium term. And, if we recall the situation with the euro currency, there are big doubts that, based on COT reports, we can expect strong pair growth. How can you count on it if the market buys the dollar more than the pound? The non-commercial group has now opened a total of 91 thousand contracts for sale and 40 thousand for purchase. The difference, as we can see, is still very big. The euro cannot show growth in the "bullish" mood of major players, and the pound will suddenly be able to grow in a "bearish" mood. As for the total number of open buy and sell orders, the bulls have an advantage of over 25 thousand. But, as we can see, this indicator also does not help the pound much. We remain skeptical about the long-term growth of the British currency, although there are certain technical reasons for this. Analysis of fundamental events. During the current week, only one really important report was published in the UK - on inflation. The consumer price index rose by 10.1% y/y and, as we can see, continues to grow, despite the seven increases in the key rate. Many experts suggest that the rate in the UK should be raised to at least 5% to count on a significant reduction in inflation. But is there an opportunity for BA to raise the rate so high with the current financial and economic problems? From our point of view, no, and the ECB, together with BA, will stop tightening monetary policy in the near future. Or they will greatly slow down its pace. Both can create additional pressure on the pound, as the Fed will continue to accelerate its pace at the same time. In general, the prospects for the pound are bad as usual, and rising inflation does not mean that the British regulator will increase the aggressiveness of the monetary approach. Trading plan for the week of October 24–28: 1) The pound/dollar pair as a whole maintains a long-term downward trend but is located above the critical line. Therefore, small purchases can now be considered as long as they are located above the Kijun-sen. The target is the Senkou Span B line, which runs at 1.1843. There are some reasons for the pair's growth, but there are still many reasons for a new fall. Be careful with your purchases. 2) The pound has made a significant step forward but remains in a position where it is difficult to wait for strong growth. If the price fixes below the Kijun-sen line, the pair's fall can quickly and cheerfully resume with targets of 1.0632–1.0357. Explanations of the illustrations: Price levels of support and resistance (resistance /support), Fibonacci levels – target levels when opening purchases or sales. Take Profit levels can be placed near them. Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5). Indicator 1 on the COT charts is the net position size of each category of traders. Indicator 2 on the COT charts is the net position size for the "Non-commercial" group.     Relevance up to 10:00 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. Read more: https://www.instaforex.eu/forex_analysis/325030
US Stocks Extend Rally Amid Optimism Over Fed's Monetary Policy

Recent Reports Have Not Helped The Euro To US Dollar Pair (EUR/USD)

InstaForex Analysis InstaForex Analysis 23.10.2022 10:04
  The US dollar index showed contradictory dynamics this week. Initially, at the start of the five-day trading period, it dropped sharply, returning to the area of the 111th figure. The market unexpectedly increased interest in risk, amid quarterly reports of the largest US banks (in particular, Bank of America and Bank of New York Mellon), which exceeded the expectations of most analysts. After that, the main Wall Street indexes went up, while the safe greenback came under pressure. In addition, on Monday it became known that British Prime Minister Liz Truss canceled the key points of her odious anti-crisis plan, which included large-scale tax cuts. And although this step subsequently did not help her stay in the chair of the head of government, directly "in the moment" it increased interest in risky assets. Against this background, the EUR/USD pair reached 0.9875 (one and a half week price high). However, bulls on the pair were unable to develop an upward trend. On Tuesday, the US dollar index turned around and headed upward again. Throughout the week, including on Friday, the pair had been trading within a wide price range, actually circling in the area of 97-98 figures. Traders reacted reflexively and are reacting to contradictory macroeconomic statistics, mainly from the United States. For example, the greenback reacted positively to the published report in the real estate sector: the volume of construction permits issued in America increased by 1.4% in September after a serious decline in August (-8.5%). At the same time, the volume of housing sales in the secondary market (the release was published the next day) unexpectedly decreased, and immediately by 1.5% (with a forecast decline of 0.8%). The Federal Reserve-Philadelphia Manufacturing Index also turned out to be disappointing, which came out at -8.7 in October. While the growth rate of initial applications for unemployment benefits was at the level of 214,000 (a three-week low). The above-mentioned macroeconomic reports (generally of a secondary nature) could not help – neither the EUR/USD bears nor the bulls. Of course, traders reacted to these reports accordingly, but only formally – literally after a few hours, the downward/upward momentum faded away. Obviously, traders need a more powerful informational occasion that will allow them to either approach the parity level or break through the defense at the base of the 96th figure. For the development of the upward corrective movement, EUR/USD bulls need to settle above the 1.0000 mark, and for the continuation of the downward trend, bears need to go below the 0.9600 target. Current macroeconomic statistics are not able to cope with such tasks. In my opinion, EUR/USD traders can only pin their hopes on larger-scale information campaigns. The vector of price movement will be determined primarily by the level of anti-risk sentiment. By the way, Friday's dynamics of the dollar index eloquently illustrated the current situation. So, during the day, the greenback steadily strengthened its positions throughout the market, but at the start of the US session it weakened sharply: it became known that Russian Defense Minister Sergei Shoigu held telephone talks with US Defense Minister Lloyd Austin. According to Russian media, the parties discussed "topical issues of international security, including the Ukrainian issue." These are the second talks between the heads of defense departments this year (the first were in May). Amid general geopolitical tensions, this news was received by the market "with a bang". However, the growth of the EUR/USD pair was limited. Almost immediately, the press secretary of the president of Russia Dmitry Peskov said that following the conversation of the ministers, "there are no plans for a telephone conversation between Vladimir Putin and Joe Biden." However, this moment highlighted the main idea: traders react sharply to news of a geopolitical nature. A decline in anti-risk sentiment can put significant pressure on a safe greenback - and vice versa, an increase in panic will allow dollar bulls to open a second wind. Also, the tone of trading can be set by representatives of the Fed. But, to the disappointment of the EUR/USD bears, the members of the Fed have not yet decided to voice "ultra-hawkish" comments. In particular, many representatives of the central bank spoke this week – Philip Jefferson, Lisa Cook, Michelle Bowman, Patrick Harker, James Bullard, Charles Evans. In one form or another, they made it clear that the Fed is ready to continue taking steps to curb inflation in the United States. In one form or another, they hinted that they are ready to support a 75-point rate hike in November. But the thing is that even before their speeches, the probability of a 75-point rate hike at the November meeting was estimated at 95%! That is, the market has already largely played this fundamental factor. While the members of the Fed are not yet ready to "increase the degree of heat", allowing, for example, a 100-point increase. They are also not ready to talk about more distant prospects (regarding the November meeting) – according to them, further decisions will be made taking into account incoming data, primarily in the field of inflation and the labor market. Thus, traders of the EUR/USD pair in the medium term will continue to trade in the 100-point price range of 0.9750-0.9850. In my opinion, the downward dynamics will resume over time, but at the moment it is impossible to talk about prioritizing short or long positions. Given the current uncertainty, it is advisable to take a wait-and-see attitude for the EUR/USD pair.     search   g_translate       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/325008
The EUR/USD Price May Fall Under 1.0660

Today There May Be Confirmation Of The Bearish Sentiment Of The EUR/USD Pair

InstaForex Analysis InstaForex Analysis 24.10.2022 08:10
On Friday, the head of the San Francisco Federal Reserve, Mary Daly, said that the high pace of rate hikes is slowing down the economy, this pace needs to be slowed down. As a result, yields on government bonds fell, stock indices rose, and the euro closed the day up 75 points. The quote of the single currency again reached the resistance of 0.9864 and the MACD indicator line. The European Central Bank raises rates on the 27th, but we still doubt the market's willingness to switch so quickly from the Fed's leading role in pricing the euro to the ECB's leading position. Eurozone business activity indicators for October will be released today, and a recession is predicted for them. On the technical side, in order to consolidate the euro in the green, the price needs to go above the descending price channel, marked in green on the daily chart, that is, above the level of 0.9950. Price development above 0.9864 (September 6 low) before breaking 0.9950 in this situation is considered as a false exit above the MACD indicator line. Consolidation below this line may bring the price back to support 0.9724. The Marlin Oscillator is already turning down and does not share the optimism of the price. The price is already forming a divergence with Marlin on the H4 chart. As long as it's weak. A decline below the MACD line (0.9797) will set the bearish mood for the euro.       Relevance up to 04:00 2022-10-25 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. Read more: https://www.instaforex.eu/forex_analysis/325066
The Loonie Pair (USD/CAD) Bounces Off An Upward-Sloping Support Line

The Future Of The USD/CAD Exchange Rate Will Depend On The Decision Of Bank Of Canada (BOC)

TeleTrade Comments TeleTrade Comments 24.10.2022 08:40
USD/CAD has accelerated to near 1.3680 amid a stellar recovery in the DXY. The 10-year US Treasury yields have extended their losses to near 4.17% amid soaring market mood. The BOC may trim the extent of the rate hike to 50 bps this week. The USD/CAD pair sensed buying interest after dropping to near the round-level support of 1.3600 in early Tokyo. The loonie bulls have retreated after the US dollar index (DXY) defended the intervention rumors of the Bank of Japan (BOJ) recovered its entire intraday losses. The asset has extended its gains to near 1.3680. The DXY has recaptured its intraday high at 112.26 and is expected to behave critically ahead as the returns on US government bonds have dropped sharply. The 10-year US Treasury yields have extended their losses by 4.17% after displaying jaw-dropping gains to near 4.34% on Friday. Market sentiment is extremely cheerful and S&P500 futures are holding their gains. On Monday, the US S&P PMI data will be keenly watched. The Manufacturing PMI is expected to decline to 51.2 vs. the prior release of 52.0 while the Services PMI may drop to 49.2 from 49.3 reported earlier. This week, the interest rate decision from the Bank of Canada (BOC) will determine the further direction of the asset. A Reuters poll on projections for BOC’s interest rate claims that BOC Governor Tiff Macklem will announce a rate hike of 50 basis points (bps). The extent of the rate hike seems lower than their current pace of hiking interest rates. It is worth noting that the headline inflation rate in Canada was recorded at 6.9% for September. On the oil front, oil prices have dropped below the crucial support of $85.00 amid mounting global recession fears. In addition to the BOC, the BOJ and the European Central Bank (ECB) will announce their monetary policies. The BOJ may continue its ultra-loose stance while the ECB could tighten its monetary policy. An expectation of a fresh rate hike spell is weighing pressure on oil prices.
Prices Of Gold Rose For The Third Straight Session

The Decision Of The ECB May Threaten The Gold Rate (XAU/USD)

TeleTrade Comments TeleTrade Comments 24.10.2022 08:46
Gold price prints mild losses while reversing from one-week high. DXY pares the first weekly loss in three amid geopolitical, market meddling concerns. Fed speakers’ absence, likely hawkish outcome from ECB could test XAU/USD bears. Preliminary readings of US PMI for October, Q3 GDP are also important for near-term directions. Gold price (XAU/USD) remains pressured around the intraday low of $1,652, keeping the week-start pullback from a fortnight top, during early Monday morning in Europe. In doing so, the yellow metal justifies the firmer US dollar, as well as the market’s cautious mood. US Dollar Index (DXY) rises 0.30% intraday to 112.25 by the press time amid chatters surrounding Japan’s meddling in the market to defend the yen, as well as challenges to the risk appetite. That said, the news that both North and South Korea have exchanged warning shots near their disputed western sea boundary, published on Monday, also seemed to have favored the US dollar buyers of late. On the same line could be the fears that China President Xi Jinping won’t hesitate to escalate geopolitical matters with the US when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the annual Communist Party Congress after winning the third term in a row. Additionally, ABC News quoted Ukrainian General Oleksandr Syrskiy citing fears of Nuclear war, which in turn might have recalled the US dollar buyers. Recently, news that China announced covid lockdown in the factory hub Guangzhou weigh on the market sentiment and the XAU/USD prices. The latest jump in the market’s bets over the Fed’s 75 bps move in November, from 88% to 95%, also seemed to have drowned the gold prices. Amid these plays, S&P 500 Futures print 0.50% intraday gains while the US 10-year Treasury yields remain offered around 4.17%, extending Friday’s losses from the 14-year high. That said, the US equities posted the largest weekly gains in four months in the latest amid previously receding fears of the Fed’s aggressive rate hike. On Friday, the gold price rose heavily while portraying the first weekly gain in three as the hawkish Fed bets retreat after a mixed Fedspeak. That said, St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” On the same line, Chicago Fed President Charles Evans stated that they will need to raise rates further and hold them for a while. However, Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal (WSJ) wrote that the Federal Reserve officials are barreling toward another interest-rate rise of 75 bps at their meeting in November and are likely to debate then whether and how to signal plans to approve a smaller increase in December. Looking ahead, gold traders should expect further weakness amid dicey markets and challenges to sentiment. However, the absence of the Fed speakers and a likely hawkish outcome from the European Central Bank (ECB) could challenge the XAU/USD downside. Technical analysis Gold price retreats from the 21-DMA hurdle amid bearish MACD signals and sluggish RSI, which in turn suggests the metal’s further declines towards the resistance-turned-support line from October 06, around $1,630 by the press time. However, monthly horizontal support near $1,620, quickly followed by the yearly bottom of $1,614, could challenge the gold bears afterward. In a case where the metal prices drop below $1,614, the $1,600 threshold and the 61.8% Fibonacci Expansion (FE) of June-October moves, near $1,565, lure the XAU/USD bears. Alternatively, the 21-DMA and the 50-DMA, around $1,665 and $1,694 in that order, guard the short-term recovery of gold price. Following that, the $1,700 round figure and the monthly high near $1,730 might be interesting to watch for further upside. Gold: Daily chart Trend: Limited downside expected
China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

Asia Stock Markets Are Not Positive, Chinese Markets Have Met An Intense Sell-Off

TeleTrade Comments TeleTrade Comments 24.10.2022 09:23
The third-term leadership of China’s XI Jinping has messed up Chinese and Hang Seng indices. S&P500 futures have extended their gains after an upbeat Friday. Oil prices have dropped amid escalating recession fears. Markets in the Asian domain are not tracking positive cues from S&P500 futures and are displaying terrible price movements. The risk-on sentiment has extremely firmed as 10-US Treasury yields have trimmed further to near 4.15%. Meanwhile, the US dollar index (DXY) is attempting to establish above 112.00 after a roller-coaster move. At the press time, Japan’s Nikkei225 gained 0.57%, ChinaA50 nosedived 2.93%, and Hang Seng witnessed a bloodbath. The index has erased 5.53%. Indian markets are closed on account of Diwali-Balipratipada. Chinese markets have witnessed an intense sell-off after the announcement of China’s XI Jinping's third leadership term.  Investors have dumped equities significantly amid soaring fears of economic slowdown as the Chinese leader could prefer ideology-driven policies even at the cost of economic growth. Apart from that, upbeat Gross Domestic Product (GDP) and Trade Balance data have failed to fetch optimism for investors. Blood has spilled over the roads as indices in Hang Seng have witnessed a bloodbath. The continuation of China’s XI Jinping leadership has strengthened fears of an economic downturn. In Japan, gains in Nikkei225 are weak against the run-up recorded in S&P500. Potential intervention chatters from the Bank of Japan (BOJ) in the currency markets against disorderly yen moves have restricted the upside in Japanese equities. On the oil front, oil prices have dropped below the crucial support of $85.00 amid mounting global recession fears. In addition to the BOC, the BOJ and the European Central Bank (ECB) will announce their monetary policies. The BOJ may continue its ultra-loose stance while the ECB could tighten its monetary policy. An expectation of a fresh rate hike spell is weighing pressure on oil prices.
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

It Will Be Busy Week, Central Bank's Decisions Ahead (BoC, ECB, BoJ), Softer US yields Could Play In Favour Of Gold And More

Swissquote Bank Swissquote Bank 24.10.2022 14:13
Last week ended on a strong positive footage, on hints that some Federal Reserve (Fed) officials have started talking about pausing the interest rate rises to avoid going too far. BoC, ECB & BoJ to decide Softer Fed expectations pulled US yields lower and sent equities higher.On the earnings front, 70% of the S&P500 companies that reported earnings so far did better than earnings expectations, and big US tech companies and oil giants will be reporting earnings this week. In politics, Boris Johnson announced yesterday evening that he will not be running for the PM role this week. That makes the British ex-Chancellor of Exchequer Rishi Sunak the front runner in the contest. Sterling kicked off the week on a positive note, but bumped into 50-DMA resistance. In central banks, the Bank of Canada (BoC) is expected to raise interest rates by another 50bp when it meets this week, the European Central Bank (ECB) will certainly raise its rates by 75bp, while the Bank of Japan (BoJ) is expected to stay pat. The BoJ intervened again in the currency markets on Friday to pull the USDJPY lower, after the pair flirted with the 152 level last week. The pair eased to 145.50 following the intervention and is back to almost 149 at the time of video. Commodities In commodities, US crude trades around $85per barrel level, and gold is better bid. Softer US yields could play in favour of gold if we really start seeing material easing in Fed expectations. But the latter is data dependent. Due this week, investors will closely watch the US latest GDP update, and the PCE index. Watch the full episode to find out more! 0:00 Intro 1:02 Are Fed officials softening tone? 3:23 China GDP better-than-expected, but well below target 4:44 US Big Tech & Oil Giants due to announce earnings 7:54 UK to choose its new PM 8:57 BoC, ECB & BoJ to decide 11:05 Update on crude oil & gold 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. #Apple #Amazon #Microsoft #Meta #ExxonMobil #Chevron #earnings #UK #PM #Rishi #Sunak #GBP #USD #JPY #BoJ #ECB #BoC #China #US #GDP #XiJinPing #crudeoil #XAU #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___  Let's stay connected: LinkedIn: https://swq.ch/cH
Credit squeezing into central banks – what next?

Growth Of The EUR/USD Pair Could Be Associated With The Future ECB Meeting

InstaForex Analysis InstaForex Analysis 26.10.2022 08:20
EUR/USD 5M The euro/dollar pair alternated between an absolute flat and a strong trend on Tuesday. Recall that at this time the pair's movements are confusing so any development of events should be expected. However, yesterday everything went more or less logically, as the pair was again virtually in the same place during the European trading session, and again traded in a very volatile manner during the US session. There were no reports or events in the European Union and the United States that could provoke a fall in the dollar by 100 points in just an hour. Thus, we are inclined to believe that the nature of this movement was technical. The euro in the long term continues to move away from its 20-year lows, but it is still somehow hesitant. Yesterday's growth could be associated with the future European Central Bank meeting, the results of which will be known on Thursday, but at the same time, the British pound was also growing, which, in theory, should not be reacting to such a factor. But it's good that the euro is at least trying to show growth. There was a difficult situation in regards to Tuesday's trading signals, since the very first one formed in the middle of the US session, when most of the upward movement had already been completed. Thus, after the pair grew by 100 points, it was hardly worth trying to work out a buy signal. The same applies to the second signal to buy near the level of 0.9945, it also formed too late in time. Unfortunately, a pretty good move was missed, but out of 8-10 hours of the daytime, the pair was only following a trend movement for an hour, and it was impossible to predict this breakthrough. COT report: The euro Commitment of Traders (COT) reports for 2022 could be used as good examples. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again and the euro is still dropping. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing. In the given period, the number of long non-commercial positions increased by 6,500, while the number of shorts decreased by 4,000. Accordingly, the net position increased by about 10,500. This fact is not of particular importance, since the euro still remains "at the bottom". At this time, commercial traders still prefer the euro to the dollar. The number of longs is higher than the number of shorts for non-commercial traders by 48,000, but the euro cannot derive any dividends from this. Thus, the net position of the non-commercial group can continue to grow further, this does not change anything. If you look at the total open longs and shorts for all categories of traders, then shorts are 22,000 more (586,000 vs 564,000). Thus, according to this indicator, everything is logical. We recommend to familiarize yourself with: Overview of the EUR/USD pair. October 26. Four more explosions occurred in the area of the Nord Stream pipelines. Overview of the GBP/USD pair. October 26. The British prime ministerial election ended dull and prosaic. Forecast and trading signals for GBP/USD on October 26. Detailed analysis of the movement of the pair and trading transactions. EUR/USD 1H You can see on the hourly timeframe that the pair continues to form a new upward trend and, if not for yesterday's strong growth that lasted for about an hour, we would say that the pair is preparing for a new fall. But no, it came close to price parity, breaking 400 points off its 20-year lows for the second time in recent weeks. There are still no obvious reasons to buy the euro. They can be highly technical and expressed by the bears' lack of desire to continue selling the euro. On Wednesday, trading could be performed at the following levels: 0.9553, 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, as well as Senkou Span B (0.9754) and Kijun-sen lines (0.9838). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also additional support and resistance levels, but trading signals are not formed near them. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. Today there will be no important events or reports scheduled again in the European Union and America. Thus, once again there is a possibility that we might witness a flat or "swing". What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group.       Relevance up to 02:00 2022-10-27 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. Read more: https://www.instaforex.eu/forex_analysis/325311
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

No Repayment Of TLTRO Loans, The ECB Is Facing A Difficult Task

ING Economics ING Economics 26.10.2022 14:10
The US curve is looking to the end fo the Fed cycle, and bank funding cost is ratcheting higher. The European Central Bank is about to change the targeted longer-term refinancing operations (TLTRO) rules after the game has started. It can save €31bn in interest but early repayments should remain modest In this article The US story continues to hum in a nuanced fashion A change of TLTRO rates is now widely expected Saving the ECB money but repayments to remain more elusive Today’s events and market view The US story continues to hum in a nuanced fashion Two things have happened in the past couple of days. First the structure of the curve has flipped toward a more bullish leaning as the 5yr has resumed an outperformance on the curve as market rates have fallen. This is typical as the market starts to converge on a likely completion of the rate hiking process. Second, the market discount for the terminal rate itself has eased off from the highs. A few days back the fed funds strip was peppering the 5% area. Its now back down to 4.85%. That pulls down the need for the 10yr to ratchet higher. The 10yr had been at 4.25%, and looking up. It’s now closer to 4%, pulled there in part by a slew of weak macro data, and talk that the Fed may be about to ease off on the size of hikes once they deliver the 75bp discounted for November. But there is something else going on too. Sneaky item three. Bank funding costs are now creeping higher. The 3mth commercial paper rate is up to 25bp over the risk free rate, and double that for European names. That’s the beginning of signs of creaking in the system. If the Fed is going to pull back in the face of persistent inflation it is more likely to reflect this than the macro weakness that, after all, they are actively engineering. No panic yet. Just something to monitor. Probably enough there to keep the 10yr above 4% for now, and for it to continue to be re-pressured higher in the weeks ahead. But we are also looking at 4.25% as being quite peakish (with an outside risk to 4.5%). Can’t quite conclude that the 4.25% seen was in fact the high, but these are the things we are looking at. 5Y coming in on the curve indicates a peak in 10Y yield is getting more likely Source: Refinitiv, ING A change of TLTRO rates is now widely expected Heading into tomorrow’s ECB meeting, various press reports have put changing the terms of TLTRO loans to banks as the ECB’s favourite option. The goal is to nudge them to repay, and to reduce a perceived subsidy paid to banks that can currently place these funds back at the ECB at a higher interest rate than they borrowed. As we’ve outlined in earlier publications, all options on the table are potentially disruptive but the central bank seems intent on acting before TLTRO loans fall due, the majority of them as soon as June next year. The question now is what change the ECB will implement. The central bank seems intent on acting before TLTRO loans fall due Changing the borrowing rate from “average interest rate on the deposit facility calculated over the life of the respective TLTRO III during the rest of the life of the same operation” to “average interest rate on the deposit facility calculated over the rest of the life of the respective TLTRO III during the rest of the life of the same operation” would make the borrowing rate identical to the rate at which the proceeds are placed back at the ECB, and eliminate the carry trade opportunity. A change to TLTRO terms would only result in partial repayments Source: Refinitiv, ING Saving the ECB money but repayments to remain more elusive This wouldn’t guarantee immediate repayment of TLTRO loans, however. Likely, these funds have been earmarked by banks for other uses already, and it is probable that some banks don’t have the liquidity available to repay the ECB at the next opportunity in December 2022. Given funding difficulties over year-end some may choose to wait for March 2023 for their early repayments. Finally, we expect other banks would hold on to their TLTRO loans until their maturity given challenging funding environment currently. In the chart below, we illustrate the difference between this early repayment scenario and the original maturities of TLTRO loans. This wouldn’t guarantee immediate repayment of TLTRO loans Of course, the ECB could be more aggressive and add a spread on top of the average interest rate on TLTRO loans to incentivise earlier repayments. This is an option it might pursue if a sharp reduction in excess liquidity is its goal but we think it is far from guaranteed to work, and would end up punishing banks with the most difficulties in accessing funding markets. The other, apparently more important, objective of getting rid of the perceived subsidy to banks, can be achieved without causing such disruptions as desribed above. By this simple change, up to €31bn of interest cost to the ECB disappear. Euro syndicated supply has been above recent years' despite difficult markets Source: Refinitiv, ING Today’s events and market view The economic release calendar is relatively thin today, with only eurozone M3 growth to watch out of Europe, followed by mortgage application, inventories, and new home sales in the US. Instead, the action will be on the supply front. Italy will auction 2Y bonds as well as inflation-linked debt. The US treasury will auction 2Y floating rate notes, as well as 5Y T-notes. The UK will sell 7Y bonds. This will come on top of syndicated supply which has overshot previous years’ average on most weeks since the summer (see chart above for euro syndications). Despite this headwind, short-covering into tomorrow’s ECB could tip price action in favour of lower rates today. 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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

ECB to hike by 75bp | Softer US Dollar (USD) Helps Gold And Crude Oil

Swissquote Bank Swissquote Bank 27.10.2022 13:51
Yesterday wasn’t not a good day for the US Big Tech. Google dived almost 10% after reporting disappointing results, while Microsoft sank almost 8%. Nasdaq bounced 2% lower after having tested the major 38.2% Fibonacci retracement, a touch below the 11700. Meta And don’t expect the things to look better today. Meta dived another 20% in the afterhours trading, after announcing disappointed results. Softer-than-expected  On the macro front, however, the Bank of Canada (BoC) surprised with a softer-than-expected rate hike, and US home sales fell almost 11% in September.   EUR/USD The US dollar index dived below its 50-DMA yesterday. The EURUSD rallied above parity, as Cable advanced past 1.16. Focun On Focus shifts to US GDP dat, the European Central Bank (ECB) decision, Apple & Amazon earnings today. Watch the full episode to find out more! 0:00 Intro 0:33 US Big Tech selloff intensifies. Meta down 20% post-market 1:55 What to expect from Apple & Amazon?7 4:05 Policy pivot? 5:20 US GDP to rebound despite sluggish economy 6:52 US dollar softer, EURUSD rallies above parity, Cable past 1.16 7:52 ECB to hike by 75bp, discuss QT 9:19 Gold, oil up on soft dollar 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. #Apple #Amazon #Meta #Google #Microsoft #earnings #USD #GDP #ECB #rate #decision #EUR #XAU #crudeoil #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      
ECB's Hawkish Hike: Boosting EUR/USD and Shaping Global Monetary Policy

The Main US Indices Fell | Asia-Pacific Stocks Are Mostly In The Red | Fortescue (FMG) Plans To Increase Iron Ore Production

Saxo Bank Saxo Bank 28.10.2022 08:38
Summary:  The ECB rose its key rate to 1.5% from 0.75% and signaled it is making progress in the fight against inflation. The US economy grew 2.6% on an annualized basis last quarter after two declines in a row, beating consensus as personal consumption rose more than forecast. The Nasdaq 100 & S&P 500 ended 1.6% and 0.6% lower, with Amazon falling 13% after hours, while the Dow Jones lifts, boosted by McDonald’s and Boeing. Crude oil climbs above $89, while iron ore falls to its lowest level since 2020. Asian equity futures mostly trade lower. Australia’s ASX200 opens 0.6% lower today, but tracks 2% higher this week, supported by commodity stocks and Macquarie beating forecasts. What’s happening in markets?     Need to know  The ECB rose its key rate to 1.5% from 0.75% and signaled it is making progress in the fight against inflation. Officials dropped a reference to hikes continuing for "several meetings," while saying they expect further action. Christine Lagarde emphasized that more increases were on the way: "We still have ground to cover." Money markets pared tightening wagers by as much as 20 bps, and European stocks erased losses. The US economy grew 2.6% on an annualized basis last quarter after two declines in a row, beating consensus as personal consumption rose more than forecast. The GDP report showed foreboding signs, as growth was almost entirely driven by trade, and residential housing investment plunged. As such, treasuries yields extended their fall, with 10-year yield pushing below 4%. The dollar was mostly higher, though the yen was barely up ahead of the BOJ meeting. Oil advanced and gold retreated. Asia-Pacific's equity futures are mostly in the red. The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) ended 1.6% and 0.6% lower, while the Dow Jones lifts, boosted by McDonald’s The US major indices fell on Thursday from continued weaker than expected earnings carnage with Facebook (META) falling 25%. In mega caps, Amazon (AMZN) was leading the losses, falling 4.1% on projecting slower growth and cutting its spending in the face of economic uncertainty, falling 13% after hours. Apple (AAPL) shares fell 3% on reporting weaker than expected iPhone and services sales in its latest quarter, however it gave an otherwise somewhat upbeat report, noting record sales spurred its active base of devices to hit an all-time high. Post market, Apple shares trade 0.4% higher. Meanwhile, the Dow Jones 30 blue-chip index ended 0.6% up on Thursday, supported by recession-stalwart McDonald’s (MCD) shares rising 3.3% on reporting sales that well surpassed analysts’ estimates, despite inflationary pressures. McDonald’s results were boosted by McRib sales, with the CEO saying they are “the GOAT of sandwiches on our menu,” using the acronym for greatest of all time. The fast-food chain will offer McRib nationwide in the US from the end of this month. Oct. 31. Boeing (BA) shares moved up 4.5% with the company releasing a bullish 20-year forecast for China’s commercial jet market, saying China will need to double its fleet in two decades and that China will be a major driver of Boeing sales. Boeing expects China to need 8,485 new passenger and freighter planes valued at $1.5 trillion through 2041.   Crude oil (CLX2 & LCOZ2) climbs above $89, while iron ore (SOCA) falls to its lowest level since 2020 Oil is trading higher for the third day, on tightness and heavy worry about the price of fuel products over the coming months as the northern hemisphere heads to winter. WTI climbed above $89 with US data showing an economic rebound last quarter. US natural gas futures steadied after the EIA reported stockpiles rose last week. European gas prices advanced. It’s also really important to note, tight diesel markets are taking the main stage at the moment, which you can read more on from our head of commodity strategy, just click here. As for other commodities, copper fell 0.7%, while iron ore (SCOA, SCOX2) fell 0.2% to $81.55, which is its lowest level since May 2020 on concerns that the iron ore market could be oversupplied. Yesterday Fortescue Metals (FMG) affirmed extra production will come to the market before March, (instead of June), with investors worried there is not enough demand from China. Most other commodities were lower, including Wheat and Corn while Cocoa rose 1.6%  Australia’s ASX200 (ASXSP200.1) falls 0.6% on Friday, but tracks 2% higher this week, supported by commodity stocks. Macquarie beats forecasts  After the Aussie share market rose for four straight sessions putting on 2.5% Monday to Thursday supported by commodity stocks, including lithium, gold stocks and agricultural stocks, today’s focus is on tech stock carnage, following the Wall Street sell off. Brainchip (BRN) is down 15%. While iron ore shares are lower, with Fortescue (FMG) trading 7% lower after noting that its increasing its spending, while its margins are tightening. Plus Fortescue is ramping up production, at a time when iron ore demand is limited. On the upside, Macquarie Group (MGQ) shares trade up 3.5% after reporting profit that beat forecasts with market volatility buoying its commodities and global markets business. Macquarie’s net income for the six months to Sept. 30 rose to A$2.31 billion ($1.49 billion), up from A$2.04 billion in the prior year. That exceeded the A$2.15 billion average estimate of four analysts surveyed by Bloomberg. Elsewhere, oil stocks are higher with the WTI price cleared $89, with Viva Energy (VEA) up the most in energy, up 1.6%. What to consider Markets, businesses, commodities with high exposure to China see heavy selling this week. Will it continue?   Assets with exposure to China are being heavily penalized as it seems investors are realigning their portfolios somewhat with the priorities of President Xi his policy on stronger state control over the economy and markets, which look set to continue unchallenged for years. The confirmation was made on Sunday and across the week, Hong Kong’s Heng Seng fell 7.5%, and the iron ore (SCOA, SCOX2) price fell to 15% $79.60 its lowest level since 2020 on concerns that the biggest iron ore consumer, China will further slow demand, all while iron ore seems oversupplied. The biggest pure play iron ore company in the southern hemisphere, Fortescue (FMG) shares fell almost 12% this week, as a result. Plus Fortescue company affirmed it is increasing its spending, while its margins are tightening. Fortescue plans to ramp up iron ore production at its expanded facility in March, instead of June, which will likely further push the iron ore market into greater oversupply. Australian exports trade prices stumble, imports prices rise   Australian exports prices fell last quarter, but less than expected, falling 3.6% vs the 7% fall consensus forecast. That said, export prices are still up 25.9% YoY. The quarterly drop in prices was driven by the fall in iron ore demand from China, and the drop in coal prices, as global steel demand weakens. That said, Australian gas and crude export prices rose amid surging global demand particularly from Europe. And lithium prices rose markedly, boosted by global electric vehicle sales. Inversely, Australian import prices rose more than expected, up 3%, vs the 0.9% consensus forecast. What contributed to this was price of imports of sodium hydroxide (used in bauxite refining) rose, while the price of importing plastics rose, coinciding with higher energy prices. All in all, import prices to Australia are up 19.3% YoY.    For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/market-insights-today-28-oct-28102022
The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

The Risk Is Aggravated By The Weakness Of The Japanese Yen (JPY) |Gold And Oil Are Doing Well

Saxo Bank Saxo Bank 28.10.2022 10:02
Summary:  A rocky session for equity markets once again yesterday, which tried to find cheer on falling bond yields, only for a thorough thrashing after the close yesterday on Amazon issuing its weakest ever holiday sales outlook, which saw its shares knocked some 13% in the aftermarket. Elsewhere, Apple shares managed to stabilize after its earnings report in, as revenue and earnings topped estimates. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The recent string of US earnings have not done much to keep the recent momentum in US equities alive. Neutral earnings from Apple last night was topped with awful outlook from Amazon, the second largest stock in the US equity market, that saw its shares decline 13% in extended trading. S&P 500 futures are retreating this morning trading around the 3,790 level despite a sizeable readjustment lower in the US 10-year yield to 3.93%. Euro STOXX 50 (EU50.I) European equities saw more diverging price action yesterday but closed above the 3,600 level again, but this morning STOXX 50 futures are coming down 1% trading around the 3,570 level with 100-day moving average at 3,528 being the next support level to watch. There are no economic releases in Europe of importance today so it will be interest rate direction and sentiment on earnings that will drive price action into the weekend. FX: USD pulled in two different directions as falling yields negative, weak sentiment positive The further drop in US treasury yields fail to extend the US dollar sell-off yesterday, as a far less hawkish than expected ECB took EURUSD back below parity and the Bank of Japan sent no new signals on its terminally stuck policy mix of ongoing QE and yield-curve-control.  Weak risk sentiment seems to provide offsetting support from the greenback, but the dollar will find stronger support if US data remains resilient and the Fed is faced to stay on message with further tightening, especially now that the market has significantly downshifted expectations for peak Fed Funds rate beyond the 75 basis point move expected at next Wednesday’s FOMC meeting, with less than 100 basis points of further tightening now priced and a peak rate near 4.78% by next March. Gold (XAUUSD) Gold remains on track for a second week of gains although some caution has emerged ahead of next week's FOMC meeting. Yesterday, the positive sentiment received a knock as the dollar regained some ground, especially against the euro after the ECB stayed far less hawkish than expected. Countering this potential gold negative development, US bond yields continued lower with the US 10-year treasury yield benchmark falling below the important 4% level to record a +25-basis point drop on the week. While the FOMC is expected to deliver another bumper 75 basis points hike they may tilt towards slowing the pace at future meetings while assessing the impact of their rate and quantitative tightening actions. As a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called. Crude oil (CLZ2 & LCOZ2) Crude oil remains on track for a second week of gains but for now without challenging resistance indicating a market still struggling for direction with no overriding theme being strong enough to set the agenda. Strength this week has been driven by a developing tightness in the fuel product market, US exports of crude and fuels setting a weekly record and the weaker dollar, as well as strong buying from China as refineries there plan to boost fuel exports through the end of the year. Diesel markets in Europe and the US continues to signal tightness ahead of winter with elevated refinery margins and prompt spreads signalling tight market conditions. Focus next week on the Nov 2 FOMC meeting and major OPEC producers beginning to cut their production. Additional technical upside in WTI above $89.25 while Brent’s next level of resistance is the October high at $98.75. US treasuries (TLT, IEF) The US 10-year treasury yield benchmark fell through the important 4.00% level yesterday, with the yield trading as low as 3.90% before treasuries found resistance. The 3.85% area is arguably a pivotal level if treasuries continue to rally. The entire yield curve dropped yesterday, in part on a less hawkish ECB continuing the trend recently of central banks delivering less than expected on guidance, as German 10-year Bunds dropped below 2.00% for the first time in weeks on the ECB meeting yesterday (more below). It looks like we’ll be heading into next week’s FOMC meeting with a fairly hard market lean for a significant downshift in the Fed’s hawkish message. What is going on? ECB the latest central bank to surprise dovish The ECB hiked its key rate 75 basis points to 1.5% from 0.75%. Officials dropped a reference to hikes continuing for "several meetings," in the statement, while saying they expect further action. Christine Lagarde said in the press conference that more rate hikes were on the way: "We still have ground to cover." The bank will continue to reinvest all maturing assets in its asset purchase program (QE) and QT won’t be discussed until the December meeting. The market read the meeting as a strong dovish surprise, as another 20 basis points of tightening were removed from forward expectations for 2023 (down some 50 basis points now from peak expectations just over a week ago.) Apple is a fortress FY22 Q4 revenue came out at $90.2bn vs est. 88.6bn up 8% y/y keeping up with inflation and EPS at $1.29 vs est. $1.26 driven by a new all-time high of active devices. The number of paid subscriptions, which Apple has recently announced will see price hikes, have doubled in three years to 900mn. Shares were unchanged in extended trading. Amazon shares plunged 13% on Q3 results Revenue in Q3 hit $127.1bn vs est. $127.6bn up 15% y/y but operating income hit $2.5bn vs est. $3.1bn. The weaker than estimated operating income was driven by a negative revenue surprise in their cloud business AWS with revenue of $20.5bn vs est. $21bn. The free cash flow in Q3 was still negative at $5bn with the combined negative free cash flow over the past year at $26bn. The change in cash generation for Amazon indicates that the pandemic turned out to be bad for the business as it spent too much on expanding capacity that could not be maintained. The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4bn vs est. $4.7bn and revenue of $140-148bn vs est. $155.5bn. Japan announces massive fiscal stimulus Japan’s Prime Minister Fumio Kushida announced a ¥71.6 trillion (nearly $500 billion) stimulus package overnight, in a purported bid to “ease inflation” and shore up his government’s popularity. The new spending in the package is set at ¥39 trillion and will focus on incentivizing companies to raise wages, national security/defense and subsidies to reduce the impact of energy costs, especially electricity bills. With the Bank of Japan not allowing government bond yields to adjust, this risks adding to the yen’s weakness as long as other major central banks are not in easing mode. Caterpillar, McDonalds, and Boeing positive stories in the negative backdrop A few positive stories to highlight amidst the massive drop in marquee megacap names include Caterpillar, which soared a massive 7.7% on impressive results. Elsewhere McDonald’s (MCD) shares rose 3.3% on reporting sales that handily beat analysts’ estimates, despite inflationary pressures. McDonald’s results were boosted by McRib sales, and the fast-food chain will offer McRib nationwide in the US from the end of this month. Meanwhile, Boeing (BA) shares jumped a day after an ugly drop on its earnings report. Yesterday, shares rose 4.5% with the company releasing a bullish 20-year forecast for China’s commercial jet market, saying China will need to double its fleet in two decades and that China will be a major driver of Boeing sales. Boeing expects China to need 8,485 new passenger and freighter planes valued at $1.5 trillion through 2041. A tough week for coffee, cotton and sugar The Bloomberg Commodity Softs index trades down 5% on the week led by a 6% drop in Arabica coffee (KCH3) $1.79/lb, a 14-month low as money managers continue to exit long-held bullish bets, now turning increasingly sour amid concerns a global recession will hurt demand at a time where the outlook for the 2023/24 crop in Brazil is showing signs of improving. However, a combination of exchange monitored stocks lingering at a 23-year low and oversold condition may soon drive a technical bounce ahead of support at $1.73/lb. Sugar (SBH3) meanwhile has been hurt by a weaker Brazilian Real boosting incentives to export. Cotton (CTZ2), down 52% from its May peak has plunged to near a two-year low on weak demand for supplies as consumers around the world cut back on spending. Weekly export sales from top shipper, the US, plunged from a year earlier with overall sales for the current season being well behind last year and the long-term average. What are we watching next? Market leaning very hard now for a dovish downshift at next Wednesday’s FOMC After the Bank of Canada surprised with a smaller than expected hike this week and the ECB surprised with more dovish forward guidance, the market is now. But will the US data cooperate and is the maximum conceivable downshift from the Fed next week already in the price – given that the Fed itself has said that it will continue to hike even as the economy – including the labor market - weakens? After all, the market has removed nearly 25 basis points of tightening through the March FOMC of next year from the peak of just above 5.0% a bit more than a week ago to just under 4.8% now, and is more aggressively pricing the Fed to begin cutting rates by late next year (December ‘23 FOMC yield down almost 50 bps from peak).  Earnings to watch Today’s US earnings focus is on the two oil and gas majors Exxon Mobil and Chevron expected to report strong earnings in Q3. Exxon Mobil is expected to grow revenue 44% y/y with the operating margin expanding further. NextEra Energy is also worth watching given the recently passed US bill on renewable energy because it may lift the outlook for the industry. Today: Macquarie Group, OMV, ICBC, China Merchants Bank, LONGi Green Energy Technology, Midea Group, Imperial Oil, Danske Bank, Sanofi, Airbus, Volkswagen, China Construction Bank, Agricultural Bank of China, Bank of China, BYD, China Shenhua Energy, Eni, Keyence, Hitachi, Denso, Equinor, CaixaBank, Wilmar International, Swiss Re, Exxon Mobil, Chevron, AbbVie, NextEra Energy, Colgate-Palmolive, Royal Caribbean Cruises Earnings releases next week: Monday: Daiichi Sankyo, Stryker Tuesday: Toyota Motor, Sony Group, Mondelez, AMD, Airbnb, Eli Lilly, Pfizer, BP Wednesday: KDDI, Novo Nordisk, GSK, Booking, Qualcomm, CVS Health, Estee Lauder, Humana Thursday: Cigna, Amgen, PayPal, Starbucks, EOG Resources, ConocoPhillips, Regeneron Pharmaceuticals, Zoetis, Canadian Natural Resources, DBS Group Friday: Duke Energy, Enbridge Economic calendar highlights for today (times GMT) 0800 – Germany Q3 GDP0900 – Eurozone Oct. Confidence Surveys1200 – Germany Oct. Flash CPI1230 – Canada Aug. GDP1230 – US Sep. Personal Income/Spending1230 – US Sep. PCE Inflation1400 – US Oct. Final University of Michigan Sentiment   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-28-2022-28102022
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Recent Decisions On Interest Rates (ECB,BoJ) | Big Oil Earnings

Swissquote Bank Swissquote Bank 28.10.2022 12:32
An ugly week of Big Tech earnings is coming to an end, having wipe out hopes of seeing earnings boost gains across the stock markets. Yesterday, Meta plunged more than 24%; Nasdaq 100 lost almost 2%. And today won’t be any better, as Apple and Amazon also lost in the afterhours trading. Amazon lost up to 20%! US Big Tech US Big Tech rather killed joy this week, so all eyes are on Big Oil to reverse mood. Exxon Mobil and Chevron will be reporting earnings this Friday and are expected to announce stunning earnings. US GDP data On the data front, investors didn’t know what to do with the mixed US GDP data yesterday. The latest GDP update showed that the US economy grew 2.6% in the Q3, exports boosted the headline figure, while imports fell - meaning that the domestic demand from the US weakened despite a significant appreciation of the US dollar. The central banks On the central banks front, the European Central Bank (ECB) hiked the interest rates by 75bp at yesterday’s meeting, as the stubborn Bank of Japan (BoJ) maintained its interest rate unchanged at -0.10% at today’s meeting, while revising the 2022 inflation forecast significantly higher from 2.3% to 2.9%. What ahead Today, investors will be watching one last thing on the macro front before the weekly closing bell – and that’s the September PCE index, along with the personal income and spending data. Any weakness could further weigh on the dollar before we close the week, and before next week’s FOMC meeting. Watch the full episode to find out more! 0:00 Intro 0:41 Big Tech selloff continues as Amazon & Apple fail to convince 2:23 Watch Big Oil earnings: Exxon & Chevron are due to report today. 4:17 US GDP data was mixed! 6:16 ECB hiked 75bp, but euro slipped 7:46 BoJ stood pat, while revising inflation forecast! 8:35 Watch US PCE index, personal income & spending 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. #Apple #Amazon #Meta #Google #Microsoft #ExxonMobil #Chevron #earnings #USD #GDP #ECB #BoJ #rate #decision #EUR #JPY #crudeoil #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
Oanda Podcast: US Jobs Report, SVB Financial Fallout And More

In USA Higher Interest Rates Exacerbate The Problem Of Public Debt

InstaForex Analysis InstaForex Analysis 28.10.2022 14:02
Today the BLS (Bureau of Labor Statistics) will publish the latest inflation report in relation to the PCE index for September 2022. This will be the most recent inflation data the Federal Reserve will receive and will therefore be a key component in deciding the size of the next rate hike at the Federal Open Market Committee meeting next week. According to the CME FedWatch tool, there is an 88% chance that the Fed will raise rates by 75 basis points, down from yesterday's forecast of 92.5%. This will raise the Fed's base rate between 375 and 400 basis points at the FOMC meeting next week. According to Bloomberg News, economists polled predict that, compared with last year, the PCE index will rise by 6.3% in September. "Excluding food and energy, the figure is expected to rise by 0.5% compared to August and by 5.2% from September 2021. The higher forecasts follow government data released earlier this month, which show that a key indicator of core consumer prices accelerated to a 40-year high in September. In an article written by Jessica Menton of Bloomberg News, the biggest question facing investors and traders is: "Is multi-year inflation nearing a peak, or will prices continue to rise... Traders are keeping a close eye on the Federal Reserve's preferred inflation rate. The PPI will help determine if there will be another 75 basis point interest rate hike by the central bank at its meeting next week." Although her article focused on Wall Street and stock investors, her statements give a clear picture of other asset classes, including gold and silver. Thomas Martin, senior portfolio manager at Globalt Investments, said: "The Fed is laying the groundwork to end excessive rate hikes if inflation data supports it. But if this does not happen, they will be ready to continue their big campaigns after November. Unlike previous trading days, yesterday's dollar strength was negatively correlated with gold prices. The dollar rose 0.79%, with the dollar index currently at 110.87. This means that the partial decline in the price of gold would have been much larger had the dollar not added about 8/10 percent of its value. Market participants are also considering how the Fed will take into account yesterday's government report, which showed third-quarter GDP rose 2.6% from an estimate of 2.3%, expanding faster than expected. It is also clear from the report that this year the US economy experienced a period of positive growth for the first time. This led to a decline in gold prices after the release of yesterday's GDP report. The third-quarter GDP report included the most recent data on annual federal interest payments, indicating they had increased to $736.5 billion. This set a new record for annual interest payments on US government debt. According to US Debt Clock.org, the US national debt is currently over $31 trillion and is unsustainable. The higher interest rates set by the Fed only exacerbate this problem. However, the current level of government debt and the high cost of servicing only interest rates are creating extremely optimistic market sentiment for gold.   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/325634
German labour market starts the year off strongly

The Peak Of German Inflation Will Probably Come At The Turn Of The Year

ING Economics ING Economics 28.10.2022 14:57
German inflation increased once again in October. We are still a few months away from the peak  The German inflation shocker has entered the next round as headline inflation just came in at 10.4% year-on-year in October, from 10.0% YoY in September. The HICP measure increased to 11.6% YoY, from 10.9% YoY in September. The fact that monthly inflation (0.9% month-on-month) is still far above the historical average for October illustrates how inflation is spreading across the German economy. Peak not reached, yet The available regional data suggest that the increase in headline inflation was not only driven by higher food, energy and commodity prices. Inflationary pressure is actually spreading across the entire economy with prices for clothing and other apparel, and leisure and packaged holidays further increasing. Looking ahead, the peak of German inflation will probably come at the turn of the year but it will take until next spring before inflation drops into single-digit territory again. The recent drop in wholesale gas prices will hardly affect the short-term inflation outlook and may only bring relief later in 2023. Today’s German inflation data once again underlines that no central bank in the world can bring down actual inflation. This is why the ECB’s own narrative will increasingly shift toward inflation expectations and longer-term inflation outlooks. With this in mind, after yesterday’s jumbo rate hike, the December meeting could indeed deliver a dovish pivot. ECB president Christine Lagarde was more vocal than ever regarding a looming recession yesterday and the ECB’s staff projections in December will very likely show inflation structurally coming down to 2% during 2024 and 2025. Enough to stop the rate hiking cycle at the latest in February and shift from rate hikes to gradual quantitative tightening at the start of the second quarter of 2023. TagsMonetary policy Inflation Germany Eurozone ECB   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
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

The Eurozone Releases Its Inflation And FOMC Decision Ahead

Ed Moya Ed Moya 29.10.2022 08:37
US Will the fourth 75 basis-point rate hike be the last major rise before the Fed downshifts in December?  Next week’s FOMC decision is widely expecting a unanimous vote for one last major rate increase. With the Fed’s preferred price measure still showing inflation is running hot, that might make it harder for them to set up a possible downshift in its rate-hike pace for the December meeting. Despite an acceleration with inflation, strong consumer spending data, and a robust labor market, much of Wall Street is growing confident that the Fed will pause tightening once they take the funds rate to 4.50-4.75% next quarter. In addition to the FOMC decision, traders will also closely monitor the nonfarm payroll report.  The strong labor market is still expected to show job growth with 200,000 jobs created in October, down from the 263,000 created in the prior month. The unemployment rate is expected to tick higher and wage gains are expected to slow. It will be another busy week filled with earnings that will likely confirm the slowdown being seen across the economy.  Healthcare, consumer discretionary, energy, and car manufacturer stocks will report next week. EU Inflation has hit double-digits and remains the ECB’s number one priority. The Eurozone releases its inflation report on Monday. Inflation rose to 10.0% in September, and it is expected to surge to 10.3% in October. Some analysts are expecting a possible surge to 11.0%.  Core inflation is projected to tick higher to 4.9%. The Eurozone will release the October Final PMIs, which are projected to indicate contraction, with readings below the 50.0 level. Manufacturing will be released on Wednesday and Services on Friday. Manufacturing is expected at 46.6 and Services at 48.2, confirming the initial estimates. UK The UK releases Final PMIs for October, with Manufacturing on Tuesday, Services on Thursday and Construction on Friday. The 50.0 line separates contraction from expansion. The initial readings were 45.8 for manufacturing and 47.5 for services, indicative of weak economic activity in the UK. Construction may provide a silver lining, with an initial reading of 52.3, pointing to slight expansion. The highlight of the week will be the Bank of England’s rate decision on Thursday. The BoE raised rates by 0.50% in September and is expected to go all in with a jumbo 0.75% hike, which would bring the cash rate to 3.0%. The vote could have two dissenters, which is why markets are expecting a downshift to a half-point pace in December.  The UK may already be in a recession and higher rates will hurt households and businesses, but the BoE has little choice but to continue tightening if it hopes to curb red-hot inflation, which is at 10.1%. Russia The war in Ukraine and the severe Western sanctions have taken a steep toll on consumer spending. In August, real retail sales plunged by 8.8% and September is supposed to be just as bad with an 8.6% decline. South Africa South Africa’s recovery from Covid-19 has been slow and a weak global economy is not helping matters. The October PMI will be released on Thursday. The PMI is expected to rise slightly to 49.7, following a 49.2 read in September. A reading below 50.0 indicates contraction. Turkey Turkey will release the October inflation report on Wednesday. The Turkish central bank continues to slash interest rates, with a 150 basis point cut earlier in October. This policy has seen inflation soar to staggering levels that is more than 17 times the CBRT’s target rate.  CPI rose to a 24-year high of 83.4% in September, and the consensus for October stands at 85.6%. Switzerland Switzerland releases the October inflation report on Thursday. Inflation has been rising in Switzerland, which forced the central bank to raise interest rates by a massive 0.75% in September. Still, inflation is much lower than in the Eurozone or the UK. Headline CPI is expected to tick lower to 3.2%, down from 3.3% in September. China Strict anti-COVID measures are about to send China’s factory activity back  into contraction territory. The global growth outlook will struggle as China’s economy shows their recovery is struggling. Both services and manufacturing data are expected to weaken in October. Currency traders will pay close attention to the PBOC as they have set the yuan reference rate at the weakest levels since 2008. Authorities want a strong yuan, but defending it could prove costly.  They might need to consider narrowing the band. India India’s economy is losing momentum and the latest PMI readings might confirm that trend.  The growth outlook continues to get slashed and the current rate hiking cycle is starting to weigh much more on the economy. The RBI will have an an out-of-cycle meeting next week as the government urges them to get inflation back under 6%.  Traders should not be surprised if some RBI action occurs before the December 5-7th policy decision. Australia & New Zealand The focus is on the RBA policy decision. This meeting could have some added volatility as the general consensus leans towards a 25bp rate rise, but a half-point increase should not be ruled out.  Inflation remains hot and with the cash rate nowhere near inflation, the bank might feel more pressure to act aggressively. New Zealand’s third quarter Employment Change and Unemployment Rate data, due out next Wednesday (2 November), as an increase in employment and a decrease in unemployment will be beneficial to New Zealand’s economic growth. As the overall inflation level in New Zealand remains high, the money markets are pricing in either a half-point rise or 75- basis point rate hike at the RBNZ’s next interest rate meeting on November 23rd. Japan The Bank of Japan did not deliver any surprises. Both rates and the 10-year yield target did not have any changes. The yen remains a volatile trade and now the ball is in the Ministry of Finance hands. With momentum growing for the Fed to shift to a slower pace of tightening in December, Japan may try to be aggressive in defending the dollar-yen 150 level. Traders will also pay close attention to the minutes of the last BOJ decision. Singapore Singapore’s economy is weakening and the October PMI reading should show that the weakening trend continues. Traders will also pay close attention to the retail sales report for the month of September. Markets Energy Oil markets remain volatile as China ramps up COVID restrictions, some US oil giants signal modest commitments to boost production, and the global economic outlook continues to dim.  Next week, energy traders will get a better sense of how China’s economy is performing despite the COVID lockdowns that happened in October. OPEC will also announce their World Oil Outlook on Monday. Commodities broadly will also have a reaction to the FOMC policy decision and nonfarm payroll report. A dovish rate rise could allow for dollar weakness which could keep oil prices supported here.  If risk appetite remains healthy, WTI crude could continue to consolidate above the mid-$80s. Gold The bullish case for gold is improving as financial markets begin to grow optimistic that the Fed will begin the deliberation of a slower pace of tightening.  Gold could be on the verge of a major breakout if the FOMC decision is supported by the nonfarm payroll report at the end of the week.  Gold has initial support at $1640, with the line in the sand being $1,620.  The $1680 provides major resistance for gold, followed by the $1700 level. Cryptos Bitcoin is forming a trading around the $20,000 level as many investors await to see what happens with next week’s market reaction to the FOMC decision. What will also draw extra attention is the Hong Kong Fintech Week, that includes appearances from FTX’s Sam Bankman-Fried, but could contain more insight on how Hong Kong will provide guidelines on how retail crypto trading could be allowed. Binance CEO Zhao and Ark’s Cathy Wood will speak at the Web Summit in Lisbon. Economic Calendar Sunday, Oct. 30 Economic Data/Events: Brazilians vote in a presidential runoff election between Luiz Inacio Lula da Silva and incumbent Jair Bolsonaro. Daylight savings time ends in the UK EU trade ministers informal meeting in Prague Monday, Oct. 31 Economic Data/Events: Eurozone CPI, GDP Poland CPI Mexico GDP Australia retail sales China manufacturing and non-manufacturing PMI Japan industrial production, retail sales, housing starts South Africa trade balance Thailand trade UK mortgage approvals Danmarks Nationalbank conference, speakers include ECB Chief Economist Lane, Riksbank Governor Ingves, and Norges Bank Governor Wolden Bache Bank of Italy Governor Visco and Italian Finance Minister Giorgetti speak at a World Savings Day event. Nordic prime ministers meet in Helsinki for a Nordic Council meeting. Hong Kong Fintech Week: Speakers include FTX’s Sam Bankman-Fried, China Banking and Insurance Regulatory Commission’s Yuanqi and the Securities and Futures Commission’s Leung as speakers. OPEC launches its 2022 World Oil Outlook at the Abu Dhabi International Petroleum Exhibition and Conference. Russian President Putin meets the leaders of Armenia and Azerbaijan in the southern Russian city of Sochi. Tuesday, Nov. 1 Economic Data/Events: US construction spending, ISM manufacturing index, light vehicle sales RBA rate decision: Expected to raise rates by 15bp to 2.85% China Caixin Manufacturing PMI Canada Manufacturing PMI Czech Republic Manufacturing PMI India Manufacturing PMI Japan Manufacturing PMI, Vehicle Sales Mexico Manufacturing PMI Norway Manufacturing PMI Russia Manufacturing PMI South Africa Manufacturing PMI UK Manufacturing PMI Czech Republic GDP Macau casino revenue Mexico international reserves New Zealand building permits Denmark’s general election Riksbank Governor Ingves gives a speech on the economy and monetary policy, in Helsingborg. Web Summit conference; Speakers include Binance CEO Zhao and ARK Investment Management’s Wood Wednesday, Nov. 2 Economic Data/Events: FOMC Decision: Expected to raise rates by 75bps US MBA mortgage applications, ADP employment European Manufacturing PMI: Eurozone, France, Germany, Italy, Poland, Spain Australia building approvals Germany unemployment Japan BOJ minutes of Sept. meeting New Zealand unemployment, central bank Financial Stability Report Russia unemployment, retail sales EIA Crude Oil Inventory Report Bank of Ireland’s Financial System Conference: Speakers include Irish Central Bank Governor Makhlouf, Finance Minister Donohoe and Bank of France Governor Villeroy In Dublin. Thursday, Nov. 3 Economic Data/Events: US factory orders, durable goods, trade, initial jobless claims, ISM services index Bank of England Rate Decision: Expected to raise rates by 75bps to 3.00% UK services PMI Australia trade balance China Caixin services PMI Eurozone unemployment India S&P Global services PMI Italy unemployment Norway rate decision: Expected to raise rates by 25bps to 2.50% Russia services PMI Spain unemployment G-7 foreign ministers to meet in Munster, Germany German Chancellor Olaf Scholz visits China RBA’s Kearns speaks at the ASIC Annual Forum in Sydney. ECB’s President Lagarde and Elderson speak at Latvijas Banka Economic Conference 2022. ECB’s Panetta gives a keynote speech at ECB money market conference. BOE’s Mann speaks on a panel about inflation at an American Enterprise Institute web event. Friday, Nov. 4 Economic Data/Events: US October Change in nonfarm payrolls: 200Ke v 263K prior, unemployment Rate to tick higher to 3.6%, Average Hourly Wages European Services PMI: Eurozone, France, Germany, Italy, Spain Japan Services PMI Canada unemployment Eurozone PPI France industrial production Germany factory orders Singapore retail sales Spain industrial production Thailand CPI The UN’s Food and Agricultural Organization releases its monthly index of world food prices. ECB’s VP de Guindos gives a keynote speech at the Energy Prospectives session ECB President Lagarde gives a lecture on monetary policy in the euro area organized by Estonia’s central bank. Fed’s Collins speaks on macroeconomic conditions at a Brookings Institution virtual event. Sovereign Rating Updates: France (Fitch) Ireland (Moody’s) Norway (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
ECB press conference brings more fog than clarity

Eurozone Interest Rate Decisions Will Continue To Be Data Driven -28.10.22

InstaForex Analysis InstaForex Analysis 29.10.2022 09:10
The downside risks of the European economy are growing, but with inflation rising to almost 10% in September, the European Central Bank continued to raise interest rates. After raising interest rates by 75 basis points across the board, ECB President Christine Lagarde said the committee had tightened financial conditions and more work needed to be done. "There is still a field to cover," she said. "In the current state of uncertainty, with the possibility of a recession rising, everyone has to do their job," Lagarde said. "Our job is price stability. This is our main task." Interest rates are expected to rise by early 2023. But Lagarde didn't say how high the stakes would be. Reiterating that future policy rate decisions will continue to be data-driven and meeting-by-meeting. The increase in interest rates is due to the fact that the ECB continues to see further risks to economic activity until the end of the year. "Eurozone economic activity is likely to slow significantly in the third quarter of the year, and we expect further weakening for the remainder of this year and early next year. High inflation continues to hold back spending and production. Serious disruptions to gas supplies have further worsened the situation, and both consumer and business confidence has fallen rapidly, which is also putting pressure on the economy," Lagarde said in her opening remarks. However, price stability and bringing inflation down to the ECB's medium-term target of 2% is the central bank's priority. While soaring energy and food prices are the two biggest drivers of inflation, the ECB is forecasting a general rise in consumer prices. "Inflation remains too high and will remain above our target for an extended period," Lagarde said. "Incoming data confirms that the risks to the economic growth outlook are clearly abating, especially in the near term," she added. However, price stability and bringing inflation down to the ECB's medium-term target of 2% is the central bank's priority. Although the sharp rise in energy and food prices is the most significant driver of inflation, the ECB predicts a widespread increase in consumer prices. "Inflation remains too high and will remain above our target for an extended period," Lagarde said. - The risks for the inflation forecast are primarily positive. The main risk for the nearest period of time is a further increase in retail prices and energy prices. In the medium term, if energy and food prices rise, inflation may be higher than expected."     Relevance up to 12:00 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. Read more: https://www.instaforex.eu/forex_analysis/325638
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Forecasts Of The Situation In The Eurozone Are Not Very Good

Kamila Szypuła Kamila Szypuła 30.10.2022 10:48
At the beginning of the week, the European Union will share the most important indicators. Europe faces a difficult and uncertain geopolitical and economic outlook. Inflation remains too high for a long time. Actions in the field of montage policy do not bring the expected results. However, the fight against inflation is expected to be painful. High interest rates can reduce demand, investment and employment, causing the economy to slow. The ECB seems determined to overcome these fears and fulfill the bank's main mandate of price stabilization, a goal that has turned into a difficult struggle in the Ukrainian war and the energy crisis. Core CPI The change in the price of goods and services purchased by consumers, excluding food, energy, alcohol, and tobacco is expected to reach level of 4.8%. The fight against inflation continues. And the situation of the eurozone does not seem to be getting better. The geopolitical situation, which is the war in Ukraine, which directly affects the member states, still threatens the economic situation. The base CPI indicator also shows this significantly as it has been growing significantly since May. The expected level of 4.8% is the result of the previous reading, so we can believe that the actions of the European central bank may have eased the situation. CPI Although the core CPI remains below 5%, the Eurozone Consumer Price Index is expected to rise to 10.2%. The Baltic countries continue to be the hardest hit; Estonia in particular is experiencing the highest levels of inflation in the eurozone. Such a high level is significantly influenced by the situation of energy prices. It is obvious that as a result of the war in Ukraine difficulties have arisen in Euroland with energy. There is no sign of an improvement in the energy crisis, as Russia said in September that it would not fully resume gas supplies to Europe until the West lifts sanctions imposed on Moscow over its invasion of Ukraine.The central banks of the member states are doing what they can to fight inflation. The ECB has the greatest impact on the fight against inflation. The ECB tries to bring the inflation level back to stabilization. Following in the footsteps of its counterparts elsewhere in the world, in July, the European Central Bank raised interest rates by more than expected amounts for the first time in 11 years as it pursues persistently high inflation. Everything is going up: electricity, diesel, vegetables, the Internet, hotels, flights, and now interest rates as well. The only question is whether such a state of affairs leads to a recession in the euro area. Source: investing.com GDP The surprisingly positive forecast is for gross domestic product, which is expected to reach 1.0%. Despite the positive data, it should be expected that the worst is still to come. Some economists are of the opinion that a recession is already in Europe. Recession in the eurozone now appears likely as a result of the deepening gas crisis. Economic activity in the euro area declined even more in October, and Germany, the EU's largest economy, appears to be headed towards a recession. Higher interest rates tend to mean a decline in economic activity as credit becomes more expensive and consumer spending decreases. Source: investing.com
The Markets Still Hope That The Fed May Consider Softer Decision

The Markets Still Hope That The Fed May Consider Softer Decision

InstaForex Analysis InstaForex Analysis 31.10.2022 09:52
The coming week will be unusually rich in economic statistics and various events that will have a significant impact on the markets. A number of important economic data will be released this week, where the values of production indicators both in Europe, China and the USA will play a significant role. The numbers of indexes of business activity in the manufacturing sectors will have to indicate what impact the processes of raising interest rates have on national economies, of course, here we mean the countries of the so-called West. The decline in indicators will demonstrate a steady trend towards recession in the Western countries with the expected result - continued increase in interest rates by central banks and, as a result, continued pressure on demand in the stock markets and the dollar. Also, new data on consumer inflation in the euro area will be published today, which, as predicted, will again show its increase in annual terms from 9.9% to 10.2%. If the reports do not disappoint, then the growth of inflation in the euro area will again bring to life the topic of further continuation of the aggressive increase in European Central Bank interest rates, however, which we strongly doubt, since there are noticeable discrepancies between the words of the central bank's representatives and real actions. This allows us to believe that the euro is unlikely to receive significant support in the near future. Monetary policy meetings of the Reserve Bank of Australia and the Bank of England will be held this week. Interest rates are expected to rise by 0.25% in Australia and by 0.75% in Britain, which, in our opinion, is unlikely to noticeably change the positioning of the Australian dollar and sterling against the US currency if the Federal Reserve, following the meeting on Tuesday, makes it clear that the growth rate rates at 0.75% can be maintained until the start of the new year. Only a softening of the US central bank's position regarding the prospective aggressive continuation of raising rates can significantly change the situation on the markets and lead to a global reversal in the stock markets and a weakening of the dollar. And the icing on the cake will be the release on Wednesday and Friday of new data from the US labor market. If they show the preservation of a high rate of creation of new jobs, this may allow the Fed to continue actively raising rates, which will become a new basis for the dollar's growth. What can we expect in the markets today? We believe that trading in Europe, according to the dynamics of futures for stock indices, will start in the red, but a lot will depend on the positioning of American investors. If trading in the United States starts positive, this may put pressure on the dollar and support its local weakening, as the markets still hope that the Fed at the November meeting may consider reducing the rate growth rate in the near future. Forecast of the day: EURUSD The pair is trading in a very tight range of 0.9925-0.9970. If the eurozone inflation report turns out to be lower than expected or in line with the forecast, the pair may break out of this range and fall to 0.9820, at the same time, if inflation shows more growth, this will cause an expectation of a continuation of the ECB's aggressive rate hike and may cause the pair to rise to 1.0080. EURJPY The pair is moving in the range of 14550-147.65. A strong increase in inflation in the euro area may trigger the likelihood of continued aggressive rate hikes by the ECB, which will support the euro against the yen. In this case, a rise above 147.65 could lead to a rise of the pair to 148.65.       Relevance up to 08:00 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/325759
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

Major Currency Pairs (EUR/USD And GBP/USD) Are Now Subject To A Future Fed Decision

InstaForex Analysis InstaForex Analysis 31.10.2022 11:02
According to a preliminary estimate released by the Bureau of Economic Analysis, U.S. real GDP increased at an annualized rate of 2.6 percent in the third quarter of 2022, well above expectations. The main contribution to GDP growth was from data on foreign trade, other indicators turned out to be noticeably less positive. Take note that the US stock indexes were impressed by the strong reporting of companies, the S&P 500 index rose 2.5%, exceeding the cumulative fall of 1.35% over the previous two days, ending the week up 3.95%, which was the second consecutive weekly gain. In general, the US economy looks quite confident, which gives reason to expect that the Federal Reserve will not give clear signals about the slowdown in tightening, and the dollar may well win back the positive data, continuing to strengthen. In any case, the probability of a rate hike by the same 0.7% in December remains high. European stock indices showed mixed dynamics, high inflation and the threat of an energy crisis are still the main negative factors for the euro, which will prevent it from resuming growth. EURUSD As expected, the European Central bank raised interest rates by 0.75%, but did not give any signal that the pace of rate hikes will continue to be high. Most likely, the ECB is inclined to slow down the pace of rate hikes, as it noted "substantial progress" in the revision of monetary policy, plans for quantitative tightening will be determined at the December meeting, which came as a surprise to markets that were waiting for specifics. The insufficiently hawkish stance of the ECB provoked a decline in global bond yields, European ones suffered the most, and amid accelerating inflation. Germany's overall consumer price index reached an annualized rate of 11.6% in October, well above the 10.9% expected by economists, while Italy (11.9% vs. 9.5% experience) and France (7.1 % vs 6.5% experience) also exceeded expectations. The net long position on the euro increased during the reporting week by 3.4 billion to 9.3 billion, this is a very strong growth, indicating an increase in the positive relative to the euro. However, despite such a strong change, the settlement price turned down, the reason being that even the apparently hawkish decision of the ECB did not lead to an increase in European bond yields, and the yield differential between European and US bonds did not decrease, but even slightly increased. This discrepancy between the long-term positioning in the futures and options market, which is reflected in the CFTC report, and current yields does not yet allow us to break the trend towards the weakening of the euro. EURUSD, as we suggested a week earlier, made a successful attempt to corrective growth, it passed the resistance of 0.9920/40, however, short positions resumed in the area above parity. We assume that the euro will be under slight pressure ahead of the Federal Reserve meeting, growth above the local high of 1.0092 is unlikely, trading will go in a sideways range with a downward trend. The main target is the support zone of 0.9820/40. This scenario can be canceled if the Fed shows more pronounced weakness on Wednesday than the markets have been laying down so far. GBPUSD The Bank of England will hold a regular meeting on Thursday, and the rate is expected to rise by 0.75%. The government change has calmed the markets, yields have pulled back, and now the focus will be on inflation forecasts, as they directly affect the position of the BoE. The net short position on the pound slightly decreased during the reporting week by 0.2 billion to -3.4 billion, positioning, unlike the euro, remains confidently bearish. The yield differential widened sharply in favor of the dollar, resulting in a rapid decline in the settlement price. The pound on the wave of rumors about the easing of the Fed's position still went higher than we expected, and reached the upper limit of the long-term bearish channel. We assume that a high will be formed here, an attempt to test the strength of the local high of 1.1735 is not ruled out, but a downward reversal from current levels is much more likely. Technical support at 1.1336 and 1.1147 can also act as immediate targets. High volatility is unlikely before the announcement of the results of the Fed meeting.   Relevance up to 09:00 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/325776
US Inflation Forecasted at 3.3%, UK GDP Projections at 0%, Fed Member Harker's Views on Rates

Inflation In Eurozone Higher Than Forecast | Retail Sales Reports

Kamila Szypuła Kamila Szypuła 31.10.2022 11:15
We start the beginning of the new week with data on inflation in the European Union. Apart from important data from Strego Kontunet, the market does not expect important data from America. Japan Industrial Production In Japan, despite the positive results in August, Industrial Production fell below zero to -1.6%. The decline was expected but not that low. The result was forecast at -1.0%. Such a situation means weakening demand in this sector. For investors, this means a significant slowdown and is not beneficial for the image of the Japanese currency or its entire economy. Japan Retail Sales Another important report for the Japanese economy is the report on retail sales. The result turned out to be positive. The 4.1% level was expected to hold this time as well, but the reading was higher. The current level of retail sales in Japan is 4.5%. Since the fall in July, sales in Japan started a new pattern trend, which, as we can observe, continues. Retail sales are seen as a stand-in for consumer spending and its growth can be considered positive for the development of the Japanese economy. Source: investing.com Austrailan Retail Sales Australia also shared the results on retail sales. The result was neither positive nor negative. The positive fact is that it has met expectations and has not fallen. This is the third reading in a row when the retail sales level is 0.6%. According to this indicator, the Australian economy is stagnating. China Manufacturing PMI The China Manufacturing Purchasing Managers Index fell below 50 again. The current reading shows that the index reached the level of 49.2 against the previous one (50.1), it is a negative reading. Also, this reading did not meet the forecast level (50.0) The China Non-Manufacturing Purchasing Managers Index (PMI) also fell. The spatula trend continues. The gauge has dropped from level 50.6 to level 48.7. The current value and movements of the PMI and its components can provide useful information for business decision makers, market analysts and investors .We can expect that poor performance in both sectors will have negative effects on market decisions. Important economic data from Europe The core CPI reached the level of 5.0% against the forecasted 4.8%. On the other hand, the overall CPI reached the level of 10.7% and was higher by 0.5% than forecasted. As we can see, the situation in the euro zone has not changed despite the actions of the ECB. Read more: Forecasts Of The Situation In The Eurozone Are Not Very Good| FXMAG.COM ECB’s member is set to speak After today's important economic data from the Eurozone, a speech by Philip R. Lane, member of the Executive Board of the European Central Bank will take place at 16:00 CET. The speech that will take place after important reports will be helpful for investors in taking further decisions and thus contain indications on the future possible direction of monetary policy. Summary Despite the fact that only the European Union released data important for the markets, during the week there will be more reports that will have a significant impact on the market situation. This week we should focus on next decisions of central banks regarding interest rates (Fed, RBA, Bank Of England). 0:50 CET Japan Industrial Production (MoM) (Sep) 0:50 CET Japan Retail Sales (YoY) (Sep) 1:30 CET Austrailan Retail Sales (MoM) (Sep) 2:30 CET China Manufacturing PMI (Oct) 11:00 CET EU CPI 11:00 CET EU GDP 11:00 CET EU Core CPI 12:25 CET BCB Focus Market Readout 16:00 CET ECB's Lane Speaks Source: https://www.investing.com/economic-calendar/
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The Currency Markets This Week Will Be Dominated By Fed Decisions

ING Economics ING Economics 31.10.2022 11:58
It is a busy week for FX markets, with key policy rate meetings on both sides of the Atlantic and some tier-one data releases. The question to be answered this week: is the Federal Reserve ready to pivot? We would argue that the Fed has less cause than many to pivot. And weak growth overseas should mean that it is too early to unwind long dollar positions In this article USD: Wednesday's FOMC will dominate EUR: Markets still price a 75bp ECB hike in December GBP: Thursday's BoE could do some damage CEE: Tough times are back USD: Wednesday's FOMC will dominate FX markets this week will be dominated by Wednesday's FOMC meeting and whether the Fed provides any oxygen to the idea of a pivot - or a shift to a slower pace of tightening. As we discuss in our FOMC preview, the Fed faces several challenges here, but we suspect the bar is quite high for a pivot and we feel it is too early to call time on the dollar's rally. After all, the market in effect already prices the pivot (pricing a 75bp hike this week and a 50bp hike in December) and we suspect the chances of another 75bp hike in December are under-priced. In addition, this week sees a whole raft of US data culminating in Friday's nonfarm employment data. We forecast 220k in job gains and an unemployment rate of 3.6% - still below the 3.8% the Fed forecast for year-end. Recall that even with the unemployment rate rising to 3.8%, the Fed's dot plots had assumed that a policy rate in the 4.25-4.50% area would be appropriate for the end of this year. As always there are two sides to the dollar story - what's going on at home and what's going on abroad. High beta currencies like the Norwegian krone, New Zealand dollar and British pound have been some of the best performers against the dollar over the last month. That has largely been due to the turnaround in sterling. But as my colleague James Smith discusses in his Bank of England (BoE) preview, the BoE may well disappoint with just a 50bp hike.  A weaker tone in sterling could undermine the recent renaissance in European currencies and push more wind back into the dollar's sails. At the same time, Chinese data continues to disappoint, with the October composite PMI dropping back into contraction territory for the first time since May. In short, it looks as though the dollar's month-long, 4.5% correction could have ended last Thursday and events this week could prove a catalyst to send the dollar back towards the highs. Our base case does see the dollar retesting the highs later this year. A break of 111.00/10 in DXY today could open up a move to the 111.80 area. Chris Turner EUR: Markets still price a 75bp ECB hike in December The eurozone continues to battle with inflation and today should see the release of a new cycle high in CPI at 10.3% year-on-year - and potentially even higher given the German CPI release. Today we will also get a first look at 3Q22 eurozone GDP, expected at 0.1% quarter-on-quarter. The news may temporarily push eurozone rates higher, even though a 75bp hike is virtually priced for the 15 December ECB meeting. Ultimately, however, our macro team believes the ECB will only hike 50bp in December and that the terminal rate for this cycle proves to be in the 2.25% area rather than the 2.80% currently priced by the markets. And bluntly, the ECB has far more cause than the Fed to pivot. With global growth under pressure from tighter rates and a misfiring Chinese economy, we think the eurozone and the euro will continue to struggle. That is why last Thursday's high of 1.0089 in EUR/USD could have been significant. A close back under the 0.9900/9910 area this week would support our preferred view of EUR/USD retesting the lows near 0.95. Chris Turner GBP: Thursday's BoE could do some damage GBP/USD is consolidating above the important 1.1500 level, holding onto recent gains. The highlight this week will be Thursday's Bank of England meeting. The market firmly prices 75bp, but we think the risk of a softer 50bp is under-priced as the BoE prepares for the coming recession. As we have argued previously - now that a lot of the fiscal risk premium has come out of sterling - the forthcoming tighter fiscal and more dovish than expected monetary policy could prove a bearish combination for sterling. We are dollar bulls and would thus favour GBP/USD breaking back under 1.1500 based on this week's confluence of events. This would also point to current EUR/GBP losses under 0.8600 proving short-lived. Chris Turner CEE: Tough times are back This week we have a busy calendar not only at the global level but also in Central and Eastern Europe. Today we start with Polish inflation, which will be crucial for next week's National Bank of Poland meeting. We expect a jump from 17.2% to 18.1% year-on-year, slightly above market expectations, mainly due to higher fuel, energy and food prices. Tomorrow in the Czech Republic, 3Q GDP data, October PMI and the state budget result will be released. The first GDP result in the region should show a contraction in the economy and confirm the start of a shallow recession. On Wednesday, we will see October PMIs in Poland and Hungary, which will confirm the downward trend in industrial sentiment. On Thursday, the highlight of this week is the Czech National Bank meeting. In line with the market, we expect interest rates to remain unchanged. A new forecast will be presented which will show lower inflation but higher wage growth, which together with the cost of FX intervention is the main risk for us in terms of a possible additional interest rate hike at the coming meetings. However, we consider the CNB hiking cycle to be finished. The FX market in the region will be dominated by global events in the coming days. Already last week, the positive trend in CEE was halted by the ECB meeting. This week will see a series of central bank meetings led by the Fed. Therefore, we see both support from high-interest rate differentials in the region and EUR/USD as being at risk. In addition, gas prices have been rising again in the last two days and many of the reasons for the strengthening trend in the CEE region over the past two weeks are now dissipating. Of course, at the local level, we will be watching the inflation numbers in Poland and the CNB meeting in particular but this week speaks strongly against CEE FX.  We see the Czech koruna as the most vulnerable at the moment, which will again be the focus of short positioning ahead of the central bank meeting. We will likely see a move towards the 24.60-24.70 EUR/CZK levels. The Hungarian forint is likely to look above 415 EUR/HUF again. On the other hand, the Polish zloty should be best positioned this week, supported by a high inflation number and an increase in NBP rate hike bets. Frantisek Taborsky 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
Positive Start Expected as Nvidia's Strong Performance Boosts Market Confidence

Dow Jones Saw The Biggest Profits And The German DAX Index Rebound From Declines

Conotoxia Comments Conotoxia Comments 31.10.2022 12:13
October 2022 seems to have brought respite to many asset classes. During this time, the stock, bond or cryptocurrency markets tried to pick up, while the US dollar seemed to lose value at the same time, along with the falling VIX "fear index" contract. Performance of key indices and companies In October,one of the popular futures contracts, the contract for the U.S. Dow Jones Industrial Average index saw the biggest gains. It rose by almost 13 percent during this period. Although the month is not yet over, for the moment, only Verizon ranks in the entire index since the beginning of October with a negative result. On a monthly basis, the decline is 0.92 percent. In contrast, the biggest increase in the index was achieved by Caterpillar (up more than 30 percent). The company reported that sales and revenues in the third quarter of 2022 recorded an annual increase of 21 percent, reaching $15 billion. The company's profit was $2.04 billion, an increase of 43.13 percent compared to the same quarter of the previous year, BBN reported. Operating profit rose 45.73 percent year-on-year to $2.42 billion. Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel engines, industrial gas turbines and diesel-electric locomotives. Source: Conotoxia MT5, Caterpillar, Monthly DAX also with growth in October The second popular instrument, which seemed to rebound from earlier declines, was the contract for the German DAX index. Although emerging macroeconomic forecasts for the German economy appear to be worsening, and the European Central Bank raised interest rates, the DAX rose nearly 10 percent. The company that may have gained the most was Deutsche Bank, as the month's performance was up more than 30 percent by now. The German bank reported its best results since 2016 in October. Net income for the third quarter of 2022 was €6.9 billion, up 15 percent year-on-year and the highest third-quarter income since 2016. The dollar exchange rate fell nearly 1 percent. Market hopes that the U.S. Fed will slow down interest rate hikes at the end of the year and in the first quarter of 2023 may have led the U.S. dollar to fall in October. At the moment, the USD index is trading 0.9 percent lower than at the beginning of the month at 111 points. The EUR/USD exchange rate is near parity at 1.0000, all likely in anticipation of the Fed's November 2 interest rate decision. The market seems to be expecting a 75bp hike to 3.75-4.00 percent, while the end of the hike cycle could be priced in at 4.75-5.00 percent in early 2023. October's biggest declines? It seems that among the popular contracts, the biggest drop in October may be the VIX, which fell 15 percent to 26.86 points this morning. Looking at the chart of the contract showing expected volatility on the S&P500 index, someone could  see that this month's trading may have turned around at a potential resistance level. Source: Conotoxia MT5, VIX, Weekly Will volatility continue at lower levels in November? Here, a lot may depend on the US central bank and events in Eastern Europe. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The US Dollar Index Is Expected A Pullback Rally At Least In The Near Term

The US Dollar Started The Week Stronger | Expectations For The RBA's Decisions

Saxo Bank Saxo Bank 01.11.2022 08:44
Summary:  A return to hawkish expectations for the FOMC and risk-off from weak China data as well as possible issues in Russia-Ukraine grain deal saw markets tumble on Monday and US 10-year yields reversed back to 4.10%. Dollar strength returned as well, with gains most pronounced against the sterling and yuan. However, demand concerns returned, while oil also retreated with President Biden’s hopes of a windfall tax on profits of US energy companies weighing as well. Gold extended its downtrend with the surge in yields. Reserve Bank of Australia on watch in the day ahead, with some key Japanese names like Toyota and Sony also reporting earnings. What is happening in markets? The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) fall on Monday ahead of Fed, but hold onto monthly gains US stocks fell into the red on their last trading day of the month with end of month rebalancing coming into play, while stocks were also on the back foot as bond yield climbed ahead of Wednesday's Fed decision. Still the S&P500 held onto a monthly gain of 8%, but on Monday the index dropped 0.75%. The Nasdaq fell 1%, but held a 4% October gain. Most Treasury yields rose, with 10-year notes up to around 4.05%, while the dollar climbed against every G-10 partner, save the kiwi. Oil and gold both retreated. Energy shares whipsawed on news that President Joe Biden will call on Congress to consider tax penalties for oil producers accruing record profits. JPMorgan Chase Marko Kolanovic is joining strategists who believe the aggressive Fed hiking is nearing an end. He thinks the Fed will raise rates by 50 basis points in December and pause after one more 25-basis-point hike in the first quarter. Apple (AAPL) shares fell 1.5% with iPhone’s Foxconn plant in central China grappling with virus outbreak.  Fertilizer giant, Archer Daniels (ADM) rose 2.2% with traders expecting higher agricultural prices amid supply concerns from added geopolitical tension. Australia’s ASX200 (ASXSP200.1) futures suggest a 0.15% rise on Tuesday, ahead of the RBA rising rates today The Reserve Bank of Australia is expected to deliver its 2nd straight month of 0.25% hikes at today’s meeting, according to Bloomberg consensus, which will take the cash rate from 2.6% to 2.85%. However it will be a tough decision, with stronger-than-expected third-quarter inflation data from last week, and hot retail and credit data yesterday giving room for a potential 50-bp (0.5%) hike. This could trigger a knee jerk jump in the Aussie dollar vs the US (AUDUSD), however we maintain our bearish view of the AUDUSD given the Fed has more ammo to aggressively rise. Also note, Governor Philip Lowe has regularly wrong-footed forecasts. Still, swaps imply only a 20% chance of an outsized move, and Australian 10-year yields are a full 25 bps below similar-dated Treasuries, meaning there are expectations that RBA will take a softer line than the Fed. The RBA will last month previously noting loan arrears and insolvencies have picked up in Australia, while housing loan commitments declined -  ‘demonstrating the effect of high interest rates on housing’. This demonstrates, the RBA has a tough task of rising rates to slow inflation, without compromising the health of the economy. FX: Dollar returns to gains ahead of FOMC Dollar started the week on a firmer note as WSJ Timiraos comments turned more hawkish over the weekend after dovish Fed expectations possibly went a bit far. The worst performer was GBP, and we had raised concerns yesterday that it was pricing in all the good news so there was scope for disappointment. GBPUSD broke below 1.1500 with EURGBP also reversing back higher to 0.8620 despite EURUSD weakness to sub-0.99. USDJPY rose back above 148.50, with US 10-year Treasury yields touching 4.1% at one point. Japan’s Finance Ministry data showed a record USD 42.8bln was spent on multiple interventions in the FX market last month to attempt to cushion the Yen’s fall. The Chinese yuan continued to slide, USDCNH rose to 7.34 and the onshore spot USDCNY seen close to 15-year highs of 7.30+ at Monday’s close. Crude oil (CLX2 & LCOZ2) worried about oil demand Crude oil prices were lower on Monday as concerns of weaker demand weighed on sentiment with the Fed commentary from whisperer Nick Timiraos shifting towards a hawkish stance again. Meanwhile, China’s PMIs fell below the 50 mark which separates expansion and contraction. On the other hand, OPEC’s World Oil Outlook estimates demand will climb 13% to reach 109.5mb/d in 2035, then hold around that level for another decade and secretary-general Haitham al Ghais said that the oil supply surplus was the main reason for the decision to cut output. There were also some reports suggesting that President Biden is considering a potential windfall tax on US energy companies. WTI futures slid towards $86/barrel. Gold (XAUUSD) in a downtrend Gold (XAUUSD) fell for a third consecutive day approaching the recent support area $1,625 as US dollar broadly strengthened with 10 year treasury yield touching 4.10% at one point on Monday. With the Fed poised for another 75bps rate hike this week, pressure on gold could increase, but we continue to see fundamental strength in gold especially given the higher-for-longer inflation expectation. But as a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called.   What to consider? What next for the RBA after peak hawkishness? The Reserve Bank of Australia meets today and is expected to continue with a smaller pace of rate hikes with 25bps priced in despite a hotter than expected Q3 CPI. Q3 CPI rose by 7.3% YoY from previous print of 6.1%, coming in higher than expectations. RBA’s preferred Trimmed Mean CPI was seen at 6.1% vs. expected 5.6% (prev. 4.9%), while PPI also accelerated in Q3 to 6.4% from 5.6% previously. There are, therefore, some calls for an outsized 50bps rate hike as well as inflation continues to inch above the central bank’s 2-3% target range. An update on the latest growth and inflation projections will also be seen along with today’s rate decision. AUDUSD will need a clearly larger than expected rate hike of 50bps, or a very hawkish commentary with a 25bps rate hike to make any substantial gains. If RBA tows the line, focus shifts to USD and the Fed meeting on Wednesday. AUDNZD is also key to watch, with the 1.1000 handle on test. Eurozone GDP and inflation prints continue to make the ECB’s job tougher Eurozone inflation data for October YoY printed another record as it soared to 10.7% (prev. 9.9%), and well above the median Bloomberg expectation of 10.3%. Meanwhile, Q3 GDP growth slowed to 0.2% QoQ or 2.1% YoY (prev. 0.8% QoQ, 4.1% YoY). While mild whether and full storage hasn’t unleashed the full effects of energy shortages this year, the threat continues to loom and this could mean the macro story could deteriorate further. China PMIs and Hong Kong GDP growth send red flags China’s manufacturing and non-manufacturing PMI both plunged into contractionary territory in October with Covid curbs likely continuing to weigh on demand and manufacturing ahead of the CCP meeting. China's official manufacturing PMI declined to 49.2 in October after a brief rebound to 50.1 in September following a two-month decline. Meanwhile, services activity fell to 48.7 in October from 50.6 last month. Also, Hong Kong recorded its worst quarter in over two years, with Q3 GDP growth coming in at -4.5% YoY vs. expectations of -0.8%. The QoQ growth was also in negative territory at -2.6%, signalling recession concerns if such a performance continues despite the economy’s reopening. Key Japanese earnings on watch Big Japanese names Toyota (7203) and Sony (6758) report earnings today. While high inflation and interest rates remain a key consideration to watch for consumer spending trends, the effect of a weak yen will also be key to consider. Sony will be key to watch after the US tech tumble last week, and consensus is looking for a 10% drop in its operating profit from a year ago. Toyoto will likely continue to highlight the supply chain pressures, but possible buyback announcements could support.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-1-nov-01112022
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

US 10-Y Treasury Yields Have Eased Back | Airbnb Expects Revenues To Increase

Saxo Bank Saxo Bank 01.11.2022 09:42
Summary:  Risk sentiment remains near the local highs heading into tomorrow’s FOMC meeting, where the market is hoping for guidance that suggests a downshift in the pace of tightening. Another micro-hike of 25 basis points from the RBA increases the sense that more central banks are set to slow their fight on inflation via rate hikes. Elsewhere, unconfirmed stories swirling overnight in China that that Covid restrictions are set to be lifted saw a potent rally in Chinese equities.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Momentum is trying to come back into US equities after yesterday’s retreat with S&P 500 futures trading around the 3,902 level. A higher close today could set in motion an extended rally into tomorrow’s FOMC rate decision lifting expectations for the Fed to signal a slowdown in rate increases. Given the latest macro figures we have gotten this might still be too early for the market to expect this, but if the Fed confirms the ‘peak hawkishness’ narrative then the 4,000 level in the S&P 500 futures is not outrageous. Euro STOXX 50 (EU50.I) Strong earnings from BP lifting sentiment in early trading in addition to positive spillover effects from the Chinese equity session seeing Hang Seng futures 6.1% higher on unconfirmed news that Chinese policymakers are considering phasing out its strict Covid policy. STOXX 50 futures are pushing higher this morning trading around the 3,649 level, which is the highest level since 13 September. The market is increasingly adjusting to the ‘peak hawkishness’ theme and if momentum extends here the 200-day moving average at the 3,675 level is the big area to watch out for. FX: USD on its back foot as market hopes for dovish downshift at FOMC meeting The market’s hope for a dovish downshift in the Fed’s guidance is a bit nuanced, as the expectations for the coming handful of meetings are back near the cycle highs, with the Fed funds priced to reach nearly 5.00% at the March or May FOMC meeting next year, while expectations farther out into next year and in 2024 are 25 or more basis points from the cycle highs. But with the USD on its back-foot and risk sentiment clearly unafraid of the Fed at the moment, the surprise side this Wednesday would be a stern message from the Fed that checks sentiment. Watching parity in EURUSD as an important psychological barometer, 1.1500 in GBPUSD, which was briefly broken yesterday, and eventually 145.00 in USDJPY and 7.25 area in USDCNH if the sudden USD drop overnight on hopes that China Covid policy is set for relaxation sticks and follows through. HG Copper (HGZ2) recovered all of Monday’s losses during Asian trading ...partly driven by a report that a “Reopening Committee” has been formed led by a Politburo Standing Member. The committee is reviewing data to assess various opening scenarios, targeting a March 2023 reopening. In addition to a weakening dollar and demand towards renewable energy, the copper market is being supported by persistent supply challenges highlighted by top supplier Codelco lowering its annual guidance for the second time in three months. The futures price remains stuck within a narrowing trading around $3.45 and looks poised for a breakout soon. Given the latest developments the risk of an upside break has risen. Gold (XAUUSD) trades higher … after falling for a third consecutive day on Monday, thereby extending its monthly losing streak to seven, the longest since the late 1960’s. The market bounced with support from lower bond yields and a softer dollar but as a minimum the yellow metal needs to break above $1730 before an end to the month-long downtrend can be called. The WGC reported that central banks bought a record 400 tons during the third quarter, more than quadruple the amount of a year earlier, thereby more than offsetting the 227 tons reduction in holdings across bullion-backed ETFs Crude oil (CLZ2 & LCOZ2) Crude oil trades higher within the established range after advancing with the broader market overnight as OPEC+ begins to cut production by around 1.2 million barrels per day, a decision that has been driven by excess supply according to its secretary-general. OPEC also released its World Oil Outlook in which they estimate demand will climb 13% to reach 109.5mb/d in 2035, then hold around that level for another decade. A weaker global economic growth hurting demand, OPEC+ production cuts and EU sanctions on Russian crude from December have all clouded the outlook, thereby supporting the current rangebound price action. Focus on Wednesday’s FOMC meeting and its potential impact on the dollar. Brent has since the September low several times been bouncing off trendline support, currently at $92 with resistance at $97.25 and $98.75. US treasuries (TLT, IEF) US 10-year treasury yields have eased back toward 4.00% after briefly touching above 4.1% yesterday. The focus on continued strength in bond markets will be the 3.90% pivot low yield posted last week, which could open up for a run to the 3.50% area, but would such a move represent a flight to safety (weak risk sentiment) or be celebrated as a sign of easing pressure on asset valuations. The key two event risks are the FOMC meeting Wednesday and how the yield curve reacts as well as the US jobs report on Friday, with the ISM Services Thursday also an interesting data point. What is going on? RBA hikes 25 bps, ups inflation forecasts, downgrades GDP and remains dovish Will the RBA stop hikes early? The RBA hiked the cash rate by 25bps (0.25%) as most expected to 2.85%, maintaining its dovish stance and bordering on restrictive, as it again acknowledged tighter financial conditions are yet to be felt in mortgage payments, but higher rates and inflation have put pressure on household budgets, causing a small amount of loan arrears and insolvencies. This rate hike cycle since May, has been the second fastest in history. We note the RBA was the first major central bank to under-deliver on rate hike expectations last month. The RBA raised its year-end 2022 CPI forecast from 7.8% to around 8%. The RBA revised its GDP forecast down, with growth of around 3% expected this year and 1.5% in 2023 and 2024. AUD knee-jerked lower on the decision, but recovered most of the lost ground against a stumbling US dollar in Asia, while sticking near local lows against the NZD. BP had exceptional Q3 in gas marketing and trading The European oil and gas major is lifting sentiment in Europe with strong net income beating expectations while cash flow generation is coming in below estimates. The energy company is increasing its buyback programme further by $2.5bn. Toyota down 2% on big operating income miss Japan’s largest carmaker is lowering its fiscal year production target as Volkswagen also recently did while posting a Q2 operating income of JPY 563bn vs JPY 765bn due to soaring materials costs and one-off items. The lower production target comes as the industry is still facing a chips shortage. UK Treasury says all Britons will have to pay more tax Chancellor Hunt said that “those with the broadest shoulders should be asked to bear the greatest burden” as the clear message from the new Sunak government, after the previous Truss-Kwarteng team triggered chaos in UK Gilts and sterling, is that financial stability is priority number one. The particulars of the new budget and policy will be laid out in a statement on November 17. US President Biden rails against oil companies not reinvesting profits, promising to raise taxes on profits that are “windfall of war”... ... saying that “The oil industry has not met its commitment to invest in America.” Such a move would require a bill to pass through Congress, however, which would likely prove difficult after the mid-term elections next week, if projections of a strong GOP showing flip the House and possibly the Senate into their hands, making for a largely lame-duck presidency for the next two years. Eurozone GDP and inflation prints continue to make the ECB’s job tougher Eurozone inflation data for October YoY printed another record as it soared to 10.7% (prev. 9.9%), and well above the median Bloomberg expectation of 10.3%. Meanwhile, Q3 GDP growth slowed to 0.2% QoQ or 2.1% YoY (prev. 0.8% QoQ, 4.1% YoY). While mild weather and full storage has not unleashed the full effects of energy shortages this year, the threat continues to loom, and this could mean the macro story could deteriorate further. Japan spent a record $42 billion to defend JPY in October The Finance Ministry is said to have another 10 trillion yen, or about $68 billion in ready cash left to throw after defending the JPY if pressure mounts again, although Japan’s central bank reserves are many, many multiples of these amounts, currently at $1.24 trillion. What are we watching next? Another small hike from a central bank (the RBA) encourages speculation of dovish shift at the FOMC meeting on Wednesday A number of recent central bank meetings of late, including the latest RBA meeting overnight, which saw Australia’s central bank only hiking rates 25 basis points for the second consecutive time, encourage the notion that the Fed is set for a dovish shift at this Wednesday’s FOMC meeting. Working against that narrative have been a number of possible “leaks” by journalists at key publications thought to have strong Fed sources, including the WSJ’s Nick Timiraos and a NY Times reporter, whose latest musings suggest that the Fed is not set to indicate any backing down from its hawkish message. An overtly defensive and hawkish FOMC meeting tomorrow could badly shock the market, which coming into this morning, at least, seems hopeful that the Fed is set to downshift its tightening guidance this week. Or at least, given that Fed expectations for the next six months or so are within a few basis points of the cycle highs, isn’t obviously afraid of the message the Fed is set to deliver: equities are up near the local highs after a ripping rally off October lows. Earnings to watch Today’s US earnings focus is AMD, Airbnb, and Uber with analysts expecting revenue growth of 31% y/y for AMD but EPS down 5% y/y as input pressures are eating up growth coming from strong product introductions. Airbnb is still riding the reopening tailwind with revenue expected to increase 26% y/y in Q3 and EBITDA expanding significantly to $1.39bn up from $888mn a year ago. Uber has a goal of becoming self-funded by 2024 and could achieve this based on the current trajectory. The company is expected to deliver revenue growth of 67% y/y and EPS of $-0.06 up from $-0.42 a year ago. Today: Toyota Motor, Sony, BP, Eli Lilly, Pfizer, AMD, Mondelez, Airbnb, Uber Wednesday: Suncor Energy, Nutrien, Novo Nordisk, Maersk, Vestas Wind Systems, GSK, Electronic Arts, Qualcomm, CVS Health, Estee Lauder, Booking, Fortinet, Ferrari, Albemarle Thursday: Verbund, Barrick Gold, Orsted, Novozymes, BNP Paribas, BMW, Enel, ING Groep, DBS Group, ConocoPhillips, Amgen, PayPal, Starbucks, Regeneron Pharmaceuticals, EOG Resources, Moderna, MercadoLibre, Block, Cloudflare, Coinbase Friday: Enbridge, Societe Generale, Intesa Sanpaolo, SoftBank, Amadeus IT Group, Duke Energy, Economic calendar highlights for today (times GMT) 0820 – Australia RBA Governor Lowe to speak 1400 – US Sep. JOLTS Job Openings 1400 – US Oct. ISM Manufacturing 2000 – New Zealand RBNZ publishes Financial Stability Report 2030 – API Weekly Report on US Oil Inventories 2145 – New Zealand Q3 Average Hourly Earnings 2145 – New Zealand Q3 Employment Change/Unemployment Rate 2230 – Canada Bank of Canada Governor Macklem to speak 0030 – Australia Sep. Building Approvals Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-1-2022-01112022
The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

The Reserve Bank of Australia (RBA) Hikes By 25bp | Bitcoin Could Rebound

Swissquote Bank Swissquote Bank 01.11.2022 10:06
Equities fell and bond yields rose, as the hawkish Federal Reserve (Fed) fears resurfaced before Wednesday’s FOMC decision. Fed The Fed starts its two-day meeting, and could call the end of the aggressive rate tightening and signal slower rate hikes to enter the final phase of policy tightening, before pausing. But the Fed will not want to throw the foundation of a market rally, which could play against its fight against inflation. Eurozone In the Eurozone, inflation hit a record high of 10.7% in October, versus 10.2% expected by analysts, and the European Central Bank (ECB) Chief Christine Lagarde said that inflation came from nowhere, ignoring a decade-and-a-half of aggressive bond buying that threw the foundations of the present spike in inflation, boosted by the pandemic, the war and a global energy crisis The Eurozone yields spiked on expectation that higher inflation would mean higher ECB rate hikes in the future. But the euro didn’t gain, as currency traders priced in the rising recession fears that come along with the higher interest rates. Rate Hike In Australia, the Reserve Bank of Australia (RBA) raised the interest rates by 25bp as expected and said there will be more rate hikes. The Losses In Switzerland, the Swiss National Bank announced a 142 billion franc loss in the first nine months of the year; melting currency valuations, especially the melting euro, was to blame. Gold In precious metals, gold remains under pressure. The $1615 is the next important support. If the US dollar strengthens as a result of a sufficiently hawkish Fed statement this week, gold bears could pull out the $1615 support and tip a toe into the $1500s for the first time since April 2020. Watch the full episode to find out more! 0:00 Intro 0:28 EZ inflation hits record, EZ yields rise, but euro falls 2:24 Two-day FOMC meeting starts today. What to expect? 5:28 Quick update: Apple, Exxon 6:56 How could oil respond to Fed decision? 7:55 RBA hikes by 25bp 8:18 SNB loses 142 billion francs 8:46 Gold to test important support 9:08 Bitcoin could rebound if risk appetite improves Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #RBA #rate #decision #Eurozone #inflation #crudeoil #ExxonMobil #Apple #Foxconn #China #covidzero #USD #AUD #EUR #CHF #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Statements Of ECB's Member About Inflation And Monetary Policy

TeleTrade Comments TeleTrade Comments 03.11.2022 10:20
European Central Bank (ECB) executive board member Fabio Panetta said on Thursday, “we need to bring inflation back to our 2% target as soon as possible, but not sooner”. Additional quotes   Medium-term inflation outlook presents clear upside risks. Further policy adjustment is warranted. We must calibrate our monetary policy carefully to ensure inflation durably returns to target, while also guiding market expectations and limiting excess volatility. He of our stance should not rely on a one-sided view of risks. We must avoid excessive focus on short-run developments and fully taking into account the risks. The neutral interest rate provides limited guidance here. We also need to stand ready to address collateral issues. I  prefer the concept of the target-consistent rate to that of the neutral rate. Maintaining ample liquidity in the system will help ensure smooth money market functioning. Ready to intervene in a timely manner to counter unwarranted market dysfunctions, should they arise. We should ensure that TLTRO repayments have been absorbed before we stop fully reinvesting the principal payments. A controlled reduction – whereby only redemptions above a cap are not rolled over – is preferable to active sales. A bigger-than-expected rate increase may heighten volatility and have a stronger impact in the current highly leveraged environment. We need to pay close attention to ensuring that we do not amplify the risk of a protracted recession. Our policy rate remains a suitable marginal instrument of normalization. If these bigger-than-expected increases are interpreted as signalling a higher terminal rate, we could have a stronger impact on financing conditions. We have a comparatively limited understanding of the effects of reducing the size of our balance sheet.   Market reaction The EUR/USD pair was last seen trading at 0.9786, down 0.31% on the day.
Oil Prices Rise as OPEC Cuts Output and API Reports Significant Inventory Drawdown

The Bank Of England (BoE) Is Likely To Follow The Fed

InstaForex Analysis InstaForex Analysis 03.11.2022 14:23
The US stock market continues to fall sharply. Stock index futures continued their decline as Jerome Powell warned that the Federal Reserve would raise interest rates further, if necessary. This undermined risk appetite. The US dollar eventually won. S&P 500 futures declined by 0.7% after falling by 2.5% on Wednesday. The industrial Dow Jones lost about 0.4% and the high-tech NASDAQ index sank by nearly 1.0%. Two-year Treasuries rose to 4.72% and remained below the 5.06% yield peak. The sell-off spread to Europe and Asia. China intends to continue its Covid-Zero policy and this dashed investor hopes. Meanwhile, the market is focused on another central bank. The Fed made a 75 bps hike and the Bank of England is likely to follow suit. Although the interest rate in the UK is much worse than in the US, the regulator is not expected to give up its fight against inflation, even amid an expected severe recession in the economy. Yesterday, Fed Chairman Jerome Powell disappointed traders who had bet on a reversal, saying that the US economy remains resilient, which will continue to spur inflation. A similar situation occurred at the end of the summer of this year, when investors, encouraged by a bullish rally suffered huge losses. History repeats. Every time the market participants hope for a bit of dovish rhetoric, they watch the market crash and burn. While investors are concerned about the impact of the central bank's tightening policies on economic growth, Powell said there was no doubt that the committee was ready to raise rates as high as necessary at any time to calm inflation. ECB President Christine Lagarde also spoke today and warned that a moderate recession in the eurozone may be coming soon but it was not enough to stop price hikes. Meanwhile, the US dollar rose against risky assets. The British pound fell by more than 1%, as fears that the Bank of England's interest rate hike could worsen the situation in the economy increased. The rally in Chinese stocks also came to an end before it could begin amid rumors of Covid Zero cancellation. However, this rumor remained a rumor. Economists see a further sell-off in emerging markets in Asia as the US dollar is rising. Wheat prices fell after Russia agreed to renew a deal allowing the safe passage of Ukrainian crop exports. Oil fell after Powell's comments on interest rates overshadowed supply cuts. As for the technical picture of the S&P 500 index, after yesterday's decline, the demand for the index remains rather sluggish. Bulls need to protect the support of $3,735. As long as the trading instrument is trading above this level, we can expect the demand for the risky assets to come back if the US data occurs to be weak. This may strengthen the index and bring it back to the level of $3,773 under control, opening the way to the level of $3,808. If the price breaks through this level, it may start an upward correction and reach the resistance of $3,835. The next target is located at $3,861. If the index declines, bulls will have to show some activity at $3,735. If this level is pierced, the trading instrument may be pushed down to $3,699 and to a new support of $3,661.     Relevance up to 12:00 2022-11-04 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/326184
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

No Longer Dismisses The Possibility Of A Recession In The Eurozone

ING Economics ING Economics 06.11.2022 11:27
The eurozone economy expanded in the third quarter, but most recent data suggests that the recession has already started. Double-digit inflation is keeping the ECB in tightening mode, though substantial progress has been made in withdrawing stimulus. That means we're unlikely to see any more rate hikes after February next year In this article Growth surprises positively in the third quarter Consumption is likely to cave in Horror inflation Substantial progress in withdrawing stimulus Growth surprises positively in the third quarter The eurozone registered an unexpected 0.2% Quarter-on-Quarter expansion in the third quarter. Not surprisingly Spain, Italy and France did see growth on the back of a good tourism season, but Germany also performed much better than expected with 0.3% QoQ growth. However, it is striking to see that economic data has started to deteriorate strongly after the summer holidays. The eurozone composite PMI flash estimate fell to a lower-than-expected 47.1 in October. This is just a near 2-year low but also the fourth consecutive month that the PMI is hovering below the 50 boom-or-bust levels, clearly suggesting negative GDP growth. We get the same story from the European Commission’s economic sentiment indicator: it fell in October for the eighth month in a row to the lowest level since November 2020. The forward-looking components of the business surveys such as hiring intentions and new orders are heading south, a signal that the downturn is likely to intensify in the coming months. Consumption is softening Source: Refinitiv Datastream Consumption is likely to cave in Admittedly, consumer confidence improved slightly in October, but it remains close to the historical low reached in September. As households are expecting higher unemployment in the next 12 months, their intentions to make major purchases, renovate their homes or purchase a house, are all at very low levels. This strong cooling of consumption is also seen in high-frequency data such as hotel bookings, which are showing a post-summer dip. To be sure, in most countries there is budgetary support to alleviate the energy bills, but we don’t expect this to be sufficient to generate positive consumption growth in the coming quarters. With the significant rise in interest rates, accompanied by tighter credit standards, the real estate market is starting to cool rapidly in several countries, putting downward pressure on house prices. This is likely to impact construction activity negatively over the coming year. We're reiterating our forecast of a GDP contraction in the fourth quarter of this year and in the first of 2023. But there's more. The ECB's current tightening policies and the still difficult energy transition away from Russian gas will restrain the recovery thereafter. On the back of the better third-quarter numbers, we've revised our 2022 eurozone growth forecast up to 3.1%. For 2023 we are now pencilling in -0.7% growth and for 2024 1.3%. Horror inflation The October inflation data, published on Halloween, was another shocker: 10.7% headline inflation and 5.0% core inflation. The good news is that upstream in the supply chain there finally seems to be some moderation in price pressures. Supply chain delays eased to the lowest level for over two years, with shipping and material prices now clearly coming down. With inventories of finished products rising rapidly, pricing power is also likely to wane. On the back of the mild October weather, natural gas prices have also softened significantly, though we expect prices to rise again over the coming months when more normal winter temperatures set in. But even then, the contribution of energy to headline inflation is likely to diminish gradually. For 2022 we are now looking at 8.4% inflation and for next year, 5.6%. High inventories are likely to depress pricing power Source: Refinitiv Datastream Substantial progress in withdrawing stimulus The European Central Bank no longer dismisses the possibility of a recession, though we will have to wait for the December staff forecasts to know whether it will become the base case. For the time being the bank is still in tightening mode. But at the same time, it acknowledges that substantial progress has been made in withdrawing monetary stimulus. While the Bank's president, Christine Lagarde, didn’t want to put a figure on the neutral or the terminal interest rate during the press conference after the last rate hike, Banque de France President, Villeroy de Galhau, stated on several occasions that the neutral nominal interest rate is believed to be close to 2%. We, therefore, maintain our forecast of a deposit rate of 2% in December and a final rate hike of 25bp in February. The ECB is also likely to announce the conditions that will trigger the start of Quantitative Tightening. We believe that it will begin in the second quarter of 2023 at the earliest, basically through no longer fully reinvesting the Asset Purchase Programme portfolio. This will only have a minor impact on excess liquidity and bond yields next year. TagsMonetary policy Inflation GDP Eurozone ECB   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
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

In USA Inflation Is Showing Little Sign Of Slowing

ING Economics ING Economics 05.11.2022 09:13
We're now expecting the Fed Funds Rate to hit 5% early next year, albeit in more modest steps. We also think there are limits to how much further both the European Central Bank and Bank of England can hike rates amid a looming recession In this article Federal Reserve European Central Bank Bank of England People's Bank of China Central banks: Our forecasts Source: Macrobond, ING Federal Reserve After four consecutive 75bp Federal Reserve interest rate increases officials have opened to door to a slower pace of hikes from December. The harder and faster a central bank moves into restrictive territory, the less control over the outcome and the greater chance of an adverse reaction. Given the state of the residential real estate market and the deteriorating corporate and consumer outlook, recession in the US now looks unavoidable. However, inflation is showing little sign of slowing. We need 0.1% or 0.2% month-on-month core inflation readings to get the annual rate down to 2% rather than the 0.5% or 0.6% MoM increases in ex-food and energy prices we are seeing. So, while the pace of hikes may slow, the expected terminal rate keeps moving higher. Nonetheless, with housing rents and used car prices now falling, and corporate pricing power being squeezed by the downturn, we think a 5% Fed Funds Rate will mark the peak in February and the door will open for rate cuts through the second half of 2023. European Central Bank The ECB’s October meeting had something for everyone. Another jumbo rate hike of 75bp and the opening for more for the hawks, but also more recession warnings and an opening to a dovish pivot in December for the doves. Consequently, the times of uncontested decisions at the ECB seem to be over. The December meeting will be much more controversial with a looming recession and a high chance that the ECB’s longer-term inflation forecasts will point to a sharp inflation retreat in 2024 and 2025. These aren't really the best arguments to hike into restrictive territory. We expect the ECB to deliver rate hikes totalling 75bp at the December and February meetings. The balance sheet reduction has started with the announced changes to the ECB’s longer-term loans to banks and the option for earlier repayments. More will follow as a gradual phasing out of the reinvestments of asset purchases could become a substitute for additional rate hikes in 2023. Bank of England Markets have pared back interest rate expectations in light of a more stable fiscal backdrop but are still pricing Bank Rate to near 5% next year. Bank of England officials have begun to hint more explicitly that this would come with huge damage to the economy and is inconsistent with the amount of tightening needed to get inflation lower. Still, policymakers face an unpalatable decision. If they undershoot market rate expectations, the risk is that we see a renewed downside for the pound – not least because a full-blown pivot from the Federal Reserve seems at least a few months off. That helps explain why the BoE accelerated the pace of rate hikes in November. But doing so repeatedly risks baking in mortgage rates and corporate borrowing costs which risk material stress in the economy. Around a third of mortgages are fixed for two years, while small and medium-sized enterprises (SMEs) are typically on floating interest rate products. We therefore expect the Bank to undershoot market expectations and remain unconvinced Bank Rate will go above 4% next year. We think the 75bp hike was a one-off. People's Bank of China The PBoC seems to have abandoned the traditional monetary policy tool of policy rate cuts and Reserve Requirement Ratio (RRR) cuts as a means to support the economy. Instead, the central bank has increased liquidity via policy banks in China. These policy banks lend directly to local governments for a specific policy target, for example, to finish unfinished home construction projects. This should be more time efficient as commercial banks would not be able to lend to property developers due to the still restrictive policies set for property developers, and they would be reluctant to lend to construction companies. This kind of direct lending to local government avoids them having to increase bond issuance, and therefore reduces interest costs of local governments in general. We expect the central bank to increase liquidity injections through policy banks until all unfinished residential projects are completed. TagsPBoC Federal Reserve ECB Central banks 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
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Good Retail Sales Result In Europe | Household Spending In Japan Has Declined

Kamila Szypuła Kamila Szypuła 08.11.2022 11:14
There are no important reports scheduled for today that could significantly affect the markets. Today the attention is focused on the mid-term election in the USA and on the speeches of representatives of central banks on the old continents. Japan Household Spending Japan has published a report on household spending. The result of this report was not satisfactory. The current level of 2.3% was lower than expected. It was expected to drop from 5.1% to 2.7%. This year in Japan, spending is not looking very well. They reached the level below zero several times, and the last scare was a false signal. The monthly change in household spending is already more positive. The current score of 1.8% has increased from 1.7%. Which means that within a month there was an increase in expenses, but compared to last year, the result was negative. Household expenditure is an important factor in building the country's economy and has a significant impact on the GDP level. The less households spend, the smaller the turnover is, which affects the number of companies. The profits of companies in such a situation can sleep. This situation will significantly affect individuals. Observing this indicator, it can be concluded that households have started to save to a greater extent, and thus it gives a signal about the plunging situations of life in this country. BRC Retail Sales Monitor The value of same-store sales in BRC-member retail outlets in the U.K decreased from 1.8% to 1.2%. This is a negative result despite the fact that a decrease has been reported. this decline was 0.5% larger than expected. This year is not the best. After the record level in February, there were declines and sales were negative for several months. Speeches At 9:15 CET there were speeches from the old continent. Speakers were the German Buba President Nagel, member of German Buba Wuermeling and ECB's Enria. They probably spoke at 10:00 CET. Information provided in speeches that the focus is on closing inflation and thus on raising rates. At 10:30 CET, the SNB Gov Board Member Maechler also took the floor and thus gave instructions on Switzerland's moetary policy. At 11:00 CET a representative of the Bank of England also took the floor. The speaker was Huw Pill. His statement may turn out to be a signal for the motoring policy, and thus it may direct the pound's (GBP) situation in the present day. He is expected to speak again at 18:00 CET. Outside the European continent, a representative of the Reserve Bank of Australia (RBA) also spoke at 11:30 CET. The speaker was Governor Philip Lowe. As a key adviser to RBA board members, who decide short term interest rates, Lowe has considerable influence over the value of the Australian dollar. Traders scrutinize his public engagements for clues regarding future monetary policy. EU Retail Sales Retail sales figures from the European bloc were also published today. An improvement was expected in the monthly and in the annual shift. As a result of retail sales, y/y growth was expected from -2.0% to -1.3%. Also in the monthly change, the projected increase from -0.3% to 0.4%. The current readings are positive. The annual change in retail sales rose to 0.6%, and the monthly change met expectations. The current result in such a difficult economic situation is interpreted as a slight improvement, i.e. a positive report. Summary 1:30 CET Japan Household Spending 2:01 CET BRC Retail Sales Monitor 9:15 CET German Buba President Nagel Speaks 9:15 CET German Buba Wuermeling Speaks 9:15 CET ECB's Enria Speaks 10:30 CET SNB Gov Board Member Maechler Speaks 11:00 CET BoE MPC Member Pill Speaks 11:30 CET RBA Governor Lowe Speaks 12:30 CET EU Retail Sales (MoM) (Sep) 18:00 CET BoE MPC Member Pill Speaks Although there were no important reports today, one should watch the following days. Source: https://www.investing.com/economic-calendar/
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

High Inflation, The Aggressive Fed And Geopolitical Uncertainty Increases The Likelihood Of A US Recession

InstaForex Analysis InstaForex Analysis 09.11.2022 08:15
In my previous reviews, I pointed out that the wave structures of the two instruments I analyze daily were about to see the completion of the ascending sections of the trend. These sections will comprise 5 waves, and they won't be impulse ones. This is the most likely scenario because demand for the dollar may soar in the near term. Let's now analyze possible reasons for a stronger greenback. Future decisions This article is mostly about Goldman Sachs Group. Its analysts have downgraded their forecasts for EUR to $0.94 from $0.97 for the coming three months. In the course of its latest fall, the instrument approached $0.95. Given the latest forecast, we may expect the descending section of the trend to resume its formation or a new section to build up. According to Goldman Sachs, having a floating target, the US Federal Reserve may raise interest rates to 5% by March 2023, with one increase of 0.50% and two increases of 0.25%. Meanwhile, other central banks, including the Bank of England and the ECB, won't have any floating targets. Therefore, monetary policy divergence may deepen towards the US dollar. Economic growth in the United States In addition, Goldman Sachs says there is a 35% probability of the United States entering a recession in the coming 12 months, citing high inflation, the aggressive Federal Reserve, and geopolitical uncertainty. The company underlined that its forecast is more optimistic compared to the outlooks from other firms and banks because it foresees a realistic scenario of an economic path from high inflation to low inflation and without a recession. Economic growth in the United States is expected to fall below the trend line but remain above zero. The balance in the labor market is likely to be restored, and unemployment growth to be limited. The euro and the pound If it is an accurate forecast, the US economy is unlikely to get hurt badly. If a recession is weak and inflation gets back to 2% rather fast, there will be still no reason for an increase in demand for the dollar because analysts do not expect an easy path for the European or British economy. BoE Governor Bailey announced the British economy entered a recession in the third quarter, which may last for 2 years. Meanwhile, the ECB will hardly lift interest rates to 5% because the European Union is not a single country but a union of nations in different financial situations. Some countries will survive high rates painlessly, some may need economic support for quite a long time. By economic aid, we mean new allocations and stimulus programs, and this is something the ECB would like to avoid. Thus, the dollar again looks more promising than the euro and the pound. The sum up Based on the analysis, we may anticipate that the formation of the ascending trend section will become more complex and comprise up to five waves. It may be that the fifth wave of this section is now building up. Therefore, consider buying with targets located above the peak of wave c, based on the reversals of the MACD to the upside. The entire section of the trend after September 28th now has the a-b-c-d-e structure. However, once it is complete, the formation of a new downtrend section may begin.     Relevance up to 05:00 2022-11-10 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/326596
Technical Analysis Of The EUR/USD Pair By Jakub Novak

Technical Analysis Of The EUR/USD Pair By Jakub Novak

InstaForex Analysis InstaForex Analysis 09.11.2022 08:24
Analysis of transactions in the EUR / USD pair The test of 0.9986 happened when the MACD line moved down quite a lot from zero, which limited the further downside potential of the pair. Some time later, another test took place, but this time the MACD line was in the oversold area, so the pair rose by about 35 pips. As for short positions at 1.0079, they led to losses. Although retail sales in the Euro area coincided with forecasts, the market was not affected in the morning. But by afternoon, euro shot up as the start of the US midterm elections weakened dollar's position due to the majority in Congress being taken by the Republicans Today, ECB member Frank Elderson is scheduled to speak, but it will be of little interest. There are also no important fundamental statistics, so the market will return to balance ahead of tomorrow's inflation data in the US. Statements by FOMC members John Williams and Thomas Barkin, along with US wholesale inventory changes, will also be of little interest. Only the next election results will lead to a surge in volatility. For long positions: Buy euro when the quote reaches 1.0088 (green line on the chart) and take profit at the price of 1.0141. But growth is unlikely to occur today, so be careful with buying at the highs. Nevertheless, remember that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0044, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.0088 and 1.0141. For short positions: Sell euro when the quote reaches 1.0044 (red line on the chart) and take profit at the price of 1.0004. Pressure will return after hawkish statements from Fed representatives and news on the midterm elections in the US. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0088, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.0044 and 1.0004. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Relevance up to 07:00 2022-11-10 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/326608
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The Bank Of England's Gloomy Outlook Should Undermine The Pound (GBP)

TeleTrade Comments TeleTrade Comments 09.11.2022 09:13
EURGBP lacks any firm intraday direction and remains confined in a narrow trading band. Talks for aggressive policy tightening by the ECB underpin the Euro and offers support. The BoE’s gloomy outlook could weigh on the British Pound and favour bullish traders. The EURGBP cross struggles to capitalize on the previous day's modest gains and oscillates in a narrow trading band, just above the 0.8700 mark through the early European session on Wednesday. Talks of a more aggressive policy tightening by the European Central Bank (ECB) continue to benefit the shared currency and offer support to the EURGBP cross. In fact, several ECB policymakers said that higher rates are needed for longer to bring down double-digit inflation in the Eurozone back to its 2% target. This, in turn, pushes the rate-sensitive two-year German bond yield to its highest since December 2008 and is seen acting as a tailwind for the Euro. The British Pound, on the other hand, draws support from the recent slump in the US Dollar and keeps a lid on the EURGBP cross. That said, the Bank of England's gloomy outlook for the UK economy should undermine the Sterling and supports prospects for some upside for the cross. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024 while indicating a lower terminal peak than is priced into markets. The fundamental backdrop suggests that the path of least resistance for the EURGBP cross is to the upside and any slide below the 0.8700 round figure could be seen as a buying opportunity. Bulls, however, might wait for a sustained strength beyond the 0.8775-0.8780 resistance zone before placing fresh bets amid absent relevant market-moving economic releases. The market focus now shifts to the release of the Preliminary UK Q3 GDP report on Friday.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The UK Demanding That The European Court Of Justice Be Stripped Of Its Role In Settling Brexit Disputes

InstaForex Analysis InstaForex Analysis 09.11.2022 12:09
UK and the European Union are rumored to be close to a major breakthrough in the months-long dispute over Northern Ireland's post-Brexit trading rules. Initially, the problem threatens a full-scale trade war, but the current crisis in which both regions experience record inflation seem to have made authorities do everything to find common ground. According to reports, the EU has begun testing the current UK database that tracks goods moving from the UK mainland to Northern Ireland. If they are satisfied with the system's performance, an agreement on customs checks in the Irish Sea may be signed. This recent upswing regarding negotiations allows Prime Minister Rishi Sunak's government to hope the deal will defuse tensions in the region and help the government resolve a number of problems. However, another key point to be addressed is the UK demanding that the European Court of Justice be stripped of its role in settling Brexit disputes in the region, which is not acceptable to the EU. The representative of the European Commission declined to comment on the progress of the talks, as did the British Foreign Office. Nevertheless, resolving the issue is beneficial as it would help correct supply chain disruptions and ease price pressures, especially if the Bank of England continues to increase rates at the current pace, which could push GDP down by up to 3.0% next year. GBP/USD In terms of GBP/USD, buyers are now focused on defending the support level of 1.1510 and breaking through the resistance level of 1.1590. This limits the upside potential as only a breakdown of 1.1590 will lead to a rise to 1.1690, 1.1730 and 1.1780. If pressure returns and sellers take control of 1.1510, the pair will drop to 1.1430 and 1.1360. EUR/USD In EUR/USD, sellers are not very active yet, so buyers have a chance to push the pair above 1.0090. A breakdown will spur growth to 1.0140, while a drop below 1.0030 will push euro back to 0.9970, 0.9920, 0.9880 and 0.9830.   Relevance up to 08:00 2022-11-10 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/326624
The Euro Will Probably Continue Its Upward Movement In The Near Future

The ECB Will Not Bring The Situation To A Critical Mass

InstaForex Analysis InstaForex Analysis 10.11.2022 08:44
On Wednesday, the EUR/USD currency pair began a new round of corrective movement while failing to update its previous local maximum. We've said before why this is important. If the previous highs are not updated, then there is no upward trend. Thus, a price reversal near the level of 1.0010 followed by a fall to the moving average line is very bad for the euro currency. However, we have already talked about the illogical growth of the pair in the last few days. We believe that the events of last week should have provoked a new powerful strengthening of the US currency, but not the growth of the European one. From our point of view, non-farms were strong enough, and the unemployment rate did not rise critically to sound the alarm and shout about a recession. Moreover, the recession itself may still be avoided. Some forecasts say the probability of its occurrence in the coming year is no more than 35%. And a year later, the Fed may already start lowering the key rate, which will slowly accelerate the economy again. Based on this, we believe the most logical development would be a new fall in the euro. Recall that Alan Greenspan, the former head of the Fed, believes that the US dollar will strengthen next year. Goldman Sachs lowered its 3-month forecast for the euro/dollar pair from 0.9700 to 0.9400. Thus, many significant experts do not believe that now the European currency will move to the formation of a long-term uptrend. We fully agree with this assessment because we also do not see how the euro can increase over a long distance. The Fed is not even thinking about stopping raising the rate yet, the ECB is unlikely to catch up with the Fed in terms of the rate level, and even these two factors alone suggest that the pair, at least, will not grow much and for a long time. Therefore, we believe that the decline will resume. Maybe it will no longer be large-scale and collapse, but the euro will not grow to 1.1000. Goldman Sachs forecast the Fed rate at 5%, but this may not be the limit. As mentioned above, almost all experts believe the Fed rate will continue to rise. The only question is to what level it will eventually grow. Recall that at the beginning of the year, the most "hawkish" member of the Fed monetary committee, James Bullard, spoke about raising the rate to 3.5%. Now no one doubts that the rate will rise to 4.75%, and some experts predict stronger growth. For example, Goldman Sachs economists believe the rate will rise to 5%. We believe that everything will depend on inflation. If it shows the same rate of slowdown as in the last two months, the Fed will receive the necessary grounds for further tightening monetary policy. Naturally, the higher the rate, the longer it will grow, and the more reason the dollar will continue to enjoy increased demand and strengthen against its competitors with lower rates. ECB head Christine Lagarde said last week that her department also intends to continue to fight high inflation. Still, in the case of the European regulator, it is unclear how far it can go in tightening monetary policy. We have already written earlier that not all EU countries can withstand the burden on the economy in the form of a 5% key rate. Most likely, the ECB will not bring the situation to a "critical mass." We believe that the ECB will stop somewhere in the middle to slow down inflation as much as possible, but at the same time, not bring the state of weak economies to a catastrophic state. This will mean that the rate will rise to a maximum of 4%, which is unlikely enough to return inflation to 2%. Therefore, the cost of borrowing will be more expensive in the United States, and bank deposits are also more profitable in the United States. You can make elementary money by taking a European loan and placing it on a deposit in the USA. This is a joke, but cash flows can continue to flow from Europe overseas. The average volatility of the euro/dollar currency pair over the last five trading days as of November 10 is 134 points and is characterized as "high." Thus, we expect the pair to move between 0.9897 and 1.0165 on Thursday. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement. Nearest support levels: S1 – 1.0010 S2 – 0.9888 S3 – 0.9766 Nearest resistance levels: R1 – 1.0132 R2 – 1.0254 R3 – 1.0376 Trading Recommendations: The EUR/USD pair continues to be located above the moving average. Thus, now we should consider new long positions with targets of 1.0132 and 1.0165 in the case of a reversal of the Heiken Ashi indicator upwards. Sales will become relevant again no earlier than fixing the price below the moving average line with targets of 0.9888 and 0.9766. Explanations of the illustrations: Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.   Relevance up to 01:00 2022-11-11 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/326707
Bank of England survey highlights easing price pressures

The UK Central Bank (BoE) Expects A Recession To Last For All Of 2023

TeleTrade Comments TeleTrade Comments 10.11.2022 09:51
EURGBP lacks any firm intraday direction and oscillates in a range on Thursday. A combination of factors, however, continues to act as a tailwind for the cross. Talks for aggressive tightening by the ECB underpin the Euro and offers support. The BoE’s bleak outlook for the UK economy supports prospects for further gains. The EURGBP cross is seen oscillating in a range, around the 0.8800 round-figure mark through the early European session and consolidating the overnight strong gains to a nearly one-month high. The Bank of England's gloomy outlook for the UK economy turns out to be a key factor behind the British Pound's relative underperformance and acts as a tailwind for the EURGBP cross. In fact, the UK central bank expects a recession to last for all of 2023 and the first half of 2024. Moreover, the BoE last week indicated a lower terminal peak than was priced into the markets. The shared currency, on the other hand, continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). Several ECB policymakers, including President Christine Lagarde, indicated that the central bank will keep raising rates aggressively to tackle red-hot consumer inflation, which accelerated to a record high of 10.7% in October. This, in turn, pushed Germany’s short-dated yields to fresh multi-year highs earlier this week and adds credence to the near-term positive bias for the EURGBP cross. Even from a technical perspective, the previous day's sustained move and acceptance above the 0.8775-0.8780 supply zone support prospects for an extension of a nearly three-week-old uptrend. There isn't any major market-moving economic data due for release on Thursday, either from the Eurozone or the UK. Hence, the focus remains on the Preliminary UK Q3 GDP print on Friday. Investors will also look forward to British Finance Minister Jeremy Hunt's fiscal statement on November 17. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders.
Positive Shift in Inflation Structure: Core Inflation Falls in Hungary

RICS House Price Balance Is Below Zero | Inflation Data From Both Americas Are Ahead

Kamila Szypuła Kamila Szypuła 10.11.2022 11:30
Today there are no major economic events than the result of the US CPI report. In addition, there will be important speeches by members of the FOMC and other central banks, including the Bank of England of Canada. RICS House Price Balance The Royal Institution of Chartered Surveyors (RICS) House Price Balance was published early in the day. The result showed that the index fell sharply below zero. The current reading is at -2%. A drop from 30% to 20% was forecast, but the current figure has turned out to be more drastic. This means that house prices in the designated area have dropped drastically. There has been a decline in prices since May, and the present one signifies a significant deepening of this trend. The first speeches The first speech of the day took place at 2:45 CET. The speaker was Michele Bullock serves as an Assistant Governor of the Reserve Bank of Australia (RBA). The next speech was from America. Fed member Christopher J. Waller spoke at 9:00 CET More speeches Ahead Today also representatives of European banks will take the floor. Andrea Maechler serves as Governing Board Member of the Swiss National Bank (SNB) is set to speak at 14:30 CET. At the same time will be speak Andrea Enria, Chair of Supervisory Board of the European Central Bank. Speech by representatives of the Bank of England is scheduled for 15:00 CET and 15:10 CET. Speakers in turn: David Ramsden, Deputy Governor of the Bank of England and Silvana Tenreyro, a member of the Monetary Policy Committee (MPC). Another Fed speech and one from the Bank of Canada are also planned. Bank of Canada Member Governor Tiff Macklem will speak at 6:50 PM CET. After the published reports, the following will speak: Federal Reserve Bank of Philadelphia President Patrick Harker, Federal Open Market Committee (FOMC) Member Mester and Federal Reserve Bank of Kansas City President Esther George. All speeches can provide valuable information about the future of monetary policy actions of the banks concerned. ECB Economic Bulletin At 11:00 CET the ECB published a Bulletin. The Economic Bulletin provides a comprehensive analysis of economic and monetary developments and interim updates on key indicators. Which can help investors to assess the future development of this region, as well as summarize the effectiveness of ECB's work South Africa Manufacturing Production Today, South Africa will also publish a report on Manufacturing Production. The shift from Y / Y of output produced by manufacturers is forecast to decline from 1.4% to -2.4%. A smaller index in this sector may indicate serious problems which the country's economy is struggling with, which will hinder the growth. Brazil CPI Brazil as well as the United States will publish inflation data. In South America's largest economy, Y/Y inflation is expected to decline from 7.17% to 6.34%. It is very likely as the CPI has been in a downward trend since July. Meanwhile, the CPI m/m is expected to increase from -0.29% to 0.48%. US CPI Expectations for US inflation are positive. Slightly dropping is expected. Read more: Inflation In The USA Has A Chance Of Cooler| FXMAG.COM Initial Jobless Claims The number of individuals who filed for unemployment insurance for the first time during the past week is expected to increase by 3K weekly report. The last reading was at 217K and it was a positive reading as the level persisted for another week and the forecasts will increase to 220K. At 15:30 CET it will turn out if the reading is positive this time. Summary: 2:01 CET RICS House Price Balance 2:45 CET South Africa Assist Gov Bullock Speaks 9:00 CET Fed Waller Speaks 11:00 CET ECB Economic Bulletin 13:00 CET RPA Manufacturing Production 14:00 CET Brazil CPI 14:30 CET SNB Gov Board Member Maechler Speaks 14:30 CET ECB's Enria Speaks 15:00 CET MPC Member Ramsden Speaks 15:10 CET MPC Member Tenreyro Speaks 15:30 CET US CPI 15:30 CET Initial Jobless Claims 16:00 CET FOMC Member Harker Speaks 18:50 CET BoC Gov Macklem Speaks 19:30 CET FOMC Member Mester Speaks 20:30 CET FOMC Member George Speaks Source: https://www.investing.com/economic-calendar/
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

The ECB May Need To Hike More Than Markets Expect

ING Economics ING Economics 10.11.2022 13:19
US CPI readings have had a habit of disappointing, and markets' stronger footing into the release and an ongoing preoccupation with a 'pivot'-narrative make it look more susceptible to such an outcome. In any case, Fed officials may see little reason yet to signal less tightening on aggregate given inflation is still wide of the mark In this article One slower inflation print may not yet mean the Fed will want to signal less tightening in sum ECB sticks with hawkish tones Today's events and market view One slower inflation print may not yet mean the Fed will want to signal less tightening in sum The US October CPI will be today’s main flashpoint. The consensus is for headline inflation to slow to 7.9% and the core rate to ease to 6.5%. The main focus should be on the month-on-month core rate, which is seen ticking down to 0.5% from 0.6%. Mind you, readings closer to 0.2% is what would be needed to bring the rate closer to the Fed’s 2% target, so anything we will see today will still signal central bankers that they are wide off the mark. Today will still signal to central bankers that they are wide of the mark     But coming in the wake of the Fed signalling the possibility of decelerating its tightening pace from December onwards, there is a good chance that markets will extrapolate this from today’s data. A reading in line with consensus should further strengthen expectations for a 50bp hike in December, which is what the market is currently leaning towards, with a 57bp increase discounted in the OIS forwards. The cautionary tale is that inflation data has had a habit of surprising with higher readings. Markets have been trading stronger going into today’s reading with 10Y Treasury yields dipping towards 4.05% yesterday, which could increase the impact of a disappointing inflation reading. However, we have the feeling that the market may still be too absorbed with the notion of a potential pivot. There are good reasons to slow the pace of tightening not least given policy lags involved after a phase of catching up. That does not mean that the Fed will want to signal that it is doing less tightening in sum. This should not be the case unless there is more compelling evidence of inflation being on a trajectory to return to target.       US yields off their highs means a high CPI would be most impactful for markets Source:Refinitiv, ING ECB sticks with hawkish tones The European Central Bank has shown its willingness to keep its hawkish stance even in light of growth risks. At the hawkish end, Belgium’s Pierre Wunsch stated the ECB may need to hike more than markets expect if the economic downturn remained mild. Such hawkish signalling might be motivated by real rates having failed to rebound from their late October slump. The ECB’s consumer expectations survey contained little to cheer about for the ECB To be sure, the ECB’s consumer expectations survey contained little to cheer about for the ECB and its efforts to tackle inflation. Near-term price expectations over the 12-month horizon increased a little to 5.1%, while longer run inflation expectations over the 3-year horizon remained unchanged at 3%. Uncertainty over the outlook remained elevated. At the same time expectations of economic growth deteriorated markedly. The fall in real rate is a concern with inflation expectations rising Source: Refinitiv, ING Today's events and market view Rates markets appear to be trading on the front foot going into today's US CPI report. But the backdrop is still one where the appetite to take on duration risk appears to be limited. At least this is what the disappointing metrics of yesterday's 10Y US Treasuty auction suggest and we think the risks are skewed towards a larger move on the back of a disappointing inflation reading. Note that today the US Treasury will also follow up with a 30Y auction, and such long duration supply could well extend a push towards higher yields. A number of Fed officials are scheduled to speak after the CPI release, including the Fed's Daly, Mester and George. Other US data to watch are the initial jobless claims that should still point to a relatively robust labour market. In the eurozone the focus should be on ECB comments with Isabel Schnabel scheduled to speak in the afternoon. TagsRates Daily
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Inflation Running Well Above The Fed’s Desired Level

ING Economics ING Economics 12.11.2022 08:01
Primed for pivot, the market has rallied on the US CPI surprise. Fed officials have started to push back against the premature easing of financial conditions, but timing is especially inconvenient for the European Central Bank, which is still seeing greater risk of deanchoring inflation expectations  In this article Market runs with the CPI and is tailed by the Fed's hawks Spill-over of easing financial conditions comes at an inconvenient time for the ECB More signs that collateral scarcity is also on the ECB's mind Today’s events and market views We have published our Rates Outlook 2023: Belt up, we are going down: After a horrific 2022, bond markets can look forward to improving returns helped by a higher starting running yield, and subsequent falls in market rates. Brace for a reduction in central bank liquidity, more bonds supply and lingering systemic concerns as key themes, too.   Market runs with the CPI and is tailed by the Fed's hawks For once the US CPI release broke with the bad habit of surprising to the upside. And the market was quick to jump on the ‘pivot’-bandwagon, with a larger Fed hike of 75bp for December now seen off the table, and if anything it now seems that the market is shifting to discussing whether it could be 25bp rather than 50bp next month. The terminal rate that the Fed is seen reaching has slipped to 4.87%. Just after the last Fed meeting this had stood as high as 5.15%. Risk assets rallied on the prospect of slowing inflation and the Fed turning less aggressive.  At first Fed officials were quick to push back against the markets optimism The first Fed officials were quick to push back against the markets optimism. The data was better than expected, yet it is but one reading and the month-on-month core rate of 0.3% is still signaling inflation running well above the Fed’s desired level. While encouraged by the data the Fed’s Mester still saw greater risk in tightening too little than too much, Logan and George reiterated  that the Fed had more work to do. While the Fed may well move on to a slower pace of tightening also to better assess the impact of previous rapid rate increases, it may not want to signal that it is doing less overall. In fact, rallying equity markets and lower market yields easing financial conditions is probably not what it wants to see at this stage already without having more clarity where inflation is actually headed. The lower CPI print was greeted by lower nominal and real yields Source: Refinitiv, ING Spill-over of easing financial conditions comes at an inconvenient time for the ECB The read across from US markets saw the 10Y Bund yield falling to 2%, coincidentally the lowest level since just after the October ECB meeting. Terminal rate pricing for the ECB also slipped to 2.87% from above 3% previously. The ECB, however, does not even have the comfort of having at least one set of encouraging data with regards to inflation that could justify easing financial conditions, which may explain why we have had the ECB hawks becoming more vocal yesterday. We had highlighted the ECB’s consumer survey pointing to elevated if not slightly higher inflation expectations. The ECB’s Schnabel picked up on the higher persistence of inflation in her talk yesterday, while pointing out that the risk of inflation expectations deanchoring remains. There is no time for complacency and rates will likely have to move into restrictive territory to rein in inflation. Neutral won't cut it, even as the probability of a recession in the euro area increases. More signs that collateral scarcity is also on the ECB's mind On a more technical matter concerning collateral scarcity, the ECB announced yesterday that it was raising its limit of lending against cash collateral from €150bn to €250bn. Schnabel commented in a tweet that this was a precautionary measure ahead of year-end. Indeed when looking at the daily data through September, daily lending against cash never exceeded €100bn, which should be testament to the rather expensive conditions of this facility. But markets are also going into the upcoming year-end from an already much more strained starting point, so this increased backstop should be taken as a positive signal and further acknowledgement that the ECB is heeding market concerns. Daily ECB securities lending has not run into its cap Source: ECB, ING Today’s events and market views The post CPI gains in bond markets may persist for a while despite some pushback from Fed officials. The US holidays might induce some calm into overall markets allowing also risk assets to bask in the sentiment lift from improving inflation for a little while. Alongside positive news out of China that could limite the further downside in rates. This is not without risks, though. Today will still see the University of Michigan consumer confidence including its measure of surveyed inflation expectations. Longer run expectations are seen stable, while shorter run 1Y inflation expectations are seen ticking up a tad. In the eurozone we will see another busy slate of ECB speakers, though this time around with representatives from both ends of the dove-hawk spectrum. Among others look out for Holzmann, Lane, Panetta and de Guindos. Also keep an eye on the release of the European Commission economic forecasts. In primary markets Italy will be active auctioning a new 7Y bonds and tapping a 3Y bond as well as a 12Y green bond, in total for up to €8.75bn.      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
Economic Calendar Details and Trading Analysis - August 7 & 8

In India Headline Inflation Is Expected To Ease | How Quickly Growth Is Slowing In Europe

Craig Erlam Craig Erlam 12.11.2022 08:29
US After a round of soft inflation data triggered a buy-everything relief rally, Wall Street will focus on Fed speak and a plethora of data points that might show the economy remains resilient.  The key economic readings include manufacturing activity, retail sales, and housing data. There will be no shortage of appearances by the Fed this week. Brainard and Williams speak on Monday, while Tuesday includes speeches by Harker, Cook, and Barr. Wednesday brings Williams, Barr, and Waller, and on Thursday we will hear from Bullard, Bowman, Mester, Jefferson, and Kashkari. In addition to a swathe of economic releases, traders will also closely monitor big retail earnings from Walmart, Target, Macy’s, and Kohl’s. We should learn more about the health of the consumer and if we should expect a further easing of prices as we enter the holiday season. EU  It’s a relatively quiet week for the EU with the two standout economic releases being flash GDP and final HICP. With the economy facing a recession, the GDP data will be an interesting insight into how quickly growth is slowing going into an uncertain winter. The inflation data will naturally be of interest but it may take a significant revision to really grab investors’ attention. UK The Autumn statement has been a long time coming, it feels. The markets have calmed down a lot since the ridiculous mini-budget but it will still take time for the government to regain credibility and the confidence of the markets. It starts next week and all eyes will be on Parliament as we learn how the new government plans to balance the books while not piling more misery on the economy. The BoE monetary policy report hearing next week is another highlight but there’s also a lot of economic data due. The path for interest rates remains uncertain so it’s not just what policymakers have to say that matters, it’s whether the data allows them to slow the pace of tightening going forward as they so clearly want to do. CPI on Thursday is the obvious highlight but there’s plenty more throughout the week. Russia A quiet week with no economic data of note. South Africa Another quiet week with the only economic release being retail sales on Wednesday. Turkey No major economic releases next week, with investors still focused on the central bank and inflation. Switzerland Tier three data dominate next week. Focus remains on what the SNB will do in December, with Chair Jordan acknowledging on Friday that monetary policy isn’t restrictive enough to bring inflation back into the range of price stability over the medium term. The risk of a pre-meeting rate hike remains. China Weeks of speculation around China’s commitment to its zero-Covid policy have spurred a recovery in local stocks and we may be about to get more information on what that will entail. A relaxation of quarantine measures has been announced in recent days and a press briefing is now reportedly scheduled for Saturday. At the same time, China is seeing a steady rise in Covid cases resulting in more restrictions and mass testing.  China’s October retail sales, industrial production, and investment data will be released next week.  The PBOC is also expected to keep its one-year medium-term lending facility rate at 2.75% in November.   India A key inflation report could show pricing pressures are easing which might allow the RBI to be less aggressive with its tightening path.  Headline inflation is expected to ease from 7.4% to 6.7%.    Australia & New Zealand The focus for both Australia and New Zealand might stay on China and their weakening outlook due to their struggles with COVID.  Australian employment data is expected to show job growth continues, while unemployment remains at 3.5%. Wage pressures in the third quarter are expected to rise, but some of that is attributed to the increase in the minimum wage.    In New Zealand house sales data and producer prices will be released. Japan Japan’s third-quarter GDP reading is expected to show significant weakness as import costs skyrocketed.  Japan’s core inflation is also expected to surge from 3.0% to 3.5%, which should clearly weigh on consumer spending.  Given the weakness in the US dollar, the BOJ might save its ammunition and hold off intervening anymore in the foreign exchange market. Singapore It is expected to be a quiet week with the exception of non-oil domestic export data.   Economic Calendar Sunday, Nov. 13 Economic Data/Events China medium-term lending The ASEAN summit concludes in Cambodia. Monday, Nov. 14 Economic Data/Events Eurozone industrial production India trade, CPI, wholesale prices New Zealand performance services index Fed’s Williams moderates a panel at the Economic Club of New York ECB’s Fabio Panetta speaks in Florence ECB’s de Guindos speaks in Frankfurt. BOJ announces the outright purchase amount of Japanese government securities Tuesday, Nov. 15 Economic Data/Events US empire manufacturing, PPI France CPI Poland CPI  Eurozone GDP Hungary GDP Canada existing home sales China retail sales, industrial production, surveyed jobless France unemployment Germany ZEW survey expectations Japan industrial production, GDP Mexico international reserves New Zealand home sales, net migration South Korea export/import price index, money supply UK jobless claims, unemployment G-20 summit in Bali IEA monthly oil market report ECB’s Elderson speaks Fed’s Harker speaks at GIC Annual Monetary & Trade Conference Former US President Trump is due to make an announcement in Florida RBA releases minutes of its November interest rate meeting Wednesday, Nov. 16 Economic Data/Events US business inventories, cross-border investment, retail sales, industrial production Australia leading index Canada CPI, housing starts China property prices Israel GDP Italy CPI Japan machinery orders, tertiary index, department store sales Philippines Bloomberg economic survey Russia GDP South Africa retail sales UK CPI EIA crude oil inventory report G-20 summit in Bali BOE Gov Bailey appears before the Treasury committee   Fed’s Williams and Brainard, SEC’s Gensler speak at the 2022 Treasury Market conference ECB Financial Stability Review ECB President Lagarde speaks ECB’s Fabio Panetta speaks Thursday, Nov. 17 Economic Data/Events US housing starts, initial jobless claims Italy trade Singapore trade Australia unemployment China Swift payments Eurozone CPI, new car registrations Hong Kong jobless rate Japan exports, trade balance New Zealand PPI Singapore non-oil exports UK fiscal statement, economic forecasts Fed’s Kashkari and Jefferson speak at the Federal Reserve Bank of Minneapolis Fall Institute Research Conference Fed’s Mester speaks at the Federal Reserve Bank of Cleveland and the Office of Financial Research Annual Financial Stability Conference Fed’s Evans speaks ahead of his retirement BOE’s Silvana Tenreyro speaks SNB’s Maechler speaks at Money Market Event in Geneva BOE’s Huw Pill speaks at the Bristol Festival of Economics on ‘What Next for Central Banks’ Friday, Nov. 18 Economic Data/Events US Conference Board leading index, existing home sales Norway GDP Japan CPI Thailand foreign reserves, forward contracts, car sales ECB President Lagarde, Nagel, and Knot speak alongside BOE’s Mann Fed’s Collins speaks at the Federal Reserve Bank of Boston Economic Conference BOE’s Jonathan Haskel speaks Sovereign Rating Updates Italy (Fitch) Sweden (Fitch) Turkey (Fitch) Ireland (S&P) South Africa (S&P) Portugal (Moody’s) South Africa (Moody’s) Denmark (DBRS) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

Forecast For The Eurozone Are Not Optimistic, Inflation Can Reach A Record High

Kamila Szypuła Kamila Szypuła 12.11.2022 10:40
The euro zone has been battling against surging inflation for about a year, with Russia’s invasion of Ukraine accentuating those inflationary pressures. The European Central Bank has meanwhile raised interest rates three times this year to tackle the rising prices. Expectations According to the autumn economic forecast of the European Commission, in the last quarter of 2022, the euro area and most EU countries will be in economic recession. Prices are expected to fall in 2023, but inflation is projected to remain at 7% in the EU and 6.1% in the euro area before falling to 3% in the EU and 2.6% in the euro area in 2024 r. The EU forecast was based on the assumption that geopolitical tensions, such as the war in Ukraine, would not normalize or escalate and sanctions against Russia would remain in place. EU labour markets are expected to react to the slowing economy. Unemployment rates in the EU were projected to be at 6.2% in 2022, 6.5% in 2023, and 6.4% in 2024. GDP growth will be around just 0.3% in the EU and euro area in 2023, the European Commission predicted. Inflation The new percentages were revised up from the European Commission's last economic outlook, which predicted that inflation would reach an average of 7.6% in the eurozone this year and 8.3% in the EU. Inflation in the eurozone reached a record high. Eurozone inflation is expected to hit a new record high of 10.7% in October. Eurostat's October estimates predict that the prices of food, alcohol and tobacco, non-energy industrial goods and services will rise from August and September, when annual euro area inflation was expected to be 9.1 percent and 9.9 percent respectively. Official figures will be released on Thursday, November 17 Energy prices were again the main driver of inflation with a 41.9% increase year-on-year, compared with 40.7% in September and 38.6% in August. Euro area #inflation up to 10.7% in October 2022: energy +41.9%, food, alcohol & tobacco +13.1%, other goods +6.0%, services +4.4% - flash estimate https://t.co/b9t9sOMDLM pic.twitter.com/NbsakF4eVe — EU_Eurostat (@EU_Eurostat) October 31, 2022 Every corner of the continent is facing rising prices and the expected economic recovery in Europe after the coronavirus pandemic is hampered by a number of factors. The Baltic countries remain the hardest hit, with annual inflation above 20%. Estonia leads in comparison with estimates of 22.4%. This is mainly because they are particularly vulnerable to fluctuations in the energy markets. According to Eurostat, the price of natural gas for households increased by 154% and 110% respectively in Estonia and Lithuania between the first half of 2021 and the first half of this year. Meanwhile, France maintained its position as the country least affected by the crisis, although annual inflation in October was 7.1%. The European Central Bank (ECB) raised interest rates Central banks use their interest rates to make money more expensive or cheaper to increase or reduce spending as they directly affect the interest rates offered to households and businesses by commercial banks. Following in the footsteps of its counterparts elsewhere in the world, in July the European Central Bank (ECB) raised interest rates for the first time in 11 years by more than expected as it pursues persistently high inflation. This was followed by another record rate hike in September, raising new questions about whether the rush to increase credit costs and keep inflation in check will plunge major economies into recession. On October 27, the ECB raised interest rates again, increasing the deposit rate by another 75 basis points to 1.5 percent. – the highest level in over a decade. Further such increases are expected in the coming months as "inflation remains far too high and will remain above the [2%] target in the extended version." Source: ec.europa.eu/eurostat/en
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

Much Lower Front-End ECB Rates Is Flimsy In Our View

ING Economics ING Economics 13.11.2022 09:43
Recession will weigh on EUR rates in 2023 but Bund yields dipping below 2% is not a normal state of play. Balance sheet reduction at the European Central Bank will bring a new round of tightening even after hikes stop In this article The inflation peak is not certain, and rates are already low Chipping away at the reasons for structurally low rates Curve inversion is still ahead of us The inflation peak is not certain, and rates are already low 2022 has brought the end of negative interest rate policy (NIRP) and of expanding ECB balance sheet. In 2023, the challenge for markets will be how to deal with contradictory inflation and growth signals. Our economists sit at the more pessimistic end of the growth spectrum in their 2023 forecasts, and there are signs that the ECB is moving in the same direction, albeit slowly. The first order of business in 2023 should be to see tangible signs that inflation is actually on a declining path. Markets have been disappointed in the past. 2% in 10y Bund yields is already low when compared to our (below consensus) call for a 2.25% terminal deposit rate We think this should eventually push EUR rates down further, but one has to be realistic. 2% in 10yr Bund yields is already low when compared to our (below consensus) call for a 2.25% terminal deposit rate. This is all the more true given that financial conditions will tighten further due to a shrinking ECB balance sheet even after the ECB stops its hiking cycle. A dip below 2% should be a temporary one for 10yr Bunds and one we can only justify with significant assistance from declining dollar rates in 2023. The ECB has reduced the amount of German debt in circulation to record lows Source: ECB, Refinitiv, ING Chipping away at the reasons for structurally low rates The low EUR rates story has been a structural one since the global financial crisis of 2008. The low growth and perma-crisis environment resulted in ever-lower interest rates, enforced by the ECB’s NIRP and ever-growing balance sheet. Another feature of the post-GFC world was a single-minded commitment to fiscal austerity, which contributed greatly to the scarcity of German government bonds. Some, but not all, of these drivers are now going into reverse. Take austerity, the energy crisis and growing pressure to shield consumers from its effects have tipped the scales in favour of greater issuance. The ECB is also cautiously dipping its toe into the quantitative tightening shark tank. Both processes will be gradual indeed, and fraught with risks, but they are chipping away at the main technical driver for structurally low rates in the eurozone. We could see 10yr EUR swap rates (vs Euribor) dip towards 2.5% 10yr swap rates, which at times this year have been more than 100bp above Bund yields, are less sensitive to these factors but are not entirely insulated from them. Worse still, a new round of upward pressure on rates will come from shrinking excess liquidity and rising Euribor (and eventually Estr) fixings relative to the ECB deposit rate. At a push, we could see 10yr EUR swap rates (vs Euribor) dip towards 2.5% in the course of 2023 but we expect a jump back towards 3% by the end of 2024. The EUR curve should invert mildly in 2023 Source: Refinitiv, ING Curve inversion is still ahead of us Persistent inflation, and so uncertainty about the path of policy rates, should prevent front-end rates from dipping much below their 2022 levels in 2023. This should be mostly true in the first half of 2023. A corollary to our below-consensus call for a 2.25% peak in the ECB deposit rate is that the end of this hiking cycle shouldn’t be followed by much easing, unlike what our US colleagues expect. This means that the case for much lower front-end rates is flimsy in our view, and we’re expecting 2yr swaps to remain within their late 2022 range in 2023. After a shallow inversion of EUR swap 2s10s towards -15bp, we expect the re-steepening process to begin by 2024 Where the read across from US to European rates is relevant is at the back end. A meaningful drop in Treasury yields will bring 10yr Bund yields through 2% and 10yr EUR swap rates potentially as low as 2.5%. This dynamic will come at a time of worsening recession in Europe but, as the economy recovers, so will the term premia on the curve. After a shallow inversion of EUR swap 2s10s towards -15bp, we expect the re-steepening process to begin by 2024.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsOutlook Interest Rates ECB   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
Nasdaq 100 Underperforms and Faces Key Resistance - Technical Analysis and Market Outlook

Markets Are Left More Susceptible To Credit Events

ING Economics ING Economics 13.11.2022 10:00
The rapid tightening of monetary policy and significant outlook uncertainty is straining the system and testing the markets' capacity to absorb risks. The UK has shown how sketchy market liquidity can quickly lead to a solvency issue. Central bank ambitions to tighten could be frustrated if confronted with material pressure on the system In this article The financial system is vulnerable amid deteriorating market liquidity From home grown risks ... ... to outside triggers Suppression of money market risks about to fade The financial system is vulnerable amid deteriorating market liquidity As we approach the start of a new year, markets remain in a fragile state. At its foundation is the issue of market liquidity. Many of the common indicators of market liquidity are now at worse levels than they were at the peak of the Covid-19 pandemic. Take bid-offer spreads for government bonds, the go-to safe and supposedly most liquid of assets, which still reside at exceptionally wide levels. High realised and implied market volatility, while also an effect of central banks moving into action and a sign of the uncertainty surrounding the outlook, are straining the market’s capacity to absorb risk and lead to higher costs for market making. Wider gilt bid-offer spreads show that markets are increasingly dysfunctional Source: Refinitiv, ING   A liquidity problem can quickly morph into a solvency issue. This is what the UK recently experienced when the government’s expansionary fiscal plans sent shockwaves through gilt markets. Fears of higher issuance and a more hawkish Bank of England (BoE) reaction sent rates higher, but it was the pension funds' leveraged positions and ensuing margin calls that led to the situation spiralling out of control, eventually forcing the BoE to step in with purchases of long-end gilts, as well as forcing it to revisit fiscal plans.    From home grown risks ... On the back of the UK experience, the fiscal factor has received more attention as a potential trigger of market moves that could eventually put market liquidity to the test. The initial impact on rates can work via the sheer supply and credit channel, but currently also via the anticipated central bank response if the fiscal developments are seen to have a clear inflationary effect. A fiscal trigger for sudden moves may look less likely in the euro area and US political setups ... Substantial government programmes to support economies in light of surging energy prices have been set up or at least flagged in the euro area. One would think that the political decision process in the euro area – as well as in the US – as an aggregate makes the central bank response channel a trigger for sudden repricing less likely than what was witnessed in the UK. But if the economic slump deepens and another winter with potentially limited energy supply looms, one cannot exclude markets starting to focus on fiscal sustainability again. Euro sovereign spreads remain a cause for concern, but are holding up better than expected Source: Refinitiv, ING   This happens against the backdrop of central banks running down their balance sheets, leading to an increased net government debt supply that private investors will have to absorb. The Federal Reserve has been in the process of quantitative tightening (QT) for some time, the BoE just started this November – with the notable hiccup in gilt markets surrounding the pension funds – and the European Central Bank (ECB) is slated to begin in 2023. ... but sovereign debt crisis fears still linger amid ECB quantitative tightening It seems obvious to look at government bond auction metrics which have already suffered, though those are also a reflection of a limited desire for duration risk rather than the credit itself. However, with a view to the eurozone and its experience of the 2012 sovereign debt crisis burnt into collective memory, it is not too hard to imagine how a combination of political choices and geopolitical events could again sour investor confidence. The ECB has put in place a backstop – the Transmission Protection Mechanism – but being tied to conditionalities, its effectiveness could be blunted. ... to outside triggers Of the outside factors that could put the financial system’s capabilities to the test, geopolitical risks are one of the more obvious given the ongoing conflict in Ukraine. A sudden escalation, and in particular an immediate impact on energy prices, could put central banks in a tough spot as their inflation goals move further into the distance, requiring more forceful action while the economic backdrop takes a heavy blow, further straining public and private finances. One of the outside risk factors, however, relates to the policies of the Bank of Japan (BoJ) which so far has been an outlier amid the global charge of central banks tightening their policy reins. Importantly, the BoJ is conducting purchases at the long end of the Japanese government bond curve to cap yields. Any sign of the BoJ yield curve control ending could have large knock-on effects on yields outside of Japan. It could trigger another large and potentially sudden hike in global bond yields. Markets are already eying the end of the current BoJ governor’s (Haruhiko Kuroda) term in April 2023. Stable markets are no longer an argument for owning fixed income   Source: Refinitiv, ING Suppression of money market risks about to fade Money markets can be viewed as the plumbing of financial markets, which is also the reason why we have seen central banks acting quickly to intervene here in the past. We are still seeing the effects of this in the high levels of excess reserves within the banking system and the compression of money market spreads. The blanket provision of excess reserves is no longer compatible with the goal of tackling inflation But this suppression of risks is bound to be scaled back as the blanket provision of excess reserves is no longer seen as compatible with the broader policy goal of tackling inflation. Markets are left more susceptible to credit events or sudden dashes for liquidity.   For instance, the term funding provided to banks by the ECB via the targeted longer-term refinancing operations (TLTROs) and the excess of reserves flooding the system has led to a compression of Euribor rates over the risk-free 3m ESTR swap, a spread that has traditionally served as a measure of risks embedded in the banking system. In the United States, one indicator that we like to monitor is where banks print 3-month commercial paper as a spread over the risk-free rate (3mth term SOFR). It’s a simple measure of how easy it is for banks to fund themselves in the short-term market. Currently, this spread is at around 30bp (and European banks are printing at 50-60bp). That’s far wider than it was, but not yet enough to cause any material consternation.   The scaling back of central bank support is adding to the uncertainty investors are already facing as markets are perceived to be more prone to the materialisation of systemic risks, and the UK is considered a warning shot. The implication should be that risk measures can stay elevated or may even have to rise further. The above are only a selection, but it is especially relevant to monitor systemic risk measures while central banks are still tightening policies, in the sense that ambitions to do so will be frustrated if confronted with material negative pressure on the system. Anything that threatens to take the system down, or to risk doing so, is therefore out of the question. It’s also relevant as we progress through the 2023 slowdown/recession period, as any deep recession can pressure the system, as defaults can rocket. In that sense, it can act to accelerate a transition back to interest rate cuts. As such systemic risks could be a more credible reason for a “material pivot” than recessionary fears. After all, tighter policies from central banks are designed to slow growth and tend to accept the risk of recession. But what central banks can’t accept is any threat to the functioning of the system. No need to panic yet, but this is what we really need to be cognisant of.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsRates 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
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

The Bank of England Is Well Advanced On The Way To Quantitative Tightening

ING Economics ING Economics 13.11.2022 10:03
Quantitative tightening and a reduction in central bank liquidity will add upward pressure to long rates. Money market rates were suppressed in 2022. In 2023, they will be free to reflect systemic risks In this article The age of quantitative tightening Counterintuitive and delayed effect on duration The age of quantitative tightening The Federal Reserve will continue to allow US$95bn of bonds per month to roll off its balance sheet over the course of 2023. At the end of 2022, the balance sheet will have shrunk by a little over US$0.5tn, and then a further US$1.1tn is scheduled to be rolled off by the end of 2023. That would be a cumulative reduction of over US$1.6tn if all goes to plan. One issue here, however, is the roll-off over the second half of 2023 would co-exist with interest rate cuts from the Fed. While these may seem at odds with one another, remember that balance sheet roll-off is not outright selling bonds (hard quantitative tightening), it’s just allowing the Fed’s balance sheet to normalise. That can be viewed as a separate exercise to interest rate cuts, at least for a period. QT can be viewed as a separate exercise to interest rate cuts, at least for a period. The Bank of England is also well advanced on the way to quantitative tightening. The first non-reinvestment of a gilt reaching maturity occurred in March 2022, and the first gilt sale took place in November. Overall, the Bank intends to shrink its balance sheet by £80bn a year in the first year through a mix of passive (non-reinvestments) and active (outright sales) QT. This pace may accelerate in future years, but we assume that this is the relevant pace in the near term which, in FY 2023-24, should result in roughly half of that amount in passive and half in active QT. Net QT flow out of key European government bonds in 2023 should be limited   Source: ECB, Refinitiv, ING   The European Central Bank is only at the beginning of this process. QT will start in 2023 with a gradual phasing out of its Asset Purchase Programme redemptions (one of its two QE bond portfolios), followed by the same process for the Pandemic Emergency Purchase Programme (the other portfolio) in 2025. Assuming a 50% APP reinvestment cap for the second and third quarters, and an end in the fourth, the balance sheet reduction should amount to €156bn. Counterintuitive and delayed effect on duration The main effect of QE on markets is to suppress duration premium, the extra yield investors demand as compensation for taking interest risk over long periods of time. There are a variety of models that show how much lower yields are as a result of QE. In the case of the 10yr Bund, our own estimate stands at 230bp. It should also be noted that the effect of QE has typically been priced into yields before purchases actually happened. Markets are, after all, forward looking. We’ve already seen part of the increase in yields that QT should trigger As a general rule, we think it is fair to think of QT as QE in reverse. In our view, central bank balance sheet moves have been well-telegraphed months in advance, and so we’ve already seen part of the increase in yields that this should trigger. Much, however, depends on how long QT lasts. In a world where the process of balance sheet reduction is allowed to continue for years, the upward pressure on yields should gradually build up. QE has supressed Bund yields by 230bp, but don't expect a sharp reversal Source: Refinitiv, ING   We’re more circumspect, however. We think QT poses financial stability risks and central banks will struggle to carry on once their policy focus shifts to easing. As a result, we suspect most of the upward effect on yields has already been felt. This is at least true for treasuries and gilts, and less so for euro rates. If we’re wrong, however, and central banks manage to significantly reduce their balance sheets, then some upside risk to our forecasts will have to be reckoned with. If central banks manage to significantly reduce their balance sheets, then some upside risk to our forecasts will have to be reckoned with What these models have in common is that the impact of QE is greater at longer maturities. At face value, this means QT should exert a steepening effect on the curve. In practice, it hasn’t. The reasons are manifold, but the main one is that the QT effect has been drowned out by central bank hiking cycles, typically a flattening influence on the curve. In places where the sequencing between hikes and QT is clearer, like in the eurozone, there is a better chance of that steepening effect to be visible once the ECB ends its hiking campaign over the course of 2023.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsQuantitative tightening Outlook 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  
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

There Is Ample Room For The Fed To Maintain The Roll-Off

ING Economics ING Economics 13.11.2022 10:09
Central bank balance sheet reduction started in 2022, but it is in 2023 that its effect will be felt in money markets. Expect a better reflection of credit and term premia, and for repo rates to normalise, with liquidity being swapped for collateral In this article US reverse repo volumes and bank reserves to fall in 2023 Repo could see a material move higher as reverse repo volumes drop The end of abundant liquidity Collateral shortage becoming a monetary policy issue US reverse repo volumes and bank reserves to fall in 2023 The way to think about the Fed’s balance sheet in round numbers is to start with its current size at almost $9trn. Of that, there is $2.25trn showing up at the reverse repo facility, $3trn in bank reserves, and most of the rest is cash in circulation (apart from other bits and pieces). So what comes out of reserves has been going into the reverse repo facility. And as the Fed’s balance sheet falls in size through bonds rolling off the front end (soft quantitative tightening), there must be a corresponding fall in bank reserves and/or in usage of the reverse repo facility. How much balance sheet roll-off is required for better balance? We think US$2trn The question then is how much balance sheet roll-off is required in order to bring about a sense of equilibrium between collateral and liquidity. A measure of this need is the $2trn of liquidity that routinely gets shovelled back to the Fed in its overnight reverse repo facility. The large use of this facility is reflective of an ongoing liquidity overflow that manifests in market repo rates struggling to match the rate being offered by the Fed (at 5bp above the fed funds floor). In fact, at times, the SOFR rate (effectively the general collateral rate) has been trading below the funds rate floor, which is not a great look. To help rectify the situation, more available collateral will help, and the counterpart to this is a better balance versus liquidity. The rise in usage of the reverse repo window has coincided with a fall in bank reserves, which are now running at $3trn. These peaked at $4.25trn in the fourth quarter of 2021. The previous low for bank reserves was $1.4trn in 2019, having come from a prior peak of $2.75trn in 2014. Back then, the Fed’s financial crisis-inspired bond-buying programme came to a conclusion (2014), and a bond roll-off then ran through 2018/19. Part of the fall in reserves reflected an uptick in economic activity and an increase in currency in circulation, and a requirement to build a buffer of high-quality liquid assets, the other part was a reduction in the Fed’s balance sheet as bonds rolled off. Fast forward to today and bank reserves are down from the highs, still at a relatively elevated $3trn, but primed to ease lower through 2023. Reverse repo balances should be the Fed liabilities that shrink the fastest in 2023 Source: Refinitiv, ING Repo could see a material move higher as reverse repo volumes drop For 2023, we can see the bond roll-off continuing throughout the year. If things get really tough macro-wise, there may be an argument for the roll-off to be put on pause. But barring the unexpected, there is ample room for the Fed to maintain the roll-off. That could have the direct effect of reducing the use of the Fed’s reverse repo facility. It does not have to, but this facility can wind all the way down to zero, which would be a desirable outcome as the market should not require recourse to repo away from the market. Should things get tight liquidity-wise, the Fed now has a permanent repo facility, where liquidity can be supplied back to the market (with bonds posted to the Fed). Ideally, the Fed should not be required to do large volumes through either of these windows. But they are there as a buffer - a buffer in both directions. 2023 should see an accelerated reduction in usage of the Fed’s reverse repo facility Overall, 2023 should see an accelerated reduction in usage of the Fed’s reverse repo facility. This should coincide with a rise in general collateral rates to above the reverse repo rate, ideally towards the effective fed funds rate. This is typically 8bp above the fed funds floor, compared with 5bp above for the reverse repo rate. Something like 8-10bp over the fed funds floor would be a good area for SOFR to settle at, correlating with a drying up of the usage of the Fed’s reverse repo facility. 2023 should also see bank reserves falling to US$2.5trn, or lower Beyond that, there could also be pressure for bank reserves to ease lower, but these should ease lower by far less than the contraction in the reverse repo volumes. We think reserves could slip down to the $2.5trn area, and if they go lower, we’d be surprised to see them dip below $2trn. This leaves them likely some $1trn above the lows seen before the pandemic but in any case at least $0.5trn above those lows. Lower eurozone liquidity will make Euribor fixings more sensitive to credit risk Source: Refinitiv, ING The end of abundant liquidity Most of the decisions pertaining to the withdrawal of central bank liquidity were taken in 2022, but the effects should only become evident in 2023. Even with central banks in various stages of the QT process, it is clear that their preference would be for a faster withdrawal of liquidity than that produced by a simple reduction of their bond portfolios. In cases where some of that liquidity stems from other policies than QE, for instance, in the case of the ECB’s Targeted Longer-Term Refinancing Operation loans to banks, faster liquidity withdrawal is simply a matter of creating incentives for early repayments. The ECB has taken steps to that end at its October meeting and we’re expecting around half of the €2.1tn TLTRO balances to be repaid by March 2023. You’d be hard-pressed to show the effect of shrinking liquidity in money markets in 2022. This will change The Bank of England has an arduous task at hand. The basic principle is to introduce new facilities to absorb liquidity from banks. This, in effect, is what the Fed’s reverse repo facility is doing in exchange for collateral. The BoE has taken no such steps yet but the repo rates and short gilt yields' reluctance to fully reflect rate hikes might trigger calls for faster liquidity absorption. Truth be told, you’d be hard-pressed to show the effect of shrinking liquidity in money markets in 2022. This will change in 2023. Regardless of the currency zone, the liquidity situation can still be described as plentiful. This, in turn, has resulted in suppressed money market rates. In the case of government bonds and repo, these have diverged further, to the downside, from policy rates. In the case of supposedly credit-sensitive money market rates, they have failed to reflect growing systemic risk and the looming recessions. UK and German bond scarcity is stretching valuations against swaps Source: Refinitiv, ING Collateral shortage becoming a monetary policy issue The other side of the abundant liquidity problem is the shortage of high-quality collateral evident across developed markets, but most prominently making the headlines in the eurozone and UK due to ever-widening swap spreads. On one level, collateral shortage and abundant liquidity are two sides of the same coin: too much money chasing too few assets. On another, regulations and falling unsecured interbank volumes mean the availability of collateral is becoming a problem of money market functioning, which is likely to persist even after liquidity is withdrawn. Both excess liquidity and collateral shortages can be solved with the same tools The good news is that both excess liquidity and collateral shortages can be solved with the same tools, as the Fed's experience has shown. The BoE and ECB both have securities lending facilities, but their use is more anecdotal, and insufficient to keep repo rates close to the policy rates. There have been calls for more ambitious facilities to be put in place. The BoE can point to the existing standing and special repo facilities although the lending rate would have to be raised and gilts would have to be borrowed from the Asset Purchase Facility (QE) portfolio. As is the case in the UK, the ECB can also point to efforts by some institutions, more notably the German Treasury, to release more bonds on repo. More is likely to come, including to finance energy-related spending. Combined with QT, and TLTRO repayments, they will chip away at the collateral scarcity in the eurozone, but we expect the effect to be backloaded to the second half of 2023.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles   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 Euro May Attempt To Resume An Upward Movement

Technical Outlook Of The EUR/USD Pair In Long And Short Positions

InstaForex Analysis InstaForex Analysis 14.11.2022 08:31
Analysis of transactions in the EUR / USD pair The test of 1.0244 happened when the MACD line went up quite a lot from zero, which limited the upward potential of the pair. In the afternoon, sell-offs surged around 1.0317, prompting a price decrease of about 30 pips. No other signals appeared for the rest of the day. CPI in Germany, as well as forecasts for the EU economy, did not affect the market. But today, the upcoming report on industrial output and speeches of ECB representatives may prompt growth in euro, albeit not as rapid as last week's. By afternoon, the situation could even put as there are no statistics scheduled to be released. For long positions: Buy euro when the quote reaches 1.0325 (green line on the chart) and take profit at the price of 1.0383. Growth is likely to occur, especially if the statements by ECB representatives remain hawkish. But remember that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0283,, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.0325 and 1.0383. For short positions: Sell euro when the quote reaches 1.0283 (red line on the chart) and take profit at the price of 1.0231. Pressure will return after unsuccessful consolidation above monthly highs and weak reports on the eurozone. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0325, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.0283 and 1.0231. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Relevance up to 07:00 2022-11-15 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/327006
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

Inflation In The Eurozone Will Affect Risk Appetite

InstaForex Analysis InstaForex Analysis 14.11.2022 09:25
The previous week ended with a noticeable increase in risk appetite and weaker demand for dollar. The main reason was the growing purchases of government bonds in the US, accompanied by a strong drop in yields. The scenario happened because of the latest inflation data in the US, which showed a sharp decrease in the year-on-year ratio and growth in the month-over-month one. Markets have been hoping for this kind of positive news for a long time, believing that the measures taken earlier by the Fed put further pressure on the economy. Now that the figures improved, the US central bank may start easing the pace of rate increases, then take a break. Much will depend on the values of inflation indicators for November, which will be presented in December. If they show, if not a continuation of a strong decline, but at least a stabilization or a slight decrease, then a strong rally may occur in all markets without exception. It could be accompanied by the depreciation of dollar and decrease in Treasury yields. Be that as it may, positive sentiment will continue today. Although stock indices in Europe and the US remain in negative territory this morning, everything may change by the start of the US trading session. In this case, dollar will continue to weaken, then decline further towards the end of the week, especially if the published data on retail sales and their volumes show better values than expected. Data on consumer inflation in the euro area is also important as its figure will affect risk appetite. US statistics will also play an important role since the very position of the ECB on the issue of further aggressive rate hikes remains unclear. Forecasts for today: EUR/USD The pair is trading above 1.0300. If market sentiment worsens, there will be a decline to 1.0235. GBP/USD The pair is trading above 1.1735. If buying pressure remains, it will rise further to 1.1900. But if market sentiment worsens, there will be a decline to 1.1635.   Relevance up to 08:00 2022-11-16 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/327022
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

US Dollar (USD) Recovery Keeps A Lid On Any Meaningful Upside For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.11.2022 10:58
EURGBP gains some positive traction for the second straight day, though lacks any follow-through. A modest USD rebound is weighing on the common currency and acting as a headwind for the cross. Traders also seem reluctant ahead of this week’s UK macro data and Chancellor Hunt’s statement. The EURGBP cross edges higher for the second successive day on Monday and sticks to its modest intraday gains through the early European session. The cross is currently placed above the mid-0.8700s, though lacks any follow-through buying or bullish conviction. The shared currency continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). The British Pound, on the other hand, is undermined by the gloomy outlook for the UK economy. In fact, the National Institute of Economic and Social Research (NIESR) expects the UK GDP growth to be flat in Q4 and noted that the risk of a contraction remains elevated. This, in turn, is seen lending some support to the EURGBP cross. That said, the prospects for further interest rate hikes by the Bank of England act as a tailwind for the Sterling. Apart from this, a modest US Dollar recovery from a nearly three-month low exerts some pressure on the Euro and keeps a lid on any meaningful upside for the EURGBP cross, at least for now. Traders also seem reluctant to place aggressive bets ahead of this week's important UK macro data - the monthly jobs report on Tuesday and the CPI report on Wednesday. Investors will further take cues from the BoE's Monetary Policy Report Hearings on Wednesday and Chancellor Jeremy Hunt’s Autumn Statement on Thursday. This will play a key role in influencing the near-term sentiment surrounding the GBP and determine the next leg of a directional move for the EURGBP cross. In the meantime, spot prices seem more likely to consolidate in a range amid absent relevant market-moving economic releases, either from the Eurozone or the UK.
Riksbank's Role in Shaping the Swedish Krona's Future Amid Economic Challenges

Eurozone Continue To Expect Weaker Production

ING Economics ING Economics 14.11.2022 13:41
The third quarter saw remarkably strong production as easing supply problems helped production growth. Don’t expect this to continue much from here on as new orders, production expectations and increasing inventories point to weakening production ahead Industrial production increased by 0.9% in September and that resulted in a total quarterly increase of 0.5% for 3Q. This was a surprise that added to the positive GDP figure for the quarter. It is most likely caused by fading supply side problems which industry has battled since mid-2020. This is helping backlogs of work to be dealt with, which is boosting production, despite survey data having disappointed consistently over recent months. In September, production categories were a mixed bag, so there was no broad-based improvement in production. Capital goods and non-durable consumer goods production saw strong growth – just like last month – while intermediate, durable consumer goods, and energy production all declined. Germany was the only large country that recorded growth, while France, Spain and Italy all saw production contract. While August and September both saw surprisingly strong production, there is little hope for this to be the start of a strong recovery. Businesses continue to report falling new orders as demand is fading and inventories have increased. For the winter months we, therefore, continue to expect weaker production as the catch-up effect for production is unlikely to last much longer. TagsGDP Eurozone   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 Dollar Index Price Is Looking Higher From Here Soon

The Pressure On The US Dollar (USD) Has Intensified

Alex Kuptsikevich Alex Kuptsikevich 14.11.2022 13:54
The dollar index lost 4% last week, the most significant drop since March 2020. Such powerful moves against the trend often signal a further trend reversal. However, it will probably be a slower pace of decline and not a one-way street as we see it over the previous ten days. Speculation about Fed decision The pressure on the dollar has intensified over the past two weeks on speculation that the Fed will slow down the pace of policy tightening and that the maximum interest rate in this monetary cycle could be lower than previously feared. Signals from Fed members and slower-than-forecast inflation supported this view, triggering a wave of demand for risky assets. At the same time, monetary regulators in other countries were in no hurry to soften their rhetoric, returning markets to a familiar situation where the Fed acts first and more aggressively than its peers in lowering and raising rates. But overall, it does not stand out for any rigidity. Eurozone The monetary watchdogs in the Eurozone have continued to signal in recent weeks that they are prepared to maintain the high speed of rate hikes, which fed their purchases in the Euro. That pressure could be fuelled by sales of dollar assets from the reserves of the SNB and the BoJ. USD/CHF and USD/JPY USDCHF and USDJPY returned under the emotionally significant levels of 1.0 and 150, attracting market-oriented and trend-following participants' interest. Dollar Index The nearest target for the Dollar Index correction is 105, actively operating as a resistance and support between May and August. This is also where the 61.8% Fibonacci retracement level of 2021-2022 comes in. A decisive failure below would confirm that we see the Dollar moving into a decline and not just a correction in a long-term uptrend. In this scenario, the Dollar Index heads into the 90-100 area, where it has been comfortable since 2015, with a potential pullback to the upper bound of this range in the first quarter of 2023. History History has other examples. In late 2008, two weeks of a significant sell-off in the dollar were followed by three months of gains, and the DXY rewrote local highs, finally reversing only in March 2009. However, it is essential to remember that in both March 2020 and March 2009, the EUR reversal was sustained when supported by the equity market surge we also witnessed last week.
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

The ECB Should Consider The Interests Of All EU Members

InstaForex Analysis InstaForex Analysis 15.11.2022 08:00
The EUR/USD currency pair moved very calmly on Monday. We admit that we expected a noticeable correction on the first trading day of the week and throughout the week, but so far, our calculations have yet to be justified. So far, there is a clear upward trend for the euro/dollar pair, and, from a technical point of view, everything now speaks in favor of further growth of the euro currency. Recall that on the 24-hour TF, the price managed to overcome all the important lines of the Ichimoku indicator, so finally, we can witness a reversal of the long-term downward trend. At the same time, the "foundation" and geopolitics can break the entire "raspberry" of the European currency at any moment. After all, it is not the euro that is growing but the dollar that is falling. Let's read more: the dollar has been growing for almost two years, and traders have been busy buying American currency. And now they are reducing purchases, reducing the demand for the dollar, so the pair is growing, but this does not mean that the demand for the euro currency is growing. COT reports If we talk about the demand for a particular currency, it is best to turn to COT reports. However, they do not give a clear answer to what is happening in the minds of traders and investors. The net position on the euro among professional traders has long been "bullish," and the euro currency began to grow only in the last couple of weeks. Moreover, according to the logic of things, this "bullish" position should increase for the European currency to continue growing. Or it should decline against the US dollar. As we can see, there are certain reasons for the pair's growth in the future, but they still need to look more convincing as the factors for the growth of the US dollar at the beginning or middle of this year. We rely on technical analysis when we make forecasts and recommendations, so now we need to look more toward purchases. But at the same time, we must keep in mind that the current growth of the euro is quite doubtful from a fundamental background point of view. The EU inflation report will be quite formal. Industrial production The current week began with the publication of a report on industrial production in the EU. It turned out to be slightly better than predicted, which could support the euro on Monday. However, this is different from the scale of inflation or central bank meetings, so count on a long and strong market reaction. Let's go through the other events of the week in Europe. GDP The second estimate of the GDP report for the third quarter will be published today. The market is waiting for a slowdown in the growth rate of the European economy to 0.2% q/q. Still, in principle, all indicator estimates do not have much significance for the market. Some reactions may follow this report, but it is too "stretched" in time to "see" a reaction to it. Recall that three estimates are always published for GDP, which rarely differs much from each other. And in any case, the market is more interested in the ECB's monetary policy, which directly impacts GDP. The speech of ECB President  Thus, a much more important event will be the speech of ECB President Christine Lagarde on Wednesday. The ECB seems to have decided to raise the rate "to the bitter end" or at least "significantly" to lower inflation in the Eurozone as much as possible. This is good news for the euro, but the market needs to understand to what level the regulator will be ready to raise the key rate. We have already said earlier that not all member countries of the alliance can bear the high cost of borrowing relatively smoothly for their economies. The ECB should consider the interests of all EU members, so the rate will not rise to 5%, as, for example, in the USA. EUR/USD Christine Lagarde can refute this assumption or confirm it. She may want to do this, but her comments may dissuade traders from continuing to buy the euro currency (if they even have a place to be). So far, the euro is growing more on the fact that the Fed will stop raising its rate in a few months, and since traders had plenty of time to work out all the tightening of monetary policy, now the actions of the ECB, which is behind schedule from the Fed, are more important. The average volatility of the euro/dollar currency pair over the last five trading days as of November 15 is 168 points and is characterized as "high." Thus, we expect the pair to move between 1.0177 and 1.0513 on Tuesday. The reversal of the Heiken Ashi indicator downwards signals a new round of downward correction. Nearest support levels: S1 – 1.0254 S2 – 1.0132 S3 – 1.0010 Nearest resistance levels: R1 – 1.0376 R2 – 1.0498 R3 – 1.0620 Trading Recommendations: The EUR/USD pair continues to move north. Thus, we should stay in long positions with targets of 1.0498 and 1.0513 until the Heiken Ashi indicator turns down. Sales will become relevant again by fixing the price below the moving average line with targets of 1.0010 and 0.9888. Explanations of the illustrations: Linear regression channels – help to determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-11-16 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/327095
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

Aggressive Bearish Bets Has Arrived Around The EUR/GBP Pair

TeleTrade Comments TeleTrade Comments 15.11.2022 10:04
EURGBP comes under some selling pressure on Tuesday, though the downside remains cushioned. The mixed UK employment figures reaffirm further BoE rate hikes and underpin the British Pound. Talks for a more aggressive tightening ECB  benefit the shared currency and lend support to the cross. The EURGBP cross extends the previous day's modest pullback from the 0.8820-0.8830 resistance zone and edges lower through the early European session on Tuesday. The cross remains on the defensive around the 0.8770-0.8765 region and moves little following the release of the latest UK employment details. The UK Office for National Statistics reported that the jobless rate unexpectedly ticks higher to 3.6% during the three months to September from 3.5% previous. Adding to this, the number of people claiming unemployment-related benefits came in at 3.3K against consensus estimates pointing to a fall of 12.6K. The disappointment, however, was offset by stronger wage growth figures. In fact, the Average Earnings Excluding Bonuses rose to 5.7% from 5.5%, beating estimates for an uptick to 5.6%. The data reaffirms market bets for a further policy tightening by the Bank of England, which is seen offering some support to the British Pound. That said, a modest pickup in demand for the shared currency acts as a tailwind for the EURGBP cross and limits the downside. Against the backdrop of talks for a more aggressive policy tightening by the European Central Bank (ECB), the emergence of fresh selling around the US Dollar offers support to the Euro. This, in turn, warrants some caution before placing aggressive bearish bets around the EURGBP cross and positioning for any further intraday losses ahead of the German ZEW Economic Sentiment.
Bank of Japan to welcome Kazuo Ueda as its new governor

The Results Of Japanese GDP Is Negative | US PPI Ahead

Kamila Szypuła Kamila Szypuła 15.11.2022 11:10
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/
Key Economic Events and Earnings Reports to Watch in US, Eurozone, and UK Next Week

The Re-Tightening Of Credit And Sovereign Spreads Has Failed

ING Economics ING Economics 15.11.2022 12:37
Signs of optimism abound in global markets but caution remains. A Treasury short base explain the strength of the rally, but curve moves show the Fed’s cautious message has landed. Easing collateral scarcity in Europe means swap spreads could tighten alongside riskier bonds In this article A Treasury short base explain the post-CPI rally but markets remain cautious Less collateral stress means swap spreads can join the risk party Today’s events and market views A Treasury short base explain the post-CPI rally but markets remain cautious Even with Thursday’s post US CPI rally partially reversed, we find government bonds are at risk of a near-term retracement if US data continue to show pockets of strength. The most obvious risk is a disappointment in today’s PPI release. Consensus is for a colling down of both the monthly and annual core (ex-food and energy) measures. CFTC data suggested that non-commercial future positions heading into last week’s CPI were net short, and in the case of the 2Y, at a record level. This may account for the strength of the rally but data isn’t timely enough to assess what percentage of these shorts were closed since. Non-commercial future positions heading into last week’s CPI were net short Assuming a short base still exists, the potential for a rally on a soft inflation print remains, although we think most near-term short-covering needs have happened since last week. Another development that is harder to explain with this positioning data alone is the failure of the US curve to re-steepen after the CPI release. Common sense would dictate that the 2Y would rally the most if data points to an early end to the Fed’s cycle but it is the 5Y point that benefitted. This may suggest that the Fed’s cautious message has been heard, and that markets believe it won’t rush into cutting rates, which in turns means the 2Y could prove relatively sticky near-term. 5Y Treasuries dropped on the curve but 2s10s failed to steepen Source:  Refinitiv, ING Less collateral stress means swap spreads can join the risk party So far the strength of risk sentiment has failed to weigh on government bonds, in particular in Europe. The re-tightening of credit and sovereign spreads has failed to add to core yield upside which is characteristic of an environment where inflation remains the principal concern. In theory, this should weigh both on rates and riskier assets but the former is more directly impacted, so it is no surprise to see government bond yields stay range-bound even as stocks rally and spreads tighten. It is no surprise to see government bond yields stay range-bound even as stocks rally and spreads tighten Even the effect on swap spreads, an historical barometer of risk aversion, has been delayed. We’ve written repeatedly about steps taken by both the German federal treasury and the European Central Bank to ease the collateral shortage that has driven a wedge between the yield of German government bonds and swap rates. Large targeted longer-term refinancing operation (TLTRO) early repayments to be announced on Friday would add to this already well established dynamic. What lower collateral shortage would achieve is to make swap spreads more sensitive to other factors, including improving risk appetite, and so add to tightening pressure. This is assuming the reasons for the improvement in risk sentiment holds up, however. Easing collateral scarcity is allowing swap spreads to tighten alongside credit spreads Source: Refinitiv, ING Today’s events and market views Spanish and French CPI, as well as 3Q eurozone GDP will all be final readings. For more forward-looking indicators, look to Germany’s ZEW sentiment index, also released this morning. Frank Elderson, of the ECB, is due to speak today. Euro bond supply will come from Germany (7Y), Finland (5Y/25Y), and from the EU which mandated banks for a dual tranche 10Y green and 30Y deal. The UK will carry out sales in the 10Y and 22Y sectors. Given the magnitude of the post-CPI rally in bonds, today’s PPI will be scrutinised for confirmatory signs that inflation is on the descent. For the same reason, the Fed speakers scheduled for the day will be of particular importance in dictating US rates direction. They include Patrick Harker, Lisa Cook, and Michael Barr. Empire Manufacturing completes the list of US releases. We think the Treasury short base hasn’t entirely disappeared but has shrank enough to reduce the risk of a rally. Meanwhile, supply should weigh on bonds until at least mid-week. 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
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The Fed Is Doing Its Job Well And Can Afford Less Aggression

InstaForex Analysis InstaForex Analysis 16.11.2022 10:05
Dashing trouble began. After Jerome Powell's fiery speech about a higher peak federal funds rate, who would have thought that gold would not just bounce back but return to 3-month highs? In fact, the slowdown in the rate of tightening of the Fed's monetary policy is a bullish driver for XAUUSD. If inflation remains at elevated levels for a long time, and the Central Bank slows monetary restrictions and eventually pauses, real yields on Treasury bonds will fall, allowing the precious metal to rise above $1,800 an ounce. The main catalysts of the 9.5% November gold rally were the releases of data on consumer prices and producer prices. Both indicators slowed down more than Bloomberg experts predicted, which gave rise to talk that the Fed is doing its job well and can afford less aggression. In the end, the tightening of monetary policy affects the economy with a time lag, rates are already at restrictive levels, so you can not go as fast as before. However, in order to defeat inflation, you need to understand its causes well. The Fed and the White House have gone too far with stimulus in response to the pandemic. As a result, domestic demand grew by 21.4% in the three years to the end of the second quarter of 2022, which is equivalent to an annual GDP growth of 6.7%. No wonder inflation is so high and the job market is strong as a bull. Americans sitting on a mountain of dollars are in no hurry to return to work. Dynamics of domestic demand in the US, Britain and the Eurozone Sooner or later, the money runs out, which will lead to a slowdown in consumer prices in the US by itself. The Fed's aggressive monetary restriction can strengthen their decline. There will be a risk of deflation on the horizon, as in Japan. Ark Invest agrees with this scenario. The company sets the example of the beginning of the 20th century, which was overshadowed by the First World War and the Spanish flu epidemic. Inflation in 1920 in the United States exceeded 20%, but thanks to an aggressive increase in the federal funds rate from 4.6% to 7%, it fell to -15% in 2021. Current conditions have much in common with the period of a hundred years ago. The same scenario of the development of events is not excluded, but in my opinion, it is unlikely. Its implementation would be disastrous for gold, returning its quotes to $1,610 per ounce. On the contrary, a scenario where the Fed slows down and eventually pauses while inflation remains at elevated levels creates a tailwind for the precious metal. Simultaneously with the fall in real yields of Treasury bonds, the US dollar is also weakening. Technically, on the daily chart of gold, due to the implementation of the triple bottom pattern the long-term bearish trend was broken. Quotes have gone beyond the descending trading channel and are moving away from the moving averages. I recommend holding the longs formed on the decline to the support at $1,702 and periodically increasing on pullbacks. The targets are $1,790 and $1,815 per ounce.   Relevance up to 08:00 2022-11-21 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/327262
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The Impact On The Volatility Of The Forex Market Is Mainly Geopolitical Risk In Europe

ING Economics ING Economics 16.11.2022 13:03
FX markets are maintaining very high levels of realised volatility. Driving markets in the very short term is the stand-off between geopolitical risk in Europe and the powerful short squeeze in risk assets on the back of softer US price data. On the calendar today are US retail sales, industrial production, and a host of Fed and ECB speakers In this article USD: Buy-side wants and needs a weaker dollar EUR: Ongoing correction GBP: BoE speakers in focus JPY: Wild ride continues Source: Shutterstock USD: Buy-side wants and needs a weaker dollar Realised levels of FX volatility remain near the highs of the year. For example, one-month EUR/USD realised volatility, at 14%, is back to levels not seen since April 2020. The dominant near-term theme is the aggressive position adjustment in FX, perhaps more so than in other asset classes, on the back of softer US price data. The dollar took another sharp leg lower on yesterday's release of soft October PPI data. Clearly, US price data is the hottest commodity in the macro space right now. Dollar price action does suggest the market is caught long dollars at higher levels and that corrective rallies in the dollar are tending to be relatively shallow. There is also a lot of buy-side interest in expectations (and hopes) that the dollar has peaked. If so, that will release some handsome gains for emerging market local currency bond and equity markets. For example, were it not for the recent dollar correction, returns in the EM local currency bond index would be a lot lower than the current -10% year-to-date figures, and EM hard currency bond indices are down closer to 20% year-to-date.  Given the weight of long dollar positioning after a major 18-month bull trend, it looks too early to expect that this position adjustment has run its course. Yet developments in Poland late yesterday have somewhat clouded the picture. The market will await any announcement from NATO representatives today on the source of the explosion - although President Biden has partially defused the situation by suggesting the missile was not fired from Russia.  Beyond geopolitics today, the focus will be on US retail sales and industrial production data. Both should be reasonably strong, but less market-moving than price data. We will also hear from the Federal Reserve's John Williams and Mary Daly around 16CET. For the DXY today, we did note that the dollar seemed to find a little natural buying interest after the PPI data, but before the Polish news broke. That might tend to favour a 106.00-107.20 DXY trading range today. In terms of the bigger picture, the question is whether 105 is a large enough correction for DXY.   Chris Turner EUR: Ongoing correction EUR/USD turned from a high of 1.0480 yesterday - driven there by the softer US PPI data. By comparison, today's US data is second tier and might prove a weak dollar positive if retail sales and industrial production emerge on the strong side. Attention may also return to the energy markets given events in Poland. And this will also serve as a reminder of the upcoming embargo on Russian oil exports due to start in early December. This potentially is a downside risk to European currencies should energy prices take a leg higher. On the calendar today are plenty of European Central Bank speakers. The ECB will also release its semi-annual financial stability report. Expect plenty of focus on the regulation of the non-bank financial sector after the recent debacle amongst the UK pension fund industry with its LDI hedges in the UK Gilt markets. Remarks earlier this week from the ECB relating to this report drew a conclusion that financial risks had increased. We noted yesterday that EUR/USD seemed to turn naturally from 1.0480, suggesting the corrective rally might have run its course - at least for the very short term. But the bottom of the short-term range has now been defined at 1.0270 - pointing to a 1.0270-1.0500 range over coming sessions. This assumes no major escalation in geopolitics. Bigger picture, we are in the camp that something like 1.05/1.06 may be the best EUR/USD levels between now and year-end. Chris Turner GBP: BoE speakers in focus Bank of England speakers will be in focus today after the release of the October CPI data. This is expected to be peaking around the 11%year-on-year level around now.  BoE Governor Andrew Bailey and colleagues testify to the Treasury Select Committee at 1515CET today. We suspect the message will be very much the same as that given at the policy meeting earlier this month - i.e. do not expect 75bp hikes to become common and that the market pricing of the tightening cycle is too aggressive.  GBP/USD briefly peaked over 1.20 yesterday. We think 1.20 is a good level to hedge GBP receivables. Equally, we have a slight preference for EUR/GBP staying over 0.8700. Tomorrow is the big event risk of the autumn budget - which on paper should be sterling negative. Chris Turner  JPY: Wild ride continues USD/JPY continues to deliver 20% annualised readings in volatility (as do the high beta commodity currencies and those in Scandinavia). We suspect the next five big figures in USD/JPY come to the upside. We see this because the US 10-year Treasury yield typically only trades 50-75bp below the Fed funds rate towards the end of the tightening cycle. And given that our team is looking for the policy rate to still be taken 100bp higher, we think US 10-year Treasury yields will probably return to the 4.25/4.35% area before the end of the year. Equally and once position adjustment has run its course, the yen rather than the dollar should become the preferred funding currency should market conditions begin to settle. Although that does seem an unlikely prospect right now. Chris Turner 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 Extend Rally Amid Optimism Over Fed's Monetary Policy

FX Market: Range Of 2023 The EUR/USD Pair Outcomes

ING Economics ING Economics 16.11.2022 13:57
The dollar is tumbling from multi-decade highs. Calling the FX market in 2023 requires taking a view on the Federal Reserve, the war in Ukraine, China, and the overall investment environment. We suspect that the dollar can stay stronger for a little longer. But the main message in our 2023 FX Outlook is to expect fewer FX trends and more volatility Source: Shutterstock The dollar's highwire act Having risen around 25% since the summer of 2021, the dollar has recently taken quite the tumble. For 2023, the question is whether this is the start of a new bear trend or whether the factors that drove the dollar to those highs still have a say.  Given that the most liquid FX pair, EUR/USD, was such a large driver of global FX trends in 2022, we use a scenario approach to look at a range of 2023 EUR/USD outcomes – derived from the expected volatility priced into the FX options market. The range of scenarios and end-year FX levels extend from ‘Permacrisis’, where EUR/USD could be trading at 0.80, to ‘Safe and Sound’, where EUR/USD could be closer to 1.20. Key inputs to that scenario approach are factors like: i) how aggressive the Fed will be, ii) Ukraine, Europe, and energy, iii) China, and iv) the overall risk environment. Given ING’s house view of the Fed taking rates to 5.00% in early 2023, four quarters of recession in Germany amid higher energy prices, relatively weak Chinese growth, and a still difficult equity environment, our baseline view favours softer EUR/USD levels. 2023 will see fewer FX trends and more volatility But perhaps the strongest message to get across in our outlook is that FX markets in 2023 will see fewer trends and more volatility. We say this because conditions do not look to be in place for a clean dollar trend – no ‘risk-on’ dollar decline nor ‘risk-off’ dollar rally. And central banks tightening liquidity conditions through higher policy rates and shrinking balance sheets will only exacerbate the liquidity problems already present in financial markets. Volatility will stay high. Softening global activity and trade volume growth at less than 2% will likely limit the gains of pro-cyclical currencies in 2023. EUR/USD could be ending the year near 1.00. If the positive correlation between bonds and equity markets does break down next year, it will likely come through a bond market rally. Our forecast for US 10-year Treasury yields at 2.75% year-end will argue for USD/JPY to be trading at 130 or lower. EUR/USD will set the tone for European currencies in general. We favour the Swiss franc to outperform and sterling to underperform. Scandinavian currencies may continue to struggle with the high volatility environment. Further east, we see scope for the Hungarian forint to be re-assessed positively, while the overvalued Czech koruna and Romania leu look more vulnerable as FX intervention slows. In the commodity bloc, the uncertain outcome for China continues to place a question mark on the Australian and New Zealand dollars. We again prefer the Canadian dollar – although how the housing market correction plays out will be a risk. USD/CNY itself may struggle to sustain a move sub-7.00. And in a more mixed FX environment, expect local stories to win out – one of which may be Korean debt being included in world government bond benchmarks – helping the won. EUR/USD: Four scenarios for 2023 Source: ING, Refinitiv 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
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

European CPI Reached 10.6% | UK Budget Ahead

Kamila Szypuła Kamila Szypuła 17.11.2022 11:54
At the beginning of the day positive data came from Australia. GBP traders eyes will be on the UK budget release. Behind the assessment, there will also be important reports and speeches that may affect the situation on the currency market. Australian Labour Market In October, there was an improvement in the employment sector. The number of people employed increased from a negative level (-3.8K) to 32.2K. The unemployment rate also turned out to be positive. The reading was lower than expected and will reach 3.4% against the previous 3.5%. Strong employment data may help the Australian currency (AUD) and also influence the RBA's future monetary policy decisions. EU CPI Inflation in Eurozone turned out to be slightly lower than expected. The current reading showed that inflation rose from 9.9% to 10.6%. It was expected to reach 10.7%. Core inflation reached the expected level of 5.0%. Read more: Forecast For The Eurozone Are Not Optimistic, Inflation Can Reach A Record High| FXMAG.COM Autumn UK Forecast Statement Chancellor Jeremy Hunt will deliver the statement to MPs. The government is set to announce tens of billions of pounds worth of spending cuts and tax rises. It is expected about 55% of the measures will be spending cuts, but confirmation of this will appear at 14:30 CET. The Autumn Statement will affect the take-home pay and household budgets of millions of people, as well as money for key public services. Some of the Autumn Statement will affect the whole of the UK. However, the governments of Scotland, Wales and Northern Ireland also make some tax and spending decisions independently. UK Speeches In connection with the publication of budget data, speeches from the UK are also expected. The first speech will take place at 14:30 CET with MPC Member Huw Pill as the speaker. The next speaker will be Silvana Tenreyro, his speech is scheduled for 16:30 CET. US Building Permits Building permits are a key indicator of demand in the housing market. The change in the number of new construction permits issued by the government last time increased to 1,564M. It is expected that there will be no further increase and the number of permits will fall to the level of 1,512M. Observing the data from the beginning of the year, we see that the downward trend continues, and the few rebounds from the trend suggest better temporary periods. Source: investing.com Initial Jobless Claims The weekly report on he number of individuals who filed for unemployment insurance for the first time during the past week will appear today. Previously, this number increased significantly from 218K to 225K. The figure from the previous reading is expected to hold. Philadelphia Fed Manufacturing Index The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. We have been seeing negative results since May. And the last two readings were below zero, and it is expected that this time the level will be below zero, but will increase slightly. Forecasts show that the indicator may increase from -8.7 to -6.2. This may mean that a bad situation may slowly improve. Source: investing.com FOMC speeches Fed officials will also speak today. The first speeches will take place at 15:00 CET. The Federal Reserve Bank of St. Louis President and Federal Open Market Committee (FOMC) voting member James Bullard. At 16:15 CET, Michelle W. Bowman, member of the Board of Governors of the Federal Reserve System, will speak. U.S. Federal Open Market Committee (FOMC) Member Mester also speaks at 16:40 CET. Summary: 2:30 CET Employment Change 2:30 CET Unemployment Rate (Oct) 12:00 CET EU CPI (YoY) (Oct) 14:30 CET Autumn UK Forecast Statement 14:30 CET BoE MPC Member Pill Speaks 15:00 CET FOMC Member Bullard Speaks 15:30 CET US Building Permits (Oct) 15:30 CET Initial Jobless Claims 15:30 CET Philadelphia Fed Manufacturing Index (Nov) 16:15 CET FOMC Member Bowman Speaks 16:30 CET MPC Member Tenreyro Speaks 16:40 CET FOMC Member Mester Speaks Source: https://www.investing.com/economic-calendar/
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Rates: 50bp As Next Likely Move By Central Banks

ING Economics ING Economics 17.11.2022 12:12
Markets outside the US are also increasingly leaning towards 50bp being the next probable moves by central banks. European Central Bank speakers turning less hawkish and the rediscovered UK austerity should validate the rally in rates In this article 50bp is becoming the new norm Gilts benefit from both fiscal tightening and the need for less BoE hikes Today’s events and market view 50bp is becoming the new norm Looking at the Fed, markets have converged on a 50bp hike in December following the US CPI data. Fed officials have attempted – with some success – to push back against the pricing of the terminal rate dropping too much, and it has since hovered just below 5%, but it hasn’t prevented longer rates such as the 10Y UST slipping below 3.7%. Appetite seems to have returned to longer durations with yesterday’s 20Y auction also posting very decent metrics. In the eurozone, ECB officials also appear to have dialed down their hawkishness. When arch-hawk Holzmann of the Austrian central bank is mindful that too strong tightening would not just lead to stagnation but to a recession, then markets should take note. Even with its new ECB reaction function, there appears only so much pain officials are willing to tolerate. Renewed appetite for duration risk is flattening yield curves Source: Refinitiv, ING   The ECB’s hawks might ask for more progress on quantitative tightening The ECB's shift was later corroborated by a Bloomberg story suggesting that momentum for a further 75bp move was lacking. With the market still eyeing a 20% probability of a larger move in December, there is still room to test a little lower. Alongside central bankers seemingly more mindful of the recessionary risks appears to validate the rally in rates that has also pushed the 10Y Bund yield below 2%. But mind you, that the ECB could eventually slow once the key rate approaches a neutral level – seen around 2% – is not news. With a view to the December meeting we caution that the ECB’s hawks might ask for more progress on quantitative tightening in return for less aggressive action on rates. The tightening of monetary policy could thus just rely to a growing degree on the balance sheet. That could eventually test the current  indiscriminate rally across sovereign credit in the eurozone.   Gilts benefit from both fiscal tightening and the need for less BoE hikes When it comes to the Bank of England, the next expected policy moves have become more interlinked with fiscal policies. This puts the attention squarely on today’s Autumn Statement that will outline the government’s fiscal plans. The government’s main task with a view to financial markets will be to rebuild credibility lost in September’s ill-fated mini budget. To that end much is already achieved by having forecasts of the independent Office for Budget Responsibility accompany the new plans. And looking at 10Y gilt yields, they have indeed already slipped back towards levels seen before the September budget just now. The government’s main task will be to rebuild credibility lost in September’s ill-fated mini budget Perhaps the greater risk is that the government decides to push austerity too far under the impression of the rattling experience in the wake of the last budget. That could see markets further pricing out their Bank of England hike expectations. Long-end yields could also decline further, though our expectation would be that of an overall steeper curve. Keep in mind that the effective debt that private investors will have to absorb will see a considerable increase nonetheless. A Reuters survey among gilt dealers sees issuance in the 2022/23 financial year falling to £185bn compared to DMO’s September plans, but issuance in 2023/24 will rise towards £240bn. Crucially, one has to add the Bank of England’s quantitative tightening.      Private investors will be required to increase their gilt holdings by a record amount in FY2023-24 Source: Refinitiv, ING Today’s events and market view Main event on the calendar is the UK government’s Autumn Statement. The FT has reported that up to £60bn of savings may be required, which is higher than had been expected. Reports also suggest the Chancellor will more heavily focus on spending cuts than tax rises. As our economist notes, the impact on the economy will depend on how much of the burden is placed on consumers via higher taxation, and how immediately those changes come through. A fair amount of pain could be delayed until after the 2024 election. Another point to watch are details on how the government intends to restructure its flagship Energy Price Guarantee, which can have more direct bearing on funding needs. Away from the UK the focus remains on central bank speakers and how they bridge the gap between signaling a slower pace and ensuring that financial conditions don’t already ease too much. Scheduled today are the Fed’s Bullard, Mester, Jefferson and Kashkari.   In data the focus is on the US housing market where numbers should be softer due to the rapid rises in mortgage borrowing costs that have prompted a collapse in demand. Also on the calendar are initial jobless claims as well as Philadelphia and Kansas Fed activity indices. The eurozone see the final CPI for October. Today’s supply comes from France in shorter dated bonds as well as inflation linked securities, as well as Spain with taps in 3Y to 20Y bonds. 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
ECB press conference brings more fog than clarity

The ECB May Well Opt For A Less Aggressive Move

InstaForex Analysis InstaForex Analysis 17.11.2022 13:16
Euro hovered at monthly highs after some ECB members hinted at a lesser rate hike next month. Of course, inflation will play a key role, but although prices have not slowed down lately, at least there is no significant upward spurt. With no momentum for another 75 basis point move, the European Central Bank could hold off on further aggressive policies, which will pull euro down as there are no other reasons to buy it. The Board of Governors and its meetings are closed, but the leaked information gives a certain reason to think about whether it is worth buying the currency now. Obviously, unless there is another unexpected spike in inflation, the ECB may well opt for a less aggressive move. Decision of the ECB The reasons why the central bank may look towards a softer policy include growing risks of a recession, the likelihood that pressure on consumer prices will ease in the near future, and the prospect that a half-point increase in the deposit rate will move closer to the neutral a level that will no longer stimulate the economy and thereby limit inflationary pressures. With four weeks before the final decision of the ECB, there is still enough time for officials to think carefully. Amid market expectations for a half-point increase, hawkish ECB politicians have made little effort to refute this view, only calmly insisting on a third consecutive 75 basis point increase. Austrian central bank governor Robert Holzmann said that now is not the time to change course, although he also kept silent about the size of the next increase. Joachim Nagel, president of the Bundesbank, took a similar approach to the situation. Their Estonian and Latvian counterparts, suffering from the most runaway inflation in the eurozone, called 50 and 75 basis points possible, but did not express a preference for which side they would take. Meanwhile, the head of the Bank of France, Francois Villeroy de Gallo, said the ECB is likely to take a less aggressive path, which could also point to 50 basis points. Inflation in the eurozone However, inflation in the eurozone remains at 10.7%, and even if the rate falls today, it will remain a record in the history. The next meeting of the Board of Governors will coincide with the publication of inflation data for November. A week later, politicians begin a period of calm before their December decision. EUR/USD With regards to the forex market, risk appetite decreased significantly, but sellers are yet to be active. For further growth in EUR/USD, it is necessary to break above 1.0440 as only that will prompt a rise to 1.0480, 1.0525 and 1.0570. If pressure persists, the pair will fall to 1.0350, then to 1.0280 and 1.0220. GBP/USD GBP/USD has halted, so buyers are focused on protecting the support level of 1.1850. They want to breaking through the resistance level of 1.1920 because that will prompt a further rise to 1.2020 and 1.2080. But if pressure returns and sellers take control of 1.1850, the pair will fall to 1.1790 and 1.1740.   Relevance up to 10:00 2022-11-18 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/327395
The Drop In German Inflation Is Welcome News, But It Is Mean That Can We Say That Inflation Has Peaked?

A Lot Of Attention On German Wage Settlements Across The Eurozone

ING Economics ING Economics 18.11.2022 10:25
A regional wage agreement in Baden-Wuerttemberg yesterday will pave the way for broader wage developments and shows the European Central Bank that second-round effects will kick in next year but should be dampened Last night, employers and unions in the metal and electronics industry in Baden-Wuerttemberg reached a new wage agreement. Wages will be increased by 5.2% in June 2023 and by 3.3% in May 2024. There will also be a one-off payment of €3,000, exactly the amount the German government had offered to exempt from tax and social security contributions. While this is "only" a regional wage agreement, it will have knock-on effects on other regional and sectoral wage negotiations. Almost four million people in Germany work in the metal and electronics industry. Traditionally, there has been a lot of attention on German wage settlements across the eurozone. The takeaway for German wage developments and the risk of second-round effects is that last night's deal shows what a compromise can look like. It won’t be enough to fully offset the drop in purchasing power caused by higher inflation, but it softens the damage. For the ECB, it signals that second-round effects remain dampened and that a lower, subdued inflationary pressure can last for longer than markets currently think. TagsInflation Germany Eurozone ECB   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
Reducing The Risk Of A Gas Shortage In Poland In The Upcoming Heating Season

Reducing The Risk Of A Gas Shortage In Poland In The Upcoming Heating Season

ING Economics ING Economics 19.11.2022 10:28
EU response to Russian invasion of Ukraine: In response to the Russian invasion of Ukraine, the EU has introduced economic sanctions on Russia, including a full coal embargo (since August), an oil embargo (with exceptions) and a two-thirds reduction in gas imports by the end of the year. Substitution of Russian gas in the EU: EU measures (more LNG and network gas from other locations, fuel substitution, and energy efficiency) leave a gap of around 20bcm. The EC has proposed voluntary (and forced if necessary) consumption cuts of 15% in EU countries. This is roughly equivalent to the additional gas consumption that occurs during a cold winter in Europe. Re-Power EU: EU policy, in particular the May 2022 Re-Power EU program, has remained consistent with the long-term goal of climate neutrality and the Green Deal strategy. In addition to diversifying gas supplies, it envisions accelerating the low-carbon transition, mainly through support for RES and energy efficiency. EU shields package from high energy prices: On 14 September, EC President Ursula von der Leyen announced the following: •A target to reduce gas and electricity consumption by 10% and by 5% during the peak winter season to a 5-year average •A tax on excess profits of energy producers •A €180/MWh price cap on low-cost technologies (mainly nuclear, lignite and RES) for the wholesale market in all segments and bilateral contracts •A €3 million investment in hydrogen The gas shock has already caused a significant reduction in natural gas consumption in EU countries, although market prices have not been passed on to the end user. In January-July 2022, gas consumption in the EU was 10% and in Poland 15% YoY lower than in 2021. Natural gas consumption in JanuaryJuly 2022 (%YoY) In the context of deep declines in gas consumption this year, the mechanism proposed by the EC in July to reduce consumption by 15% by member countries does not seem to be a major challenge for Poland. Twelve EU countries, including Poland, have already re duced gas consumption by 15% YoY in January-July 2022. High storage fills, the launch of the Baltic Pipe pipeline from late September and new interconnectors with Lithuania and Slovakia reduce the risk of a gas shortage in Poland in the upcoming heating season. High prices are being boosted by negative events related to the war in Ukraine, including sabotage at Nord Stream. Record high prices encourage gas substitution and directly affect the decline in demand and production in gasintensive sectors. Househ olds and the service sector are generally protected; hence price increases are most severe for producers of the chemical (including fertilisers), mineral and metal smelting industries. 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
Rates Spark: Discussing the Potential of 4.5% and its Impact on Markets

Energy Prices And Their Impact On Marekts And Consumer Price

ING Economics ING Economics 19.11.2022 10:28
Energy price shock for producers in 2022 Translation of wholesale market prices into Producer Price Index (PPI) and Consumer Price Index (CPI) prices: Producer prices typically respond quickly to changes in wholesale energy market prices, which are driven by global developments. In Europe, they are largely impacted by the EU’s energy and climate policy and the EU’s energy market design. However, for individual companies, price changes are often indexed to market prices and occur with some delay. While stock market transactions are transparent, we have limited insights into bilateral contracts between energy utilities and individual manufacturers. Finally , the transmission of shifts in wholesale and 4 producer prices on consumer prices in Poland is constrained by the Energy Regulatory Office, which is responsible for electricity and gas tariffs to households, as well as government decisions on taxes and bene fits. Energy prices what and what does it depend on? Postrecession rebound 2021 and rising oil prices: The upward pressure on industrial output in 2021 was a rebound from the 2020 pandemic recession steadily. In January 2021, PPI growth was 1% built up quickly and YoY, and by December was already at 14.4%, largely driven by price increases in the coke a nd refined petroleum products While January 2021 saw a 6.9% . YoY decline in this category, while December 2021 price growth was 64.3% YoY. This category accounts for 5.2% of the PPI index basket in 2022. Producer price index (PPI) and its energy categories (%ch YoY) A rapid buildup of cost pressures in 2022 and increases in gas and electricity prices: Throughout 2022, water incre prices in the generation and supply of electricity, gas, steam, and hot ased systematically . Price increases in this category reached 30% January 2022 and accelerated to nearly 80% YoY in YoY in August. This category accounts for .8% 7.5% of the PPI basket in 2022. Increases in energy and other categories moved the PPI index from 14 YoY in January to 25.5% in August At the starting point ( before the energy shock ) , 2022 . energy prices for companies in Poland were generally close to the EU average: for companies (including taxes) average in Poland in the second half of 2021. They the past According to Eurostat data, electricity prices were about a quarter lower than the EU27 have increased by a total of about 25% over four years (between the second half of 2021 and of 2018). The price of natural gas for companies saw a total increase of 30% in four years, close to the EU average . Electricity prices for companies in the EU in second half of 2021 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
Copper Prices Slump as LME Stocks Surge: Weakening Demand and Economic Uncertainty

External Assistance And EU Policy And Government's Shield

ING Economics ING Economics 19.11.2022 10:29
External assistance and government's anti-inflation shield The vast majority of respondents say the anti-inflation shield is helpful. The shield comprised temporary cuts in indirect taxes, addressed mainly to households. However, most companies (63%) find the anti-inflation shield helps only slightly, and only 15% feel that it does not help at all. Does the anti-inflation shield help your company? External assistance and EU policy to combat the energy crisis Most companies are quite sceptical about the effectiveness of EU policies in dealing with the energy crisis. 44% of companies do not believe that EU policies can contain the crisis but do note the potential for good solutions within them. One in ten companies are strongly critical and see EU policies as a pause button rather than a firm solution for dealing with the crisis. Slightly rarer are the companies that view EU policies more positively and with more hope (a total of 36%, of which 6% believe in EU policies without reservations. The remaining 30%, however, would make changes). Could EU policies help in the energy crisis? 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
Bond Markets Feeling Weighted: US 10-Year Yield Still Pressured

In Contrast To The ECB, The Fed Will Keep Raising Interest Rates

InstaForex Analysis InstaForex Analysis 20.11.2022 12:38
Long-term outlook. The EUR/USD currency pair moved slowly during the current week, resulting in no significant price changes. We predicted a significant downward correction at the start of this week, but it has yet to materialize. Traders have been trying to decide whether to continue making speculative purchases of the euro currency or to return to a more stable dollar. The market was uninterested in the fundamental events that occurred. For example, the European Union's October inflation report was only the second assessment with which everyone was already familiar. As a result, the market did not react to the 10.6% y/y increase in inflation. The US elections were incredibly fascinating, but it's fair to say that the outcomes were predictable. Republicans narrowly won the House of Representatives, while the Democrats kept control of the Senate with a majority. Given that they previously held control of both chambers of Congress, the Democrats' situation has worsened. In contrast, many American journalists and experts refer to this loss as "the defeat of the Republicans" because of the Republicans' confidence in the prospect of a decisive defeat. Many believed that Donald Trump, the party's leader, was laying the groundwork for the elections of 2024. He congratulated the Republicans on their victory and asserted that it was his merit before the vote count was finished. Trump then began his favorite record about "numerous violations at polling stations" after it became apparent that there would be no victory in the Senate and a slight advantage in the House of Representatives. In the end, he did submit a formal application to run in the 2024 presidential election. Recall that the Democrats receive the most criticism from Americans regarding high inflation and the current economic downturn. Inflation can safely return to 2% over the following two years, and the recession can end without actually beginning. Therefore, we predict that Biden will win a second term in office rather than Trump winning another term as US president in 2024. COT evaluation. The predictions from the COT report for the euro in 2022 are paradoxical. They displayed the openly "bullish" attitude of professional traders for the first half of the year, but the value of the euro was steadily declining at the same time. Then they displayed a "bearish" attitude for a while, and the value of the euro also steadily declined. The euro has barely budged from its 20-year lows, and the net position of non-profit traders has turned bullish again and is strengthening. As we've already mentioned, this is taking place due to the continued high demand for the US dollar against a challenging geopolitical backdrop. As a result, although demand for the euro currency is rising, the strong demand for the dollar prevents the euro currency from experiencing significant growth. The number of buy-contracts from the "non-commercial" group increased by 7,000 during the reporting week, while the number of shorts decreased by 2,000. The net position consequently increased by roughly 5,000 contracts. Recent weeks have shown a gradual increase in the value of the euro, which already accords with the COT report's indications. However, the geopolitics are likely to remain the same, or there may not be enough reasons for the euro to continue to grow. The upward trend may end as the green and red lines of the first indicator are very far apart from one another. For non-commercial traders, there are 113 thousand more buy than sell contracts. As a result, although the net position of the "Non-commercial" group may continue to increase, the euro may not experience a similar increase. Sales are 39 thousand more if you look at the overall open long and short position indicators for all trading categories (635k vs. 596k). Fundamental event analysis This week, there were no significant macroeconomic reports. Last week, when the US inflation report had the effect of a bomb detonating in the market, traders were very active in buying the pair. However, we stated that while the reaction in the form of a fall in the dollar is quite logical, the strength of its fall raises concerns. The inflation report wasn't so significant or shocking that traders started selling off US currency in large quantities. Many people are still determining the best course of action when buying the euro currency, which appears to be in the early stages of developing a new upward trend. In contrast to the ECB, the Fed will keep raising interest rates. Furthermore, neither the timing nor the identity of the party whose final bid will be higher is known. Technical factors favor the euro, and the fundamental environment offers limited support for this currency. Trading strategy for the week of November 21–25 : 1) The pair crossed all of the Ichimoku indicator's lines in the 24-hour time frame, giving it a real chance of long-term growth for the first time in a long time. Of course, if geopolitics deteriorates again, these opportunities could vanish quickly. However, we can confidently anticipate an upward movement with a target of 1.0636 (100.0% Fibonacci) and cautiously buy the pair. 2) The sales of the euro/dollar pair are no longer significant. You should now wait for the price to return below the important Ichimoku indicator lines before thinking about short positions. Explanations of the illustrations: Price levels of support and resistance (resistance and support), Fibonacci levels – target levels when opening purchases or sales. Take Profit levels can be placed near them. Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5). The net position size of each trading category is represented by Indicator 1 on the COT charts. The net position size for the "Non-commercial" group is indicated by indicator 2 on the COT charts.     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/327564
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

In China The Outbreak Continues To Get Worse | The ECB Has Given Banks An Incentive To Get Rid Of Those Loans

Saxo Bank Saxo Bank 21.11.2022 09:30
Summary:  Markets remain on edge amid lack of economic data but heavy focus on Fed commentaries which were mixed at best with Collins remaining hawkish but Bostic again signaling a slowdown in the pace of rate hikes. Meanwhile, covid outbreaks in China continue to get worse, keeping expectations of a Xi pivot also restrained. Commodities including oil and gold gave up recent gains on higher USD and China concerns. Weekend elections in Malaysia saw its first ever hung parliament, although not a complete surprise. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) traded sideways US equity markets had a lackluster session with modest gains on Friday. Nasdaq 100 was unchanged and the S&P 500 edged up 0.5%. Nine out of the 11 sectors within the S&P 500 gained, with utilities, up 2% being the top performer. Energy was the largest laggard, down 0.9% as WTI crude oil fell to as low as USD77.24 at one point before settling at USD80.08, down 1.9% on Friday and 10% for the week on the concerns of weakening demand. Retailers Foot Locker (FL:xnys), Rose Stores (ROST:xnas), and Gap (GPS:xnys) surged by 7% to 10% on earnings and guidance beating street estimates. US  treasury (TLT:xnas, IEF:xnas, SHY:xnas) yield rose as Fed member Collins keeping 75bps on the table Investors sold the front end of the treasury curve, seeing 2-year yield up 8bps to finish at 4.53% on Friday, following Boston Fed President Susan Collins kept the option of a 75bps hike in December open. Nonetheless, the money market curve continue to assign a higher than 80% chance of a 50bp hike in the next FOMC meeting. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) consolidated on Friday but ended the week higher The risk-on sentiment in Hong Kong and mainland China faded towards the end of last week as investors became cautious about the surge of Covid cases in mainland China that might be testing the resolve of the Chinese authorities, in particular, that of the local governments to implement the 20-item guidelines of relaxing pandemic control measure. Hong Kong stock markets traded higher initially in the morning, led by China Internet stocks, following Alibaba (09988:xhkg) reporting earnings beating expectations and adding to its share repurchase programme and The Chinese authorities’ grant of a new round of 70 online game licences to firms including Tencent (00700:xhkg) and NetEase (0999:xhkg). China property developers declined and dragged the benchmark indices lower, after Moody’s warned that the recent government policy support to the mainland real estate sector was no game changer. Hang Seng Index dropped by 0.3% on Friday and gained 3.9% for the week. In mainland bourses, healthcare shares gained as new Covid cases surged to above 25,000, a new high since April. CSI 300 declined 0.5% on Friday and edged up by 0.3% for the week. Crude oil (CLZ2 & LCOF3) suffering from worsening Covid outbreak in China WTI futures took a look below the key $80/barrel mark on Friday amid the return of demand concerns as the Covid outbreak in China continued to get worse. Further developments over the weekend (read below) suggest further caution on Xi pivot expectations will likely remain. Meanwhile, the winter demand has so far remained restrained but the week ahead may bring further volatility as the deadline for European sanctions on Russia crude looms. NatGas prices were also lower after Freeport LNG announced initial operations are set to resume from their export facility in mid-December, one month later than prior guidance. Gold (XAUUSD) still eying the hawkish Fed Gold stayed short of making an attempt at the key $1800 level last week and was down over 1% as the USD gains returned amid the generally hawkish rhetoric from Fed speakers confirming more rate hikes remain in the pipeline. It is now testing the resistance-turned-support at 1750, and a move higher needs support from further declines in yields and the US dollar or some other catalyst that sees a run to safety. FX: NZD in gains ahead of RBNZ rate decision this week The Reserve Bank of New Zeeland is likely to deliver its sixth consecutive 50bps rate hike this week, or more with consensus tilting towards a larger 75bps move. The calls for a hike come amid hot inflation at 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target – which comes in conjunction with a tight labour market. Most members of the RBNZ shadow board also supported a 75bps rate hike. NZDUSD started the week on a stronger footing, after having touched 0.62 on Friday. AUDNZD remains in a downtrend with China’s Covid outbreak as well as a relatively dovish RBA limiting the prospects for AUD.   What to consider? Fed’s Collins says 75bps still on the table for December, Bostic dovish Fed’s Boston Governor Collins appeared on a CNBC interview on Friday, and said she hasn’t decided on the magnitude of next month’s interest rate hike, but that a 75bps rate hike still remains on the table. She also emphasised that there is no clear and significant evidence that the overall inflation is coming down at this point, and there is also no clear consistent evidence of softening in labor markets. In fact, her comments raised terminal rate expectations as she said that data since September have kind of increased the top of where the Fed may need to go with interest rates. On the economy, she is concerned there could be a self-fulfilling dynamic that could make a more severe downturn more likely. However, Collins is reasonably optimistic a recession can be avoided. On the other hand, we also heard from Atlanta Fed Governor Raphael Bostic who said he favours slowing down the pace of rate hikes and also hinted that terminal rates will be about 1% pt higher from here. Worth noting however that Collins is only a voter this year (and not in 2023) while Bostic is not a voter this year or next. China’s Covid outbreak is getting worse China reported its first Covid-related death in nearly 6 months in Beijing as the outbreak continues to get worse and cast doubts on a Xi pivot. The capital added 516 cases on Sunday, and called the situation "grim." There are some retail and school closures, and the request to stay home was made over the weekend and has been extended. Meanwhile, a district in Guangzhou has imposed a 5-day lockdown to conduct mass coronavirus testing in some areas. ECB balance sheet reduction kicks off Euro zone banks are set to repay 296 billion euros in multi-year loans from the European Central Bank next week, less than the roughly 500 billion euros expected, in its latest step to fight runaway inflation in the Eurozone. The ECB has given banks an incentive to get rid of those loans by taking away a rate subsidy last month. It was its first move to mop up cash from the banking system and the first step towards unwinding its massive bond purchases. While the odds of a 50bos are still in favor for the December 15 meeting, key focus will also be on how fast this move can reverse the ECB's 3.3-trillion-euro Asset Purchase Programme. Christine Lagarde continued to sound the alarm on inflation, saying that even an economic downturn wont be enough to tame soaring prices. However, Knot hinted at slower pace of rate hikes, expecting rates to reach neutral next month. He still reaffirmed that policy needs to be restrictive and QT should be used alongside. UK retail sales signals a temporary recovery in consumer spending A rebound in UK’s retail sales for October signalled that Q4 may see concerns on consumer spending ease slightly. Retail sales grew 0.6% MoM in October after a decline of 1.5% in September. However the outlook remains bleak given the squeeze on incomes amid high inflation and the rise in interest rates. Political gridlock in Malaysia After Saturday’s election, Malaysia saw its first ever hung parliament as none of the three major coalitions won enough seats to form a majority, extending the political crisis in an economy on a fragile rebound. It is unlikely to be a big shock to the markets, as the results were generally as expected. The king has asked the parties to name their PM candidates by Monday afternoon, and while a coalition will likely be formed it is hardly enough to ensure a smooth functioning government. Ex-PM Mahathir lost the election while the ruling coalition was reduced to 30 seats, signalling a complete lack of trust in the political framework.   For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-21-nov-2022-21112022
The Reserve Bank Of New Zeeland Is Likely To Deliver 50bps Rate Hike

The Reserve Bank Of New Zeeland Is Likely To Deliver 50bps Rate Hike

Saxo Bank Saxo Bank 21.11.2022 10:06
Summary:  Markets are off to a sluggish start this week after a choppy session on Friday, with China reporting its first official Covid deaths in months, one in Beijing, and driving new headwinds for reopening hopes. The Hang Seng Index was down over 5% at one point overnight. The week ahead is a short one in the US, with markets closed there on Thursday for the Thanksgiving holiday. Wednesday sees the release of many preliminary manufacturing and services PMI.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are trading slightly lower in early European trading hours driven by lower sentiment as China’s zero Covid policy is already under pressure with rising case numbers and the central bank, PBoC, urging stabilisation of financing to the real estate sector indicating how fragile this part of the economy is. The key level on the downside to watch in the S&P 500 futures is the 3,955 level and after that the 100-day moving average at around the 3,919 level. Euro STOXX 50 (EU50.I) European stocks are still up more than 20% from the lows in early October following better than expected macro news and mild weather on the continent. But it seems the good fortune might change now with the weather turning much colder in Northern Europe and if China is not opening up as fast and wide as expected that is a negative for European companies as China is the largest trading partner to Europe. STOXX 50 futures are trading around the 3,910 level with the 3,892 level being the first support level to watch on the downside and then the 3,873 level. FX: USD grinds higher on wobbly risk sentiment The US dollar traded firmer in the Asian session overnight after choppy action late last week as there has been no major follow up move in US yields after the huge reaction to the October CPI data release the week before. Risk sentiment seems to be the local driver here and major reversal levels for USD pairs are still quite distant, meaning the USD can continue to consolidate without major technical implications just yet. Examples of levels are the 1.0100 area in EURUSD, the 1.1600-50 area in GBPUSD and 0.6500-25 in AUDUSD. Little in the way of US macro data this week, although on Wednesday we do get the FOMC minutes, together with a dump of data points including Oct. Durable Goods Orders, weekly jobless claims, preliminary Nov. Manufacturing and Services PMI, and Oct. New Home Sales ahead of the Thanksgiving holiday, with markets close in the US on Thursday and only partially open on Friday. Crude oil (CLZ2 & LCOF3) Crude oil dropped further to fresh multi-week lows in early Monday trading with January Brent touching 86.40 and December WTI below 80. The short-term outlook has been hurt by renewed dollar strength, the most inverted US yield curve in four decades signaling high risk of an economic recession, and not least China’s continued struggle with Covid (see below). Ahead of EU sanctions on Russian oil, which will reduce supply from early next year, the seasonal softness in demand has been exaggerated by the above-mentioned developments. Crude oil trades within a wide range, and it will take a break below the September low at $83.65 in Brent and $76.25 in WTI for that to change. Gold (XAUUSD) Gold trades lower for a fourth day with the market potentially targeting $1735 support. While a stronger dollar driven by FOMC hawks (see below) is weighing on prices, gold’s biggest short-term threat remains long liquidation from funds who in the runup to last week’s failed attempt to break resistance around $1800 had bought gold futures at the fastest pace since June 2019. During a two-week period to November 15 money managers bought 80k lots thereby flipping a short position to a 49k lots net long. During the same period holdings in bullion-backed ETFs continued to drop, signaling no appetite from longer-term focused investors to get involved. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US treasury yields rose slightly on Friday, but have fallen back to start the weak amidst soft risk sentiment in Asia. Friday saw the yield curve inversion reaching a new extreme for the cycle at –72 bps for the 2-10 slope. For the 10-year yield, the cycle low is 3.67%, with considerable focus on the 3.50% level (the major high from June just after the FOMC meeting), while an upside reversal would require a jump well through 4.00%. What is going on? China’s Covid outbreak is getting worse China reported its first official Covid-related death in nearly 6 months in Beijing as the outbreak continues to get worse and cast doubts on a Xi pivot. The capital added 516 cases on Sunday and called the situation "grim." There are some retail and school closures, and the request to stay home was made over the weekend and has been extended. Meanwhile, a district in Guangzhou has imposed a 5-day lockdown to conduct mass coronavirus testing in some areas. China focused commodities have taken a haircut on the recent deterioration on concerns tighter restrictions could be enforced, while China implements its new 20-point tweaking covid restriction plan, aimed at minimising disruptions to people’s daily lives and the economy. The iron ore (SCOc1) price fell almost 4% on Monday in Asia while copper has lost 8% during the last week. Hopes regarding China’s property sector remain after the nation introduced a property rescue package last week. Netherlands trade minister says US cannot impose trade restrictions on Netherlands Referencing the US’ ban against exports of key advanced semiconductor production technology, the Netherland’s trade minister said Friday. This was among signs that Europe is seeking a “middle path” on its policy toward China after US President Biden’s administration asked key allies to comply with its ban as well. French President Macron Friday also pushed back against the idea of dividing the world into rival blocs, while German Chancellor Scholz visited China two weeks ago looking for economic reconciliation between the two countries. Sweden house prices down 3% m/m in October This takes the decline in house prices down 14% from the peak sounding off the alarms at the Riksbank and commercial banks as the house price declines will drive impairments on loans related to the sector. This could in turn lead to lower credit extension from banks into the private sector and thus slow down the economy further. ECB Christine Lagarde reaffirms high inflation remains the number one issue In a speech on Friday, ECB president Christine Lagarde confirmed once again that the central bank will mostly focus on fighting inflation in the short- and medium-term. According to her, the risk of a recession in the eurozone has significantly increased but even if this happens, it is unlikely to quell inflation significantly. This means that hiking interest rates is still on the cards. She also advises the eurozone government to embrace targeted and temporary fiscal stimulus. Too much fiscal stimulus is likely to stimulate demand, thus increasing inflationary pressures. Based on the detailed eurozone HIPC report for October which was released a few days ago, there is so far no sign whatsoever of a peak in underlying inflation pressure. In our view, we should not take for granted that the ECB will slow the pace of hikes to 50 basis points in December. COT report shows major rotation between commodity sectors The weekly Commitment of Traders report covering the week to November 15 saw speculators make some major position adjustments as the dollar and yields dropped, a further inversion of the US yield curve raising the risk of an incoming recession as well as temporary hopes China would ease its Covid restrictions. Developments that saw funds reduce exposure in energy and grains while adding length to metals and softs. The biggest changes being a sharp reduction in speculative bets in crude oil, soybeans, corn and cattle while buying was concentrated in gold, copper, sugar and cocoa. What are we watching next? NZD gains ahead of RBNZ rate decision this week The Reserve Bank of New Zeeland is likely to deliver its sixth consecutive 50bps rate hike this week, or more with consensus tilting towards a larger 75bps move. The calls for a hike come amid hot inflation at 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target – which comes in conjunction with a tight labour market. Most members of the RBNZ shadow board also supported a 75bps rate hike. NZDUSD started the week on a stronger footing, after having touched 0.62 on Friday. AUDNZD remains in a downtrend with China’s Covid outbreak as well as a relatively dovish RBA limiting the prospects for AUD. Fed’s Collins says 75bps still on the table for December, Bostic dovish Fed’s Boston Governor Collins appeared on a CNBC interview on Friday and said she hasn’t decided on the magnitude of next month’s interest rate hike, but that a 75bps rate hike remains on the table. She also emphasised that there is no clear and significant evidence that the overall inflation is coming down at this point, and there is also no clear consistent evidence of softening in labor markets. In fact, her comments raised terminal rate expectations as she said that data since September have kind of increased the top of where the Fed may need to go with interest rates. On the economy, she is concerned there could be a self-fulfilling dynamic that could make a more severe downturn more likely. However, Collins is reasonably optimistic a recession can be avoided. On the other hand, we also heard from Atlanta Fed Governor Raphael Bostic who said he favours slowing down the pace of rate hikes and hinted that terminal rates will be about 1% pt higher from here. Worth noting however that Collins is only a voter this year (and not in 2023) while Bostic is not a voter this year or next. Earnings to watch Today’s US earnings focus is Zoom Video and Dell Technologies. After being a darling through the pandemic Zoom Video has experienced revenue growth coming down to 4.4% y/y expected in the FY23 Q3 (ending 31 October) release down from 35% y/y a year ago. The company is well run but is facing intense competition in the video conferencing business. Dell Technologies will likely highlight the trends we already know of slowing PC sales and lower spending on enterprise technology driven by a slowing economy and falling share price in the technology sector. Today: Compass, Agilent Technologies, Zoom Video, Dell Technologies Tuesday: Kuaishou Technology, Medtronic, Analog Devices, VMware, Autodesk, Dollar Tree, Baidu, HP, Best Buy Wednesday: Xioami, Prosus, Deere Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 1330 – US Oct. Chicago Fed National Activity Index 1800 – US Fed’s Daly (Voter 2024) to speak 2145 – New Zealand Oct. Trade Balance  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-21-2022-21112022
A Bright Spot Amidst Economic Challenges

German PPI And Hong Kong CPI Significantly Decreased

Kamila Szypuła Kamila Szypuła 21.11.2022 10:46
The beginning of the week is quite calm when it comes to reports. Today, attention may be drawn to the events from the second half of the day, ie reports from New Zealand. German PPI In Germany, there was a report on inflation from the manufacturer. For Europe's largest economy, it turns out that the reading was positive/negative. The current reading has reached the level of -4.2% , which is what was expected. In September, the PPI m/m peaked at 7.9% for the year and then dropped dramatically to 2.3%. Today's reading may suggest a negative trend. PPI YoY has been on an upward trend since the beginning of the year. The current reading is at 34.5% and it is a drop from level of 45.8%. Hong Kong CPI The Hong Kong Consumer Price Index has reached 1.8% and thus increased/decreased. Since the beginning of the current year, it has remained at low levels to a maximum of 2.5%. A sharp increase in inflation took place in September and reached the level of 4.4%. Source: investing.com Speeches Today, the market awaits three speeches from the European continent, including one from Great Britain. The first speech was at 10:00 CET, The European Central Bank Supervisory Board Member Edouard Fernandez-Bollo. This speech can clarify certain aspects of the financial regulation in the eurozone. The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures Bank of England (BOE) Monetary Policy Committee (MPC) Member Sir Jon Cunliffe will speak at 11:05 CET. His speeches often contain indications on the future possible direction of monetary policy. Deutsche Bundesbank President and voting member of the ECB Governing Council Joachim Nagel is set to speak at 19:30 CET. He may drop subtle clues regarding future monetary policy. BCB Focus Market Readout The Central Bank of Brazil will publish a report on market expectations regarding the economic performance of the country's economy, i.e. Focus Market Readout. Expectations are important because they will determine what mood prevails in the economy, whether the country is developing and what the further economic situation in Brazil may look like. US 2-Y and 5-Y Note-Auction Yield fluctuations should be monitored closely as an indicator of the government debt situation. Investors compare the average rate at auction to the rate at previous auctions of the same security. US Treasuries have maturities of two to ten years. Governments issue government bonds to borrow money to cover the gap between the amount they receive in taxes and the amount they spend refinancing existing debt and/or raising capital. The interest rate on government bonds reflects the return an investor will receive by holding the bond for its life. When it comes to 2Y and 5Y bonds, yields are increasing, which means that investors rate the risk associated with US debt high. And they want the highest possible rate of return to decide to buy US bonds. The last reading for 2Y was 4.460% and if the trend continues you can expect a drop of 4.5%. The situation for 5-Y bonds is better as the ongoing uptrend has not gone that high and the last reading was down. The decrease took place from the level of 4.228% to the level of 4.192% New Zealand Trade Balance At the end of the day, reports on imports and exports, and thus on the trade balance, will come from New Zealand. This country is expected to import more than it exports and its trade balance will remain negative. The trade balance is forecast at -1.715M, this is the expected decline from the previous reading which was at -1.615M. It can mean that a country with a large trade deficit borrows money to pay for its goods and services. Even though the beginning of the week was calm, watch out for the next days. There may be important reports for the markets. Summary: 3:15 CET China New Loans 9:00 CET German PPI (Oct) 10:00 CET ECB Supervisory Board Member Fernandez-Bollo Speaks 10:30 CET Hong Kong CPI (YoY) (Oct) 11:05 CET BoE MPC Member Cunliffe Speaks 13:25 CET BCB Focus Market Readout 18:30 CET US 2-Year Note Auction 19:30 CET German Buba President Nagel Speaks 20:00 CET US 5-Year Note Auction 23:45 CET New Zealand Trade Balance Source: https://www.investing.com/economic-calendar/
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

2023 FX Outlook: Swedish Krona (SEK) Remain Vulnerable On The Back Of European And Global Risk Factors

ING Economics ING Economics 21.11.2022 14:22
For now, higher-than-expected inflation data trumps the mounting concerns about the housing market for the Riksbank. A 75bp rate hike looks likely on Thursday, and we expect one final 50bp increase in February In this article The Riksbank is likely to hike faster than signalled in September Riksbank is keen to stay ahead of the ECB, but housing is a risk A stronger SEK still unlikely in the near term The Riksbank is likely to hike faster than signalled in September When the Riksbank hiked its policy rate by a full percentage point back in September, it was coupled with a message that this was unlikely to happen a second time. The bank’s forecasts pointed to a peak policy rate of 2.5% in April, effectively setting the stage for a 50bp hike this week. But in what has become a familiar tale for central banks, core inflation has since come in higher than the Riksbank had anticipated, and a more aggressive move now looks likely. The Riksbank's September rate hike projection Source: Riksbank, ING   At 7.9%, core CPIF is half a percentage point above the central bank’s September forecast. The jobs market still looks strong, too, even if we saw an unexpected rise in the unemployment rate in the latest set of data (these numbers are fairly volatile). Together with the weak krona, it looks like policymakers will opt for a 75bp rate rise on Thursday. We’re forecasting that rates peak at 3% in February. Core inflation rose from 7.4% to 7.9% in October Source: Riksbank, ING Riksbank is keen to stay ahead of the ECB, but housing is a risk All of this is reinforced by the recent messaging we’ve had from Swedish policymakers. Among the Riksbank’s hawks, Governor Stefan Ingves has stressed the importance of staying a “comfortable distance” ahead of the European Central Bank. Don’t forget that Thursday’s meeting is the last before February, and the ECB will meet – and presumably hike rates – twice before then. Ingves said in the last set of meeting minutes that the Riksbank would need to “follow along upwards at the same pace” at the very least. However, there are good reasons to think the Riksbank is not very far away from the end of its tightening cycle, and the most obvious of these is the housing market. It’s no secret that Sweden’s economy is among the more interest-rate sensitive, and there are already signs that tighter policy is weighing on the housing market. Transaction volumes have fallen sharply, and by some measures, property prices have already started to fall. The headline Valueguard HOX housing index fell a further 3% in October alone, and the Riksbank has projected more declines to come. Much of Sweden’s mortgage market is either fixed for short periods or not at all. Housing market is declining at a faster pace than expected Source: Macrobond, ING   In short, there’s a growing trade-off for the Riksbank between taming inflation and exposing debt fragilities – a challenge that’s far from unique to Sweden. We expect the Riksbank’s new rate projections to factor in a further 25-50bp of tightening next year, and much will depend on the outcome of wage negotiations in the spring. A stronger SEK still unlikely in the near term The SEK OIS curve is embedding around 60bp of tightening this week, so a 75bp move would likely come as a hawkish surprise. However, we believe a greater focus will be on the new rate projections, which are (unlike in Norway) hardly ever followed to the letter by investors, but will provide an indication of how much appetite there is for further tightening. Implicitly, the projections will also show how much the focus is shifting from the mere inflation-fighting exercise to domestic concerns – in particular on housing. This is important because it will shape how SEK rates react to future data releases. On the FX side, despite the Riksbank’s constant protests against a weak krona, the implications of monetary policy remain rather limited for the near term, where we see EUR/SEK trading around 11.00 and facing upside risks. The RB’s hawkishness has been ineffective at lifting SEK in an unstable risk environment, especially in Europe, and we doubt this will change any time soon. The actual implications may emerge in the longer run. If the RB ends up hiking substantially more than the ECB by the time both central banks’ tightening cycles come to an end, then EUR/SEK may face some downward pressure next year, but only under the condition that risk sentiment stabilises. As discussed in our 2023 FX Outlook, we expect SEK to remain vulnerable on the back of European and global risk factors, and only expect limited downside risks for EUR/SEK into end-2023 despite a widening in the Riksbank-ECB rate differential. We currently forecast 10.40/50 for the pair in 2H23. TagsSwedish krona Sweden 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  
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

The EU And UK's Currencies Do Not Significantly Outperform The US Dollar (USD)

InstaForex Analysis InstaForex Analysis 22.11.2022 08:10
The foreign exchange market may currently be undergoing significant structural changes. Recall that the market has been busy creating a downward trend section for the past two years. This section ended up being very lengthy and complex. Since in this section, we have yet to see any classical structures (5 waves down - 3 up) or at least structures resembling them, some waves still need to be identified. The geopolitical situation in Ukraine and rising Fed rates were the main drivers of the increase in demand for US currency in 2022. Regarding geopolitics, nothing changes, but things start to go the other way when it comes to Fed interest rates. If the market responds favorably to the FOMC's rate hike, then the ECB and the Bank of England will likely raise interest rates more quickly in the coming months than the FOMC. As a result, the gap, which widened in favor of the dollar, will now close and no longer favor the dollar. This reasoning leads to the conclusion that the new environment will favor the euro and the pound in the next three to six months. Of course, geopolitics will also play a significant role, but making predictions in this area is much more challenging. The only way to prevent a protracted decline in the US dollar is for the ECB and the Bank of England to eventually raise their rates less than the Fed. The ECB rate, for instance, will be 4%, while the Fed rate will be 5%. The US dollar would then be able to avoid a sharp decline. The Bank of England operates similarly. The dollar will only fall in value if the rates eventually equalize, but it won't have a significant advantage either. Since the Fed rate is no longer rising faster than the ECB or the Bank of England rate, the market is pulling both instruments away from the lows reached a few months ago. However, we need more than this element to detect a long-term upward trend section. Additionally, the upward trend that is currently in place is not an impulse. It is five waves long and corrective at the same time. Even now, the EU and UK's currencies do not significantly outperform the dollar, preventing them from smiling as they look to the future. Based on everything stated above, I do not anticipate both instruments to experience significant growth over the next six months. The likelihood is that descending structures will be constructed after the current corrective ascending structures are finished. The news background is unlikely to be appropriate for impulsive downward trends, so the instruments can alternate the trend's correction sections one after the other. All of this implies that the euro and the pound can live comfortably for a long time in an area that is 700–800 base points wide. Based on the analysis, the upward trend section's construction has been complicated into five waves. However, because the wave markup does not suggest a further increase, I cannot advise purchasing euros. If there is a successful attempt to break through the 1.0359 level with targets near the estimated 0.9994 level, which corresponds to the 323.6% Fibonacci, I advise selling.   Relevance up to 06:00 2022-11-23 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/327742
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Euro: Financial Institutions' ESG Bond Supply Will Lose Some Steam

ING Economics ING Economics 23.11.2022 08:55
Euro sustainable bond issuance in 2023 is not likely to repeat the growth rates seen in the last few years. While governments and agencies could slightly accelerate ESG issuance in 2023, financial institutions' ESG bond supply will lose some steam. Corporates are expected to remain active with sustainable bonds representing 40% of their total issuance In this article Government and agencies' sustainable bond issuance to report moderate growth in 2023 Financial institutions' ESG bond issuance to lose some steam Corporate issuers will remain very active on the sustainable bond markets   2022 sustainable bonds issued in the € currency will exceed 2021 but will end up short of our initial higher expectations. We forecast 2023 total Environmental, Social, and Governance (ESG) bond issuance to be stable compared with 2022 at €355m. A strained geopolitical environment and tougher credit market conditions make bond issuance more pricey. €355bn total sustainable bond supply in 2023 in € credit markets   Government and agencies' sustainable bond issuance to report moderate growth in 2023 After an issuance volume nearing €180bn this year we expect only very moderate growth next year towards €195bn. Sovereign issuers have seen all of the main issuers enter the market, and it is now smaller issuers such as Greece that are contemplating inaugural green bonds in 2023. That also means that an additional growth push out of that direction looks unlikely. For SSAs (Sub-sovereign organisations and agencies), the EU will continue to play a dominant role as the plans remain in place to raise 30% of the Next Generation EU fund via green bonds. The Next Generation EU fund, also called the Recovery Fund, may contribute up to €30bn to EUR SSA green bond issuance. €195bn expected sustainable € bonds by governments and agencies in 2023     SSA social issuance, which has made up around a quarter of the overall SSA ESG supply, is currently dominated by the two French agencies CADES and UNEDIC followed by the Dutch BNG and NEDWBK. The EU only issued slightly more than €2bn in social bonds under the SURE programme in 2022. We would expect that situation to persist in 2023, but would not exclude the off chance that the EU’s social issuance could see a revival amid a prolonged energy crisis and recessionary environment.  Sustainability linked issuance (SLB) continues to play a very niche role among sovereigns, seeing only dollar-denominated issues from two South American countries. In EUR the Dutch state treasury has indicated that such issuance could become part of the funding mix, yet not in the short term as they would have to be part of a political process.    Financial institutions' ESG bond issuance to lose some steam The integration of environmental and social sustainability aspects into the business operations of banks has strongly accelerated in recent years. This has not only been driven by regulation but also by the wider societal sense of urgency to combat climate change and protect the environment. ESG is a top priority for banks, including in their capital markets presence   Banks have become more vocal and transparent about their environmental and social strategies and targets. These not only comprise actions taken to reduce their own climate footprint, but also involve actively engaging with clients to support them in improving their environmental footprint, or distancing themselves from sectors deemed highly polluting, such as fossil fuels. They develop dedicated lending products at attractive terms, such as green mortgage loans, for the financing of environmentally sustainable projects or assets. Green and/or social bonds have become increasingly popular as a source of funding for banks in recent years. In 2021, banks issued a record €64bn in euro sustainable bonds through different types of instruments, ranging from covered bonds to subordinated bonds. This was more than double the supply seen in previous years. Banks are well on their way to breaking this record in 2022. Sustainable bank bond supply (in €bn) Source: Refinitiv, ING   During the first ten months of this year, banks issued €58bn in sustainable bonds, of which €17bn were in covered bonds, €19bn in preferred senior, €20bn in bail-in senior and €2bn in subordinated paper. This is up from €54bn over the same period last year. While green issuance is more than €10bn higher than last year, social and sustainability supply falls €7bn short of the first ten months of 2021. This largely reflects the lower refinancing of Covid-19-related small and medium-sized enterprises (SME) and/or healthcare loans through social bonds. €60bn New sustainable supply in € by banks in 2023     For 2023, we expect less issuance in sustainable bank bonds (€60bn) despite the high refinancing need of banks due to the targeted longer-term refinancing operation (TLTRO)-III expirations. The major reason is the anticipated slower lending growth. This will mitigate the ability of banks to naturally expand their green and social loan books. Meanwhile, the growth potential for supply via new sustainable bond issuers will at some point reach its limit. That said, demand for sustainable investment alternatives will remain disproportionally high. This will incentivise banks to continue to look for possibilities to grow their green and social loan portfolios, including through the identification of new types of sustainable assets. Regulatory disclosure requirements, including those related to the EU Taxonomy, will support banks in the further identification of environmentally and/or socially sustainable assets on their balance sheet. Sustainability-linked bonds (SLBs) are still shunned by banks   The issuance of sustainability-linked bonds is still not really taking off in the banking segment. Thus far only one bank printed a EUR sustainability-linked preferred senior unsecured note, with a reduction of the carbon intensity of the bank’s loan portfolio as a sustainability performance target. This contrasts sharply with the corporates segment, where nowadays about a third of the sustainable bond supply is in the SLB format. The proceeds of sustainability-linked bonds are used by issuers for general purposes, but the characteristics of the bond (such as the coupon) can vary depending on whether the issuer meets its predefined ESG performance targets. However, coupon step-up features may be seen as an incentive to redeem the bond early. This makes it difficult to issue senior unsecured or subordinated bonds in SLB format eligible for a bank’s minimum requirement for own funds and eligible liabilities (MREL). Corporate issuers will remain very active on the sustainable bond markets Corporate issuers and investors alike are embracing ESG as core financing or investment philosophies. As the pressure from societies, governments, activists and regulations accelerate, there is a bigger push for ESG issuance – particularly now with the European Central Bank favouring ESG debt for their reinvestments. This expected shift will only make ESG bonds more interesting to issue in the future.   €100bn corporate ESG bonds in € currency in 2023     We forecast a total corporate € bond issuance around €270bn in 2023, up from c.€230bn in 2022. The percentage of ESG bond supply relative to overall € corporate supply is growing year on year. We expect this to jump up to 40% in 2023, up from 35% in 2022. We expect the industrial sector to lead issuance with c.€45bn of ESG bonds next year. Utilities could print up to €40bn of SDG bonds, representing between 75% and 80% of the sector’s total supply in 2023. Total corporate ESG bonds (in €bn) and share in total issuance (%) Source: Refinitiv, ING For corporates, green bonds will remain the dominant format   We believe that green bonds will remain the preferred format representing more than half of ESG corporate issuance, but we assume sustainability-linked bonds will continue their ascension with about €32bn issued out of the €100bn we forcast for next year. Social bonds have been absent from corporate issuance, except for one social bond issued by the French utility EDF in 2021. Sustainability bond issuance by type (in €bn) Source: Refinitiv, ING TagsSustainability Green Bonds   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
EUR/USD Faces Pressure Amid PMI Releases: Is More Downside Ahead?

The OECD Warns That The Fight Against Inflation Will Take Time | Credit Suisse May Lose $1.6bn In Q4

Saxo Bank Saxo Bank 23.11.2022 09:12
Summary:  Market sentiment bounced yesterday on little news, with sentiment steady in Asia overnight. Long US treasury yields dipped, and short yields were steady ahead of today's FOMC minutes release from the November 2 meeting, taking the US yield curve inversion to a multi-decade low of -75 basis points. The focus in Europe today will be on preliminary November PMI for a sense of how badly the EU is tilting into recession.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.3% yesterday closing at the 4,010 level, the highest close since 9 September, suggesting bulls are in control as bears are already sitting on strong profits for the year and therefore has little incentive to take bigger positions before yearend. The next big level on the upside is the 200-day moving average at around the 4,060 level. Today’s key events are preliminary US PMI figures for November and later this evening the FOMC Minutes which could provide more clues into the thinking of policymakers. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) According to Reuters, the Chinese regulators may be close to a decision to impose a fine of over $1 billion on Jack Ma’s Ant Group. Since its IPO was halted by the Chinese authorities in 2020, the group has been under regulatory overhaul. While the amount of the fine is substantial, initial reactions from the investment community to the news were positive as the fine could set the stage for the conclusion of the regulatory overhaul. Alibaba (09988:xhkg) jumped more than 4% on the news. China internet stocks gained, led by Kuaishou Technology (01024:xhkg) as the social media platform company surged 6.2% on better-than-expected Q3 results. After rising 25.5% yesterday, China Aluminum (02068:xhkg) continued its advance, rising 18% on Wednesday. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Hang Seng Index gained 1.2% and CSI 300 climbed 0.5%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. FX: Dollar drops as risk sentiment rebounds Softer long US treasury yields also pushed the US dollar lower as the US yield curve inverted to a new cycle low. Still, the big dollar has done very little after the huge, but brief sell-off move on the October CPI release nearly two full weeks ago, with today’s large data dump and FOMC minutes the last hope this week for providing a spark of volatility in either direction ahead of the long holiday weekend (tomorrow, US markets are closed, with most workers also out Friday). The FOMC minutes late today are not highly anticipated, but could surprise if there is more consensus on a hawkish stance than anticipated. EURUSD has carved out a 1.0222-1.0479 range now. Crude oil (CLF3 & LCOF3) Crude oil closed higher on Tuesday supported by a general recovery in risk appetite as the dollar softened and recent short sales in response to false production hike rumor were paired back. Crude oil prices have traded lower this month in response to a drop in demand from China as Covid cases surge to near a record with restrictions of movements currently impacting 48 cities. Ahead of today’s weekly EIA report, the API reported a 4.8 million barrel drop in US crude stocks. The data also showed that gasoline inventories declined by about 0.4m barrels last week, and distillate stocks increased by 1.1M barrels. EU diplomats will discuss and potentially approve a price cap on Russian seaborne oil sales today (see below), and if implemented Russia may retaliate by refusing to sell its crude to nations that adopt the cap. WTI resistance at $82.25 followed by $84.50 Gold (XAUUSD) Gold trades nervously around the $1735 support level for a second day as the market awaits the release of FOMC minutes. The yellow metal managed a small bounce on Tuesday as the dollar softened after Fed officials indicated they were open to implementing less aggressive hikes going forward. In the short-term the direction will be determined by fund activity and whether they need to make further reductions in recently established, and now under water, long positions. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US treasury yields were steady at the short end and dipped at the long end yesterday, driving a new extreme in the 2-10 yield curve inversion of –75 basis points. Traders are awaiting incoming US data today and the FOMC minutes for next steps, although more heavy hitting data awaits next week with Wednesday’s November PCE inflation data and next Friday’s November US jobs report. The key upside swing area for the 10-year treasury yield is near 4.00%, while the major downside focus beyond the 3.67% pivot low is the 3.50% cycle high from June. What is going on? New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Fed’s Mester and George keep the focus on inflation As investors continue to try and gauge the path of Federal Reserve rate hikes, Cleveland Fed President Loretta Mester reiterated on Tuesday that lowering inflation remains critical for the central bank, a day after supporting a smaller rate hike in December. Kansas City President Esther George said the central bank may need to boost interest rates to a higher level and hold them there for longer in order to temper consumer demand and cool inflation. Russian oil price cap in the works The Wall Street Journal is reporting that Western countries are set to agree on Russian oil price cap around $60 per barrel. However, it could be as high as $70 per barrel on oil loaded after the December 5 start date. The sanctions that the G7, EU and Australia will set, will ban the provisions of maritime services for shipments of Russian oil unless the oil sells below the cap price. The aim is to reduce petroleum revenues for Russia's war machine while maintaining flows of its oil to global markets and preventing price spikes. Russian Urals crude oil already trades at around a 25-dollar discount to Brent, so the impact on Russia’s revenues at current international prices would be limited. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The OECD revised downward its 2023 growth forecasts Yesterday, the OECD published its latest Economic Outlook. There is not much surprise. Global growth is expected to slow down significantly in 2023 to 2.2 % and to rebound modestly in 2024 at 2.7 %. This will be a long and painful economic crisis. Asia will remain the main engine of growth in the short-term. But the zero Covid policy in China will likely limit the country’s contribution to global GDP growth. Before Covid, China represented about 30 % of global growth impulse. It is now down to roughly 10 %. The OECD warns that the fight against inflation will take time. But several countries are successful. For example, in Brazil, the central bank moved swiftly, and inflation has started to come down in recent months. In the United States, the latest data also seem to suggest some progress in the fight against inflation. Nevertheless, a pause in monetary policy is unlikely in most countries in the short-term. Read the full report here. The increase in the ECB’s TLTRO funding costs for European banks came into effect Until today, European banks’ outstanding borrowings from the ECB’s Targeted Long-term Refinancing Operations III (TLTRO III). LTRO III has been funded at as low as 50bps below the average of the ECB’s Depository Facility Rate (DFR) over the entire life of those borrowings. The DFR, which is currently 1.5%, has been kept at minus 50bps from Sept 2019 to July 2022. It has been a large subsidy from the ECB in the form of below-market funding costs to European banks. Some banks are depositing these monies back into the ECB and arbitraging the interest rate differential. Last month, the ECB announced to change the calculation of the applicable DFR index with effect from Nov 23 to over the current period as opposed to the whole life of the borrowings. The move will reduce European banks’ net interest income and withdraw liquidity from the banking system. Currently, the TLTRO III balance is EUR 2.1 trillion.     JD.COM cut senior management pays while increasing benefits for all employees JD.Com announced that the company is slashing the pay for about 2,000 managers by 10-20% and using some of the savings from the move to fund planned increases in staff benefits, including health and housing benefits, for all employees including hundreds of thousands of delivery staff. Founder Richard Liu will also donate 100 million yuan of his own money towards staff benefits. Under the quest for “common prosperity” of the top government leadership, Chinese tycoons are mindful of doing their share in redistributing income. What are we watching next? Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft-landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. Copper demand growth shifting from China to Europe and the US At the FT Commodities Asia Summit in Singapore, Jeremy Weir, the CEO of Trafigura said demand for copper is shifting away from cooling building activities in China to energy transition demand, especially in Europe and the US. Weir said demand for copper has remained strong despite recent global headwinds. “We’re seeing for example very strong copper demand in Europe through electrification and even through the pandemic,” he said. “Even the current crisis and conflict in Ukraine is not reducing the demand for copper.” Following a recent rally, that got rejected ahead of key resistance at $4 per pound, HG copper has dropped back and currently trades near the middle of its established range around $3.55 FOMC minutes to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this hawkish message at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. Earnings to watch Today’s US earnings focus is Deere, the US manufacturer of agricultural and forestry equipment, with analysts expecting FY22 Q4 (ending 31 October) revenue growth of 18% y/y and EPS of $7.09 up 72% as momentum and pricing power remain strong due to high commodity prices on agricultural products. Today: Xiaomi, Prosus, Deere Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Nov. Preliminary Manufacturing and Services PMI 0930 – UK Nov. Preliminary Manufacturing and Services PMI 1330 – US Oct. Preliminary Durable Goods Orders 1330 – US Weekly Initial Jobless Claims 1445 – US Nov. Preliminary Manufacturing and Services PMI 1500 – US Nov. Final University of Michigan Sentiment 1500 – US Oct. New Home Sales 1530 – EIA's Weekly Crude and Fuel Stocks Report 1700 – US Weekly Natural Gas Storage change 1905 – US FOMC Meeting Minutes 1905 – New Zealand RBNZ Governor at Parliament committee 2130 – Canada Bank of Canada Governor Macklem to testify to parliament committee Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-23-2022-23112022
The Reserve Bank Of New Zeeland Is Likely To Deliver 50bps Rate Hike

RBNZ Interest Rate Reached 4.25% | Singapore CPI Drop | US Reports Ahead

Kamila Szypuła Kamila Szypuła 23.11.2022 11:39
Today is full of important statistics from the USA. The first will be a report on durable goods orders, which will reflect the state of the industrial sector and consumer demand. In addition, there will be PMI reports from the European Union and the UK. RBNZ Interest Rate Decision Undoubtedly, Wednesday is a very busy day. The first important information came from Noerj Zealand. As expected, Reserved Bank Of New Zealand raised rates by 75bp. Thus, interest rates are the highest since 2008. RBNZ Interest Rate reached 4.25%. CPI data Singapore At the beginning of the day, information about the level of inflation in Singapore also appeared. CPI and Core CPI reached lower than expected levels. CPI for October will amount to 6.7% against the last reading of 7.5%. Core CPI decreased by 0.2% and reached 5.1%. This may mean that inflation is heading to decline and reach a stable 2% level. South Africa The opposite movement of inflation took place in South Africa. CPI Y/Y increased to 7.6% and Core CPI Y/Y reached 5.0% PMI data French Manufacturing PMI (Nov) rose from 47.2 to 49.1. Services PMI (Nov) fell to 49.4. German A similar situation took place in Germany. The Manufacturing PMI (Nov) rose to 46.7 and the Services PMI (Nov) fell 0.1 to 46.4. Both readings were greater than expected. EU PMI In the European Union, PMIs were higher than expected. The Services PMI (Nov) held its previous level of 48.6 against expectations of a decline to 48.0, and the Manufacturing PMI rose from 47.3. In Europe, the manufacturing PMI improved while services declined or remained flat. UK PMI In the UK, declines were expected, but the Manufacturing PMI And Services PMI remained at its previous level. The Manufacturing PMI remained at 46.2 and the Services PMI at 48.8. US PMI In the US, PMI reports will appear at 16:45 CET. The manufacturing PMI is expected to decline while the services PMI is expected to increase slightly. US Reports Ahead of Thanksgiving, the US will release a broad package of reports. Weekly reports as well as reports from the real estate sector may have an impact on the situation in this and other economies. Read more: Important US Reports Ahead, The Services And Manufacturing Projected Under 50| FXMAG.COM Speeches There will also be a lot of speeches today, especially from the Bank of England. At 11:45 CET, David Ramsden, Deputy Governor of the Bank of England took the floor. His public engagements are often used to drop subtle clues regarding future monetary policy. At 12:30 the Bank of England Monetary Policy Committee (MPC) Member Pill took the floor. Dr Catherine L Mann serves as a member of the Monetary Policy Committee (MPC) of the Bank of England to speak at 15:45 CET. The last speeches from the islands will be at 5:30 pm CET and Huw Pill will speak again. Representatives of the German bank will also take the floor. Two speeches are scheduled for 14:30 CET, Prof. Dr. Johannes Beermann and Professor Joachim Wuermeling are set to speak. At 16:00 CET Prof. Dr. Johannes Beermann will be speak again. FOMC Meeting Minutes The minutes are arrived today. The minutes offer detailed insights regarding the FOMC's stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions. Summary: 3:00 CET RBNZ Interest Rate Decision 7:00 CET Singapore CPI (YoY) 10:00 CET South Africa CPI (MoM) (Oct) 10:15 CET French PMI (Nov) 10:30 CET German PMI 11:00 CET EU PMI 11:30 CET UK PMI 11:45 CET MPC Member Ramsden Speaks 12:30 CET BoE MPC Member Pill Speaks 14:30 CET German Buba Beermann Speaks 14:30 CET German Buba Wuermeling Speaks 15:00 CET US Building Permits 15:30 CET US Core Durable Goods Orders 15:30 CET US Initial Jobless Claims 15:45 CET BoE MPC Member Mann 16:00 CET German Buba Beermann Speaks 16:45 CET US PMI 17:00 CET US New Home Sales 17:00 CET US Crude Oil Inventories 21:00 CET BoE MPC Member Pill Speaks 21:00 CET FOMC Meeting Minutes Source: https://www.investing.com/economic-calendar/
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

Eurozone: Inflation Pressures Are Fading On The Back Of Easing Supply Problems

ING Economics ING Economics 23.11.2022 11:48
The eurozone composite PMI came in at 47.8 in November, slightly better than in October but nonetheless confirms a contraction in the business economy. The good news is that inflation pressures are fading on the back of easing supply problems and the imminent recession The slight increase in the November PMI was mainly driven by the manufacturing PMI     American economist Robert Solow famously said that the computer age was everywhere but in the productivity statistics. At the moment, we can say that the recession is everywhere except for in the GDP statistics. While the eurozone economy still eked out positive growth in the third quarter, it seems inevitable that a recession has started in the current quarter and today’s PMI figures confirm that. The slight increase in the PMI was mainly driven by the manufacturing PMI, which saw an uptick from 43.8 to 45.7. This is still showing a sharp contraction, but slightly less than last month. New orders continue to decline, meaning that current production is coming from a lot of previously built-up backlogs. The pace of decline in services was similar to October and fierce by historical standards. New orders continue to decline here too, and businesses are becoming increasingly reluctant to hire on the back of sluggish economic activity. The upside to the clearly recessionary environment is that inflationary pressures are fading. Weaker demand, lower energy prices than in August, and easing supply-side problems are all contributing to a softening of price pressures. While energy prices remain volatile and businesses are likely to still price through some of the higher costs incurred, these factors do point to a turning point in the inflation rate around the turn of the year. TagsInflation GDP Eurozone 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 EUR/USD Pair Chance For The Further Downside Movement

The Economy And Inflation In The Eurozone Have Been Less Rate-Sensitive

Alex Kuptsikevich Alex Kuptsikevich 23.11.2022 14:48
Preliminary eurozone PMI estimates are better than expected, although they point to an economic contraction. Germany's manufacturing PMI rose from 45.1 to 46.7 in November, contrary to forecasts of a decline to 44.9. Values below 50 indicate an activity decrease, while higher-than-expected figures indicate its lesser intensity. The service sector PMI declined from 46.5 to 46.4, but above the expected 46.1. The composite PMI rose from 45.1 to 46.4 thanks to manufacturing. Earlier, a positive reversal, albeit from low levels, was also marked by the ZEW indices. Tomorrow will be the turn of the Ifo to confirm or deny this trend. Most likely, the Eurozone and the German economies will shrink in the current quarter and could also lose some money at the start of next year. However, so far, we only see signs of a relatively modest slowdown, and the labour market is displaying the highest employment rate in the history of the Euro-region. The ECB is expected to raise its rate by at least 50 points in December but might take a more drastic step with relatively strong economic data, as we saw in New Zealand earlier today. Until 2009, the eurozone economy grew strongly, even at higher rates than in the US, contributing to the euro's strength against the dollar. The economy and inflation in the Eurozone have been less rate-sensitive than expected and more so than in the USA. The euro, however, has been relatively well worked out the difference between the ECB and Fed rates. If so, the ECB could take rates above US levels, which would gradually restore the position of the single currency lost since the start of 2021.
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

Rates: In 2023 Smaller Hikes Are Very Likely In Eurozone

ING Economics ING Economics 24.11.2022 08:53
The Fed minutes have allowed rates markets to rally further, ahead of the US holiday. The focus now shifts to the European Central Bank minutes, which could also deliver dovish headlines   In this article Dovish Fed minutes extend market rally, likely to the dismay of officials More dovish headline risks from the ECB minutes Today's events and market views We think EUR rates hold the most upside in the near term Dovish Fed minutes extend market rally, likely to the dismay of officials Markets got the dovish headlines out of the Federal Open Market Committee minutes they needed to rally further –  a “substantial majority” judged that slowing the pace of hikes “would soon be appropriate”. Together with the dismal PMI readings earlier in the session this has helped put a brake to the curve flattening, though, as the front to intermediate maturities caught up. The overall takeaway looks more nuanced, and not too different than what could be gleaned from recent official statements about the general rate trajectory – “various” Fed officials did see rates peaking at a higher level than previously thought. In their discussion officials also noted that the full effect of tightening financial conditions would take longer to feed through to inflation, though there was great uncertainty about the lags. That itself could well be seen as justifying a slowing pace of further policy tightening after what has been delivered already.  Financial conditions have already started to loosen again However to the degree that markets are running ahead of themselves and financial conditions have already started to loosen again, it is unlikely this is the broader message the Fed wants to send just yet. While the meeting pre-dates the latest positive surprise in the inflation data, officials since then were quick to note that one CPI reading alone is not yet a trend. Yes the PMIs were bad, but other data is showing more resilience with a clear focus near term on next week's job market data. Fed hike discount for 2022 and 2023 has remained stable but more 2024 cuts are now anticipated Refinitiv, ING More dovish headline risks from the ECB minutes The ECB minutes of the October meeting follow hot on the heels of last night's Fed minutes. Here as well the market's main focus is on the pace of rate hikes going forward. The ECB still hiked rates by 75bp last month, but subtle tweaks to the wording of the press statement were already interpreted as a dovish sign. Later background reporting confirmed that the Council was not unanimous on the size of its last hike with three members calling for a smaller hike.  While it was also reported that the Council did not intend to send any specific signal for the size of future rate hikes back then, we could still see some dovish headlines out of the minutes with regards to differing views on the appropriate size of the rate hike. There should also be a more thorough discussion of recessionary risks, even if they should also be balanced by inflationary risks “clearly” on the upside, as Lagarde put it in October’s press briefing. The lack of QT discussion at the October ECB meeting helped to set off a fixed income rally Refinitiv, ING   Market OIS forwards are pricing c.60bp higher rates for December. This suggests expectations leaning towards a smaller 50bp hike, but the signal is less clear than only a couple of days ago, helped also by less gloomy PMIs just yesterday. Some ECB officials have since suggested there was scope for less aggressive action, such as Italy’s Visco, who is known to lean more dovish. Even some of the better known ECB’s hawks have been less clear on their preference, and their choice between a 50bp or 75bp hike is apparently dependent on the upcoming inflation data, at least Austria’s Holzmann has suggested as much. Only Slovenia’s Vasle was still explicit in saying that the current pace was adequate and would be maintained in December. Smaller hikes are very likely, but the question is for how long However, it remains clear that the ECB is not done hiking. It is this also important to consider what happens beyond December. Smaller hikes are very likely, but the question is for how long. We make out some effort by Chief Economist Lane to direct the discussion away from potentially peaking headline inflation to the more persistent elevation of core inflation. He later also stressed that one should not interconnect quantitative tightening and rate hikes too much, though other officials have strengthened the market’s notion that there could very well be a bargain to be made between the ECB’s hawks and doves, for instance an earlier start to quantitative tightening in return for slower hikes. Going back to the issue at hand – today’s ECB minutes – recall that the clearest dovish signal out of October ECB meeting was actually the absence of a further discussion on QT. Today's events and market views Markets will be more eurocentric with US markets heading into today's Thanksgiving holiday and followed by a shortened trading day on Friday. It also means that market liquidity is about to become even thinner than already is. In any case, today's ECB accounts of the October meeting could add to the dovish central bank headlines that have extended the rally in rates yesterday, though less likely the curve flattening we have witnessed until now. In data the German Ifo index follows on the not-as-gloomy-as-expected flash PMI's released yesterday. If one looks for hawkish risks, then the focus should be on today's ECB speakers, who may well use the opportunity to clarify the message coming out of the ECB accounts. With the ECB's Schnabel we have one of the more influential ECB officials delivering a keynote speech at the Bank of England's watchers conference. That same event has of course also prominent BoE speakers lined up with Ramsden, Hill and Mann.   In secondary markets Italy will reopen two shorter dated bonds for up to €2.75bn. 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
US CPI Surprises on the Upside, but Fed Expectations Unchanged Amid Rising Recession Risks

HP Expects To Reduce Staff In Coming Years | Xiaomi Reported Revenue In The Q3

Saxo Bank Saxo Bank 24.11.2022 09:00
Summary:  U.S. equities and bonds rallied on the November FOMC minutes which has a dovish cast stating “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate”. The 10-year treasury yield fell to 3.69%. Oil prices slid sharply on Wednesday with WTI futures dipping to sub-$77 lows as the EU proposed a higher-than-expected price cap on Russian crude - between $65-70/barrel. EURUSD rallied above 1.04 and USDJPY fell below 140 amid broad-based dollar weakness. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished higher on dovish signals from the Nov FOMC minutes U.S. equities found support and bounced after the release of the Nov 1-2 FOMC minutes in an otherwise thin trading session ahead of the Thanksgiving holiday. As bond yields fell, Nasdaq 100 rallied 1%, and the S&P 500 gained 0.6%. All sectors in the S&P 500 advanced except energy, which was dragged by a 4.3% decline in the price of the WTI crude. Consumer discretionary was the top gaining sector, led by Tesla (TSLA:xnas) that surged 7.8% after a leading US investment bank called the shares of Tesla “a bargain”. Deere (DE:xnys), the largest supplier of farm tractors and crop harvesters in the world, gained 5.1% after reporting an earnings beat and upbeat guidance citing strong demand. Manchester United (MANU:xnys) surged 26.1% after the club’s owner announced that they were exploring a sale. Coupa Software (COUP:xnas) jumped nearly 29% on a report that Vista Equity Partners is exploring an acquisition. Nordstrom (JWN:xnys) dropped by 4.2% after reporting a decline in sales and excessive inventory. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The minutes for the Nov 1-2 FOMC meeting have a dovish cast, saying “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate” and some FOMC members had a concern about rate hikes might ultimately “exceed what was required to bring inflation back”. Yields declined across the curve with buying particularly strong on the long end. The 2-year yield dropped by 4bps to 4.48% and the 10-year yield finished the session 6bps richer at 3.69%. The 2-10-year part of the curve became yet more inverted at minus 79. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) China internet stocks gained, led by Kuaishou Technology (01024:xhkg) up 5.7%, Baidu (09888:xhkg) up 3.4%, JD.COM (09618:xhkg) up 3.3%, and Alibaba (09988:xhkg). Kuaishou and Baidu reported better-than-expected Q3 results. Alibaba shares were boosted by the prospect of coming out of the 2-year-long regulatory overhaul with a fine of over USD 1 billion. Meituan (03690:xhgx) underperformed with a loss of 1.1% following a statement from Prosus, shareholder of Tencent, saying that the Company was planning to unload the Meituan’s shares it received from Tencent. China Aluminum (02068:xhkg) continued its advance, rising 25.3% on Wednesday. Hang Seng Index gained 0.6% and CSI 300 climbed 0.1%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Large cities, including Beijing, Chongqing, Chengdu, Guangzhou, Zhengzhou, as well as Shanghai have further tightened pandemic control measures. FX: EURUSD above 1.04 and USDJPY falls below 140 amid broad-based dollar weakness The dovish read of the FOMC minutes from the November 2 meeting is hardly a surprise, given the key message has been around a downshift in the pace of rate hikes as expected. But together with weaker than expected flash PMIs for November (read below) suggesting demand slowdown concerns are starting to pick up pace, and a higher-than-expected jobless claims prints sending some early warning signals on the labor market, the focus has completely shifted away from inflation concerns. Market pricing of the Fed December meeting tilted further towards 50bps, and that resulted in a broad-based dollar sell-off. EURUSD surged above 1.04 while USDJPY slid below 139.50. Crude oil (CLZ2 & LCOF3) Oil prices slid sharply on Wednesday with WTI futures dipping to sub-$77 lows and Brent futures touching $84/barrel as the EU proposed a higher-than-expected price cap on Russian crude - between $65-70/barrel after a $60 level was touted yesterday. This higher price cap means that Russian oil can continue to flow into the international markets as it is above Russia’s production costs. Meanwhile, EIA data showed US crude inventories fell a more-than-expected 3.69 million barrels last week, but US gasoline stockpiles rose by 3 million barrels, the largest buildup since July, suggesting a weaker demand heading into Thanksgiving.   What to consider FOMC Minutes signal a smaller pace of rate hikes The FOMC minutes from the November 2 meeting were released on Wednesday, and the general tone of the members confirmed that the committee was leaning towards moving away from jumbo (75bps) rate hikes to a smaller pace. At the same time, "various" officials noted that the peak rate will be "somewhat higher" than previously expected. The minutes saw participants agree there were very few signs of inflation pressures abating (minutes were pre-October CPI) and they generally noted inflation outlook risks remain tilted to the upside. There were also some concerns about the strength of the labour market, where a few participants said ongoing tightness in the labour market could lead to an emergence of a wage-price spiral, even though one had not yet developed. The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions. US PMIs disappointed, jobless claims rose US S&P flash PMIs for November disappointed, as manufacturing printed 47.6 (exp. 50.0, prev. 50.4) and services fell to 46.1 (exp. 47.9, exp. 47.8), while the composite dropped to 46.3 (prev. 48.2). New orders fell to 46.4, the lowest since May 2020, while employment saw a slight uptick to 50.8 from 50.4. The only good news is that both input and output prices dipped further, offering further positive signals on inflation. The PMIs indicated how concerns are shifting from the supply side to the demand side, with better news on supply chains but demand concerns from weakening new orders. Initial Jobless claims rose more than expected to 240k from 223k and above expectations of 225k, the highest print since August, suggesting that we continue to watch for further signals on whether the tight labor market may be starting to weaken. Better eurozone flash Composite PMI for November This was unexpected. The consensus forecasted that the EZ flash Composite PMI would fall to 47.0 in November from 47.3 in October. It actually improved a bit at 47.8. The increase mostly results from a better-than-expected Manufacturing PMI (out at 47.3 versus prior 46.4 and forecast at 46.0) while the services sector remains stable. There is another positive news. Price pressures are easing quite fast. The PMI price gauge fell to its lowest levels in two years due to a collapse in input prices. On a flip note, the flash Composite PMI Output Index for the United Kingdom (UK) ticked up to 48.3 in November. Surprisingly, the UK seems to hold up better than the eurozone and especially Germany. The jump in the PMI is still consistent with a recession in the eurozone and in the UK but it may be shallow and its steepness will mostly depend from country to country on the impact of the energy shock and fiscal measures taken to mitigate it. China’s State Council is calling on the PBOC to cut the RRR After a meeting on Wednesday, China’s State Council issued a memo calling on the People’s Bank of China (PBOC) to use monetary tools including a cut in the reserve requirement ratio (RRR) at an appropriate time to support the real economy. According to historical observations, the PBOC will do what the State Council says and cut the RRR in the coming days or weeks. Violent protests at Foxconn’s iPhone factory in Zhengzhou Video clips showed violent protests broke out at Foxconn’s iPhone production plant in Zhengzhou. What exactly caused the protests were unclear but speculation was about retention allowance to workers who are willing to stay at the factory until February 15, 2023, and work conditions. New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Xiaomi reported inline revenue and better-than-feared adjusted net profit Xiaomi reported Q3 revenue of RMB70.47 billion, shrinking 10% Y/Y and flat Q/Q. Adjusted net profit came in at RMB2.1 billion, 6% above the Bloomberg consensus, and -59% Y/Y and +1% Q/Q. Excluding new initiative investment, core net profit increased 9% Q/Q to RMB2.9 billion. Blended ASP declined 4% Y/Y.  Gross margin was 16.6% in Q3, falling from 16.8% in Q2 and 18.3% a year ago. Q3 non-IFRS operating margin was 3.0%, down from Q2’s 3.1% and Q3 last year’s 6.7%. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The Glazer family is exploring the sale of Manchester United The owner of Manchester United said that they are exploring the sale of the English Premier League football club and will consider “all strategic alternatives”. In May this year, Chelsea, another English Premier League club, was sold for around USD5.3 billion. Deere sees strong demand for farm, forestry, and construction machinery Deere said they are expecting high demand for equipment from farmers on elevated prices for agricultural commodities. In addition, the company expects increases in demand for its construction machinery from the oil and gas industry and construction equipment rental businesses. Strong progress in precision agriculture adoption is expected to help boost margins and aftermarket technology product sales. For our look ahead at markets this week - Read our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-24-nov-2022-24112022
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Jump In The PMI Is Still Consistent With A Recession In The Eurozone And In The UK

Saxo Bank Saxo Bank 24.11.2022 09:05
Summary:  US stocks and bonds ended higher on Wednesday while the dollar closed at it weakest level since August after the Federal Reserve’s latest meeting minutes showed most officials backing slowing the pace of interest-rate hike soon, a prospect that was given some support following the release of weaker than expected economic data. Crude oil lost ground on growth concerns while the weaker dollar supported a rebound in gold, silver and copper. Today the US markets are closed for Thanksgiving holiday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Bad news is good news in the US with lower than estimated PMI figures for November suggesting the US economy continues to slow down bolstering bets that US interest rates have peaked, and the Fed pivot is alive. The FOMC Minutes also suggested that the pace of interest rate hikes will be lowered going forward.  P 500 futures rallied 0.5% to close at 4,030 getting closer to the falling 200-day moving average at 4,058. In addition to yesterday’s US news, China’s State Council (see below) issued a memo advising the PBOC to use monetary instruments to safeguard and kickstart the Chinese economy. In a time with falling economic growth in the US and Europe, an accelerating Chinese economy would balance the global economy and soften the recessionary dynamics. It is Thanksgiving in the US today so cash equity markets will close at 1300 ET today. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) After a meeting on Wednesday, China’s State Council issued a memo calling on the People’s Bank of China (PBOC) to use monetary tools including a cut in the reserve requirement ratio (RRR) at an appropriate time to support the real economy. According to historical observations, the PBOC will do what the State Council says and cut the RRR in the coming days or weeks. The news helped lift market sentiment which was however tempered by the rise of daily Covid cases to an all-time high of 31,444 in mainland China. Hang Seng Index edged up 0.3% while CSI 300 declined 0.5%. Shares of leading Chinese developers surged by 5% to 12% after several large Chinese banks agreed to provide more than RMB 200bn in total in credit facilities to a number of private enterprise developers. EURUSD above 1.04 and USDJPY falls below 140 amid broad-based dollar weakness The dovish read of the FOMC minutes from the November 2 meeting is hardly a surprise, given the key message has been around a downshift in the pace of rate hikes as expected. But together with weaker than expected flash PMIs for November (read below) suggesting demand slowdown concerns are starting to pick up pace, and a higher-than-expected jobless claims print sending some early warning signals on the labor market, the focus has somewhat shifted away from inflation concerns which remain persistent. Market pricing of the Fed December meeting tilted further towards 50bps, and that resulted in a broad-based dollar sell-off which extended in the Asian session. EURUSD is now attempting a break above 1.0450 while USDJPY slid below 139.00. Japan’s Tokyo CPI for October is due tomorrow and may inch higher again, further fuelling pressure for BOJ to tweak its zero-rate policy and supporting a recovery in the yen even as global yields start to get capped. Crude oil (CLF3 & LCOF3) Crude oil fell again on Wednesday thereby extending what has already been a very volatile week. The FOMC minutes driving a weaker dollar did not add much support with the market instead focusing on a challenged demand outlook in China as Covid cases continue to spread, and a 50% risk of a recession in the US next year. In addition, a price cap on Russian oil in the $65-$70 area currently being discussed by EU officials is far higher than expected and would probably not have a major impact on supply given that Russia is already selling its Urals crude at a 25-dollar discount to Brent. The negative sentiment was also reflected by the markets negative response to an otherwise price-supportive EIA stock report. Gold (XAUUSD) and silver (XAGUSD) Gold and silver both rose in response to weaker US economic data (see below) and after the FOMC minutes talked about moderating the pace of interest rate hike soon. The Bloomberg dollar index dropped to the lowest level since August while US government bonds rallied to send yields lower. Gold was already encouraged by the speed with which it recovered after briefly breaking below support in the $1735 area reached $1756 overnight with silver trading at $21.60 after showing some renewed relative strength against gold this week. With no signs yet of a pick up in demand for ETFs from longer-term focused investors, a further extension will likely require further declines in yields and the US dollar or some other catalyst that sees a run to safety. Resistance at $1757 and $1765. EU gas (TTFMZ2) EU gas jumped 8.3% on Wednesday to close near a one-month high at €130 with weather forecasts pointing to a cold beginning to December and Gazprom threatening to reduced supplies through Ukraine, one of just two remaining pipelines in operation. The Sudzha line is currently sending 42 million cubic meters per day to Europe and while the dispute only relates to part of the 5 mcm/day that goes to Moldova, the market clearly worry that this could lead to a complete closure of the line. However, with Russia’s pipeline flow to Europe already down 79% YoY, the ability to shock the system has been much reduced, hence the limited reaction in the peak winter contract of February which only trades €7/MWh above December US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The minutes for the Nov 1-2 FOMC meeting have a dovish cast, saying “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate” and some FOMC members had a concern about rate hikes might ultimately “exceed what was required to bring inflation back”. Yields declined across the curve with buying particularly strong on the long end. The 2-year yield dropped by 4bps to 4.48% and the 10-year yield finished the session 6bps richer at 3.69%. The 2-10-year part of the curve became yet more inverted at minus 79, thereby strengthening the prospects for a recession sometime next year. What is going on? FOMC Minutes signal a smaller pace of rate hikes The FOMC minutes from the November 2 meeting were released on Wednesday, and the general tone of the members confirmed that the committee was leaning towards moving away from jumbo (75bps) rate hikes to a smaller pace. At the same time, "various" officials noted that the peak rate will be "somewhat higher" than previously expected. The minutes saw participants agree there were very few signs of inflation pressures abating (minutes were pre-October CPI) and they generally noted inflation outlook risks remain tilted to the upside. There were also some concerns about the strength of the labour market, where a few participants said ongoing tightness in the labour market could lead to an emergence of a wage-price spiral, even though one had not yet developed. The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions. US PMIs disappointed, jobless claims rose US S&P flash PMIs for November disappointed, as manufacturing printed 47.6 (exp. 50.0, prev. 50.4) and services fell to 46.1 (exp. 47.9, exp. 47.8), while the composite dropped to 46.3 (prev. 48.2). New orders fell to 46.4, the lowest since May 2020, while employment saw a slight uptick to 50.8 from 50.4. The only good news is that both input and output prices dipped further, offering further positive signals on inflation. The PMIs indicated how concerns are shifting from the supply side to the demand side, with better news on supply chains but demand concerns from weakening new orders. Initial Jobless claims rose more than expected to 240k from 223k and above expectations of 225k, the highest print since August, suggesting that we continue to watch for further signals on whether the tight labor market may be starting to weaken. Deere shares up 5% on strong results The US agricultural equipment maker delivered better than expected revenue and net income in its Q4 fiscal quarter (ending 31 October) and issued a FY23 net income guidance of $8-8.5bn vs est. $7.8bn. Order books are full into fiscal Q3 next year (ending 31 July) and the company sees an extended replacement cycle indicating that the best years are still ahead of the company. Better eurozone flash Composite PMI for November This was unexpected. The consensus forecasted that the EZ flash Composite PMI would fall to 47.0 in November from 47.3 in October, it actually improved a bit to 47.8. The increase mostly results from a better-than-expected Manufacturing PMI (out at 47.3 versus prior 46.4 and forecast at 46.0) while the services sector remains stable. There is another positive news. Price pressures are easing quite fast. The PMI price gauge fell to its lowest levels in two years due to a collapse in input prices. On a flip note, the flash Composite PMI Output Index for the United Kingdom (UK) ticked up to 48.3 in November. Surprisingly, the UK seems to hold up better than the eurozone and especially Germany. The jump in the PMI is still consistent with a recession in the eurozone and in the UK but it may be shallow, and its steepness will mostly depend from country to country on the impact of the energy shock and fiscal measures taken to mitigate it. What are we watching next? Earnings to watch Today’s earnings focus is Meituan and Pinduoduo. Chinese earnings in Q3 have been mixed and the technology sector continues to experience headwinds from both the economy and regulation. Analysts expect Pinduoduo, which has so far navigated the environment flawlessly, to deliver revenue growth of 44% y/y and EPS of CNY 4.75 up 288% y/y. Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) US cash markets closed for Thanksgiving. Early closes in some futures markets. 0900 – German IFO for November Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-24-2022-24112022
At The Close On The New York Stock Exchange Indices Closed Mixed

American Stocks Rallied, USD Drop | Tesla Rallies On Citi

Swissquote Bank Swissquote Bank 24.11.2022 09:40
US stocks spent most of yesterday’s session hesitating between slight gains and slight losses, then the release of the latest Federal Reserve (Fed) minutes helped the bulls take the upper hand, as the minutes confirmed that a ‘substantial majority’ of Fed members thought it was a good idea to slow down the pace of the rate hikes. Stocks The S&P500 gained around 0.60% while Nasdaq jumped around 1%. The US 10-year yield eased, as the US dollar sold off quite aggressively across the board. Economy We saw a decent price action yesterday was oil, and that was well before the Fed minutes. The barrel of American crude dropped up to 5% yesterday on news that the Europeans would set the price cap for Russian oil to around $65 to $70 per barrel, levels at which Russian oil is already exchanged. Tesla and Morgan Stanley On individual stocks, Tesla was one of the biggest gainers of yesterday’s session as Citi and Morgan Stanley revised their views higher, but that rally was maybe… exaggerated. Watch the full episode to find out more! 0:00 Intro 0:21 Fed minutes send stocks higher, USD lower 4:11 Crude oil tanks on EU’s new Russian oil price cap 5:55 Foxconn living a nightmare in China, but Apple holds on 6:32 Tesla rallies on Citi, Morgan Stanley upgrades Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #minutes #USD #crudeoil #EU #Russia #price #cap #EUR #GBP #ECB #minutes #Thanksgiving #holiday #Tesla #rally #Apple #Foxconn #China #Covid #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
Saxo Bank Podcast: Riksbank's Expected 75 Basis Point Hike Today

Saxo Bank Podcast: Riksbank's Expected 75 Basis Point Hike Today

Saxo Bank Saxo Bank 24.11.2022 10:18
Summary:  Today we look at the market continuing to rally despite US Services PMI figures for November missed estimates suggesting the US economy continues to slow down. This means that equities right now interpret bad news as good news because it will force the Fed to pivot on the policy rate which will be net positive for equities. We also discuss expected PBOC easing, Riksbank's expected 75 basis point hike today, and the weakening USD helping financial conditions to ease globally. In commodities, our focus today is the energy market with Europe's gas market holding up well despite low volumes coming from Russia. Finally, we talk Deere earnings as the US agricultural equipment maker is delivering strong results as pricing power remain high on the back of high commodity prices on agricultural products. Today's pod features Peter Garnry on equities, Ole Hansen on commodities. 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-24-2022-24112022
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Fed May Choose To Slow Down The Tightening Of Monetary Policy

InstaForex Analysis InstaForex Analysis 25.11.2022 08:20
The week's most intriguing day was Wednesday. We also learned about the Fed protocol in addition to receiving fairly sizable packages of statistical data from the UK, the USA, and the European Union. The majority of analysts believe that the minutes of the November meeting were much more significant than the minutes of earlier meetings because the Fed is now at the point where it must choose whether to keep raising rates at their maximum or to begin slowing them down. The FOMC members' recent speeches supported the idea that the rate would increase gradually. Additionally, Jerome Powell alerted the market that rate increases may eventually be greater than anticipated. The most crucial query to which the protocol was required to respond was, "To what level will the rate rise?" The protocol did not respond to this query. Furthermore, it was unable to respond to it. The time lag, which is several months, between the rate hike and the economy's response is a crucial point. In other words, if the Fed increases the rate by 75 basis points today, the impact will be felt over the next two to three months, if not longer. As a result, the rate increase to 4% has yet to cause inflation to respond fully. If this is the case, inflation may begin to decline in March 2023, even without a subsequent increase in interest rates. But since it is unlikely to decrease from 7.7% to 2% in 4 months, as the Fed wants, it makes sense to continue raising it, but more slowly, since the economy should also be remembered: a strong rate increase will slow its growth. This data was presented in the protocol that was made public last night. Most FOMC members agreed that the pace of monetary policy tightening needed to be slowed down, but it was unclear how much longer the rate would increase. Currently, the market anticipates it to grow to 5%, but a gradual decrease in inflation may prompt the FOMC to improve it more significantly. The "insignificant but obvious progress" on inflation, according to FOMC members, indicates that rates still need to be raised. The Fed will thus accomplish two objectives by choosing to slow down the tightening of monetary policy. It will first keep up the difficult fight against inflation. Second, it won't put as much of a strain on the US economy. Generally speaking, a pause is taken for a few months to evaluate the effects of those four rate increases of 75 basis points that occurred in the year's second half on inflation. In the interim, the impact on inflation will be assessed, rates will increase to 5%, and it will be possible to predict how many additional increases will be necessary for March of the following year. Based on the analysis, the upward trend section's construction is finished and has evolved into a five-wave structure. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. Although there is a chance that the upward portion of the trend will become more complicated and take on an extended form, this possibility is currently at most 10%. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I cannot suggest purchasing the instrument immediately because the wave marking already permits the development of a downward trend section. Sales are more accurate now that the targets are close to the 200.0% Fibonacci level.     Relevance up to 05:00 2022-11-26 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/328100
ECB press conference brings more fog than clarity

The European Central Bank Is Getting Ready To Slow Down The Pace Of Interest Rate Hikes

InstaForex Analysis InstaForex Analysis 25.11.2022 08:40
The struggle continues for the EUR/USD pair: the bulls need to settle in the area of the 4th figure to show the strength of the upward movement, whereas the bears need to settle near the 2nd price level to finally stop the upward momentum and pave the way for the next surge to the parity level. Both sides of the "conflict", in fact, do not need a third figure, which in the current circumstances acts as a point of transit. Take note that both bears and bulls of the pair can boast of their momentary successes, but in reality they failed to consolidate their gains. The contradictory fundamental background is to blame. At the beginning of November, the dollar weakened across the market due to several factors. U.S. inflation slowed its growth, Federal Reserve officials admitted the possibility of a slowdown in monetary policy tightening, and the results of the G20 summit set the warmer tone for U.S.-China relations. All these factors came together to boost interest in risky assets, while the safe-haven dollar was out of action. The euro surged, reaching 1.0480. Then, the news flow changed a bit. The US central bank represented by many of its Committee members (Bullard, Cook, Daley, Waller and others) claims that slowing down the pace of interest rate hikes does not negate the fact that the upper bar of the current cycle may be reviewed upwards. By the way, Fed Chairman Jerome Powell also spoke about this scenario after the November meeting. The focus of the market attention shifted, the hawkish expectations strengthened and the dollar was back on the horse, due to which the pair fell to 1.0225. But bears couldn't settle in this price area. The dollar was under pressure again due to a new report, thereby, allowing the euro bulls to organize one more counterattack. We are talking about the minutes of the Fed's last meeting, which was published on Wednesday. In my opinion this document was not dovish at all. Moreover, all the key theses of the minutes were played back by the market - this report didn't bring anything sensational. But the fact is that traders reflexively reacted to the facts that have already been regarded, which were presented to the market in a "new cover". The essence of the minutes boils down to one simple conclusion: Fed members are ready to move further by smaller steps, i.e. more moderate rates. The document states that a number of Committee members believe that "a rapid tightening of monetary policy could pose a threat to economic growth and financial stability. Given the fact that the November FOMC meeting took place even before the release of data on October inflation growth in the U.S., we can assume that the central bank will slow down the pace of rate hikes at the next (December) meeting. That is, after four increases of 75 basis points, the central bank will raise the rate by 50 points. The minutes only confirmed the assumptions discussed earlier, putting a thick end to the relevant discussion. But the minutes did not answer the main question: how high can the final rate climb? The fact that the Fed will slow the rate hike is no indication that the upper bar of the current cycle will be lowered. In fact, some Fed officials (notably James Bullard) recently said that the "final stop" would probably be at 5.25%. Incidentally, in the same minutes, Fed members indicated that there has been "clear but little apparent progress" on inflation, and that rates still need to be raised. Therefore, in my opinion, the EUR/USD pair is growing on rather shaky grounds. Again, the bulls were supported by a trivial coincidence: The Fed's minutes were published ahead of Thanksgiving in America, amid low liquidity and high volatility. US statistics also weighed on the greenback: according to the latest data, business activity in the US declined again in November - both in the service sector and manufacturing. At the same time, the new orders dropped to the lowest level in 2.5 years. And yet long positions on the pair look risky. In fact, bulls have already played their game - there are no good reasons to develop an uptrend. Only the shortened Friday session (due to Thanksgiving) is on their side, due to which an inertial price growth is possible. Several factors are in favor of the bearish scenario. Firstly, the European Central Bank is also getting ready to slow down the pace of interest rate hikes in December. This was stated by some ECB officials over the past two weeks (in particular, Philip Lane and Mario Centeno), as evidenced by the minutes of the ECB's last meeting, which was published on Thursday. According to the document, back in October several members of the Governing Council were in favor of raising the rate by 50 basis points, not 75. Secondly, the safe-haven dollar (and consequently the EUR/USD bears) may find support from the news from China, where the number of coronavirus infections is growing. For example, on Wednesday the number of infections in China exceeded the 30,000th mark. Chinese authorities are once again forced to tighten quarantine measures, with partial lockdowns and mass testing resumed in major cities. The "zero-tolerance" policy, which has cost the Chinese (and global) economy so dearly, is back on track after easing the Covid policy. Thus, in my opinion, short positions in the pair look more promising, despite the contradictory fundamental background. The first bearish target is 1.0350 (the line Tenkan-sen on the D1 timeframe). The next (and so far the main) target is 1.0210. At this price point the bottom of the Bollinger Bands indicator coincides with the lower limit of the Kumo cloud on the four-hour chart.     search   g_translate     Relevance up to 01:00 2022-11-26 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/328088
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The Actions Of The ECB May Be A Factor Providing Some Support For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 25.11.2022 09:35
EUR/GBP stages a modest recovery from the monthly low touched on Thursday. A combination of factors underpins the shared currency and offers some support. Rising bets for additional BoE rate hikes benefit the GBP and seem to cap gains. The EUR/GBP cross gains some positive traction on Friday and reverses a part of the overnight slide to a fresh monthly low. The cross maintains its bid tone through the early European session, though seems to struggle to capitalize on the strength beyond the 0.8600 mark and remains below the 100-day SMA. The shared currency's relative outperformance could be attributed to talks of a more aggressive policy tightening by the European Central Bank (ECB). This, in turn, is seen as a key factor offering some support to the EUR/GBP cross. The ECB Governing Council member Isabel Schnabel said on Thursday that the central bank will probably need to raise rates further into restrictive territory. Schnabel added that the incoming data suggests that the room for slowing down the pace of interest rate adjustments remains limited. Adding to this, the prevalent selling bias around the US Dollar, along with an upward revision of the German Q3 GDP print, benefit the Euro and act as a tailwind for the EUR/GBP cross. According to the final reading, the Eurozone's economic powerhouse expanded by 0.4% during the three months to September and the annual growth rate in Q3 2022 stood at 1.3% vs. the 1.2% estimated. The intraday uptick, however, lacks bullish conviction and remains capped amid the underlying bullish sentiment surrounding the British Pound. The recent sharp decline in the UK government bond yields represents an easing of financial conditions, which should allow the Bank of England to continue raising borrowing costs to tame inflation. This, in turn, is seen underpinning the Sterling Pound and keeping a lid on any further gains for the EUR/GBP cross, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and positioning for any meaningful appreciating move.
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

The ECB Has Started To Shift The Focus Of The Discourse To Underlying Inflation Pressures

ING Economics ING Economics 25.11.2022 10:29
The loosening in financial conditions is not going unnoticed with central banks. Their pushback is becoming more vocal. Next week's events will be a crucial test for the sustainability of the rally in rates, which looks to have its roots not just in markets' fundamental reassements but is also seeing technical factors at play    In this article Explicit pushback against the market rally from ECB's Schnabel The interdependence between TLTROs, QT and rate hikes Next week's events provide a crucial test to the market rally Today’s events and market view Shutterstock   Explicit pushback against the market rally from ECB's Schnabel ECB’s Schnabel remained true to her role as prominent hawk. Her speech was a clear pushback against any notion of the ECB materially slowing its tightening process. She could hardly have become more explicit in her disapproval of current market developments, saying “market expectations of a pivot have worked against [the ECB’s] efforts to withdraw policy accommodation.” She highlighted that policy is likely too accommodative, with real rates still in negative territory for most tenors. That said, she is but one voice on the ECB, even if an important one. Policy is likely too accommodative, with real rates still in negative territory for most tenors The market’s pricing of the December ECB meeting remains little changed at close to 60bp and also the terminal rate continues to hover just below 3%. The ECB minutes of the October meeting itself did not bring about anything surprisingly new, but served as a confirmation of media reports that already suggested the momentum for another 75bp hike in December was lower. Next week will see the release of the November inflation data, which in the end could tip the balance in the ECB’s decision. However, the ECB has started to shift the focus of the discourse to underlying inflation pressures. This included Schnabel yesterday - stressing that these showed little sign of subsiding just yet.   Negative real rates on much of the EUR curve show policy is still accomodative Refinitiv, ING The interdependence between TLTROs, QT and rate hikes The ECB minutes provided some insight into the ECB’s thinking on how the TLTRO changes fit into the broader balance sheet strategy. Reducing the TLTROs was seen as a necessary first step before considering the reduction of bond holdings. An assessment of the repayments after the adjustments of the TLTROs and impact of financing conditions would also inform the discussion to be had on reducing the reinvestments of the bond portfolio in December. Reducing the TLTROs was seen as a necessary first step before considering the reduction of bond holdings Clearly there is some interdependence between the TLTROs, QT and even rate hikes in the minds of the ECB. According to the minutes the Council deemed the TLTRO recalibration “more efficient” than trying  to achieve the same objective through an earlier start of QT or more aggressive interest rate hikes. Clearly, the first voluntary repayment in November of €296bn was on the low end of expectations and had also limited market impact. Ahead of the December meeting there will be one more repayment opportunity to consider. That amount will be closely watched as it could also be part of the bargaining process between hawks and doves when they decide on the pace of further hikes.     Curve flattening is not a typical reaction to more dovish central bank expectations Refinitiv, ING Next week's events provide a crucial test to the market rally Global rates have seen a significant rally over the past weeks, EUR 10y swap rates alone have pulled back 75bp from their peak in early October. The extent of the long-end rally seems to be more than just hopes for a pivot, noting also that front end rates have proven more stable, helping the strong curve flattening. A more technical component, where extensive short positioning has been reduced amid thin liquidity going into the Thanksgiving holidays and year-end, appears to be at play as well. The extent of the long-end rally seems to be more than just hopes for a pivot The events lined up for next week will this provide a crucial test for the sustainability of the rally lower in rates. In the US all eyes will turn to Fed Chair Powell’s speech on Wednesday. Of late he has taken a more hawkish line than the majority of the FOMC, as evidenced by his last press conference when compared to the subsequent FOMC minutes. On Friday the job market data will speak to the resilience of the economy, with expectations for a 200k increase in payrolls. In the euro area ECB president Lagarde will be speaking to parliament on Monday. More important will the release of the preliminary inflation data, starting with first country readings on Tuesday and the Eurozone-wide measure in Wednesday. Today’s events and market view Market liquidity should remain subdued, with the US only returning for a shortened session in between yesterday's holiday and the weekend. There is little in terms of data to change the course of markets today, with only public appearances of the ECB’s Muller and Visco being of note. But looking ahead that will change - with the crucial events lined up for next week. We have seen a remarkable rally in rates, which has likely been underpinned by market conditions surrounding the Thanksgiving holiday and the nearing year-end. Given the technical facors at play we have already earlier expressed our doubts about the sustainability of this rally and believe that it could be put to the test next week by the Fed's Powell and in the eurozone by the release of the inflation data for November. 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
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

FX: The US Dollar (USD) Is Getting Close To Some Decent Support Levels

ING Economics ING Economics 25.11.2022 10:33
FX markets are becalmed by holiday trading conditions in the US and a very light data calendar. A further unwinding of long dollar positioning remains the risk, but we think the dollar is getting close to some decent support levels. Elsewhere, 75bp rate hikes are still going through in the likes of Sweden and South Africa In this article USD: Focus on 'Cyber Five' retail sales EUR: A little less pessimism GBP: BoE stays hawkish JPY: Set for out-performance into 2023   US retailers have come up with the 'Cyber Five' sales promotion campaign which should boost retail sales    USD: Focus on 'Cyber Five' retail sales Today sees another holiday-shortened US session following the Thanksgiving public holiday. Innovative US retailers have come up with the 'Cyber Five' sales promotion campaign which stretches from Thursday's Thanksgiving all the way through to Monday. Expect to hear reports as to how this has gone, although high levels of employment and lower levels of petrol prices (now $4.30/gallon versus a high of $5.50 in June) suggest retail sales may hold up despite talk of the looming 2023 recession. FX markets are becalmed and the only stand-outs yesterday were the large 75bp rate hikes in Sweden and South Africa, plus the 150bp rate cut in Turkey in preparation for elections next year. We also note the further legacy of this year's rise in dollar and US yields, where Ghana looks set to impose a 30% haircut on Eurobond holders as it seeks a deal with the International Monetary Fund (IMF). Back to the dollar – buy-side surveys taken right before the big sell-off on 10/11 November still had long dollar positions as 'the most crowded trade' and saw the dollar as the most over-valued on record. We doubt those views will have changed that much and the buy-side will now be eager to sell any dollar rallies, believing the dollar may well have peaked. That may be the case, but as we discuss in our 2023 FX outlook, we doubt conditions will be in place for a major dollar bear trend.  We mentioned earlier that the dollar may be nearing some decent support levels. We think DXY has strong support near 105.00, marking the 200-day moving average, important lows in early August and a big 38.2% retracement level of the whole rally from summer 2021 (when the Fed started this dollar rally with its more hawkish Dot Plots). For those needing to buy dollars, DXY levels near 105 may be as good as any. Chris Turner  EUR: A little less pessimism Business surveys in Germany and France released yesterday showed a little less pessimism. And increasingly there is a view that the forthcoming downturn will be mild because of issues like a) strong employment b) large government support and c) strong household savings. Our eurozone team, however, are a bit more pessimistic. Certainly, Europe's large exposure to the manufacturing cycle and what should be weaker export markets make us sub-consensus on European growth prospects.  Despite the looming eurozone recession, ECB hawks such as Isabel Schnabel suggest it may be premature to scale back rate increases. Currently, the market prices 61bp of hikes on 15 December (we expect 50bp). Clearly, the 50bp versus 75bp debate will continue to run. For EUR/USD, it still looks like the big dollar story is dominating. We cannot rule out a further correction into the 1.05-1.06 region but would see these as the best levels before year-end. These levels could be seen next week should Fed speakers or November US jobs data prove the catalyst. Chris Turner GBP: BoE stays hawkish Recent speeches have seen the Bank of England (BoE) staying pretty hawkish despite the fiscally tight budget and broadening consensus of recession. We think positioning has played a major role in this sterling recovery and GBP/USD could see some further, temporary gains to the 1.22/23 area – which we would again see as the best levels before year-end.  Equally, EUR/GBP has good support in the 0.8550/8600 area, and given our view of a difficult risk environment into year-end and early 2023 as central banks raise rates into recessions, sterling should remain vulnerable. Chris Turner  JPY: Set for out-performance into 2023 Probably the best chance of the dollar having peaked is against the Japanese yen (JPY). USD/JPY is now nearly 10% off its high near 152 in late October. Next week we will find out whether Japanese authorities sold FX in November – having sold a combined $70bn in September and October. So far intervention can be considered to be exceptionally well-timed and effective.   If the dollar is to move lower in 2023, USD/JPY would be the best vehicle to express the view, in our opinion. This is based on the view that the positive correlation between bonds and equities can break down – bonds rally, equities stay soft – and that the US 10-year Treasury yield ends 2023 at around 2.75%. USD/JPY could be trading at 125-130 under that scenario. We now suspect that any dollar rally between now and year-end stalls at 142/145. In addition, USD/JPY will be facing a change in the ultra-dovish Bank of Japan governor next April – a big event risk for local and global asset markets. Chris Turner TagsYen FX Dollar   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 Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

Swissquote Bank Swissquote Bank 25.11.2022 10:49
Markets were quiet yesterday, as the US was closed for Thanksgiving. European markets mostly surfed on the positive reaction from the US equities to the Federal Reserve (Fed) minutes released a day earlier. EU Stocks The German DAX advanced to a fresh 5-month high, as the French CAC40 hit a fresh 7-month high, thanks to the euro’s appreciation against the greenback, which somehow eases the inflationary pressures for the European companies, along with the falling energy prices. Central Banks Elsewhere, the latest minutes from the European Central Bank (ECB) released yesterday revealed that ‘a few’ officials favored a smaller rate increase, than the 75bp that the bank delivered last month, citing the other monetary tightening measures that would help restricting the monetary conditions. The Swedish Riksbank raised its interest rates by 75bp yesterday and said that the monetary tightening will continue to tame inflation in Sweden. The Korean Central Bank raised its interest rates by another 25bp to the highest levels since 2012 and the won gained, whereas the Turkish Central Bank CUT its policy rate by another 150bp points, but said that the easing is perhaps enough at 9%, and that risks on inflation – which stands around 85% officially, and 185% unofficially – increase from here. China In China, the central bank signals lower reserve ratios for banks, and conducts reverse repo operations to boost liquidity in the system, as news of fresh Covid restriction measures creep in. The Chinese news certainly prevent oil bulls from jumping in the market right now, and the American crude consolidates below $80pb this morning, with solid offers seen at $82/85 range. Credit Suisse In Switzerland, Credit Suisse continues making the headlines. The stock price flirts with all-time-lows, as UBS sees its share price extend gains as outflows from CS reportedly benefit UBS. Watch the full episode to find out more! 0:00 Intro 0:32 Soft USD boosts European stocks 4:02 Will the USD further soften? 5:40 Central bank roundup 7:44 China re-closing weighs on oil 8:11 Credit Suisse outflows benefit UBS 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. #DAX #CAC #FTSE #EUR #GBP #USD #FOMC #ECB #minutes #Riksbank #CBT #SEK #TRY #China #Covid #crudeoil #CreditSuisse #UBS #Thanksgiving #BlackFriday #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 EUR/USD Pair Chance For The Further Downside Movement

European Central Bank Noted That The Outlook For Inflation Continues To Deteriorate

Conotoxia Comments Conotoxia Comments 25.11.2022 11:10
The minutes of the European Central Bank's latest meeting, released yesterday, may indicate that policymakers would not back away from further interest rate hikes, even despite the risk of recession. How is the euro exchange rate reacting? Policymakers at the European Central Bank agreed at their last meeting that the central bank should continue normalizing and tightening monetary policy to combat high inflation, even in the event of a shallow recession, according to a report on the central bank's October meeting, Trading Economics reports. Officials noted that the outlook for inflation continues to deteriorate, with inflation running too high and many times above forecasts, and that there is a growing risk of its perpetuation and the emergence of second-round effects and a wage-price spiral. However, the central bank has hinted that it may want to halt ongoing interest rate hikes if there is a prolonged and deep recession, which could curb inflation to a greater extent. The ECB raised its key interest rate by 75 basis points in October, raising borrowing costs to the highest level since early 2009, with broad support for a meeting-by-meeting approach to future monetary policy decisions, depending on the data, according to minutes released yesterday. Euro exchange rate this week and month For the euro, the current month appears to be the best since July 2020. The EUR/USD exchange rate rose more than 5 percent in November, reaching its highest level since late June 2022. It seems that, in addition to improving data from the European economy, there may also be an overestimation of expectations for further Fed actions. The U.S. dollar may already be "rallied" if no new factors emerge in the U.S. pushing up expectations for more interest rate hikes. Source: Conotoxia MT5, EURUSD, Monthly In front of the EUR/USD, however, there are potential resistances from the chart. We are talking about the lows of late 2016 and the low of March 2020. Thus, the potential resistance zone could stretch between 1.0320 - 1.0640. Nevertheless, looking at the chart, we could see that we are dealing with the biggest correction in the trend since the beginning of 2021. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The Drop In German Inflation Is Welcome News, But It Is Mean That Can We Say That Inflation Has Peaked?

German GDP Showed Favorable Results | Switzerland Employment Level Keeps Its Trend

Kamila Szypuła Kamila Szypuła 25.11.2022 12:03
The end of the week is quiet due to America's lack of activity due to Thanksgiving. The market's attention will be focused mainly on the Asian and European markets. Today, an important report turns out to be the result of the German GDP. Tokyo CPI At the beginning of today, Japan, and more specifically Tokyo, published its inflation report. In this city, Core CPI increased from 3.4% to 3.6% and it was a higher than expected reading (3.5%). The upward trend of this indicator has been going on since the beginning of May, but since May Core CPI has been above 1.0%. Also CPI increased significantly from 3.5% to 3.8%. The consumer price index only in Tokyo excluding fresh food and energy prices held its previous level of 0.2%. In this city, the rate peaked this year in May (0.4%), and then fell twice. After that, from July to September it held the level of 0.3%. Singapore Industrial Production Singapore Industrial Production MoM increased significantly. Comparing October to September, the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities was 0.9%, which is a good result as another decline was expected. The same index comparing the result from October 22 to October 21 has fallen. The fall was expected. The current reading is -0.8%, it is the first result in a year that was below zero, but it was higher than the expected -0.9%. This means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has decreased significantly, but not as much as expected. Source: investing.com German GDP In Germany, both the quarterly and annual change in gross domestic product turned out to be a positive surprise. GDP Q3 YoY was 1.2%. Unfortunately, it was a decrease in comparison to the previous period, the reading of which was at the level of 1.8%. This time it was expected to score 0.1% lower. A very positive result for the German economy as well as for the euro zone turns out to be the reading of GDP Q3 q/q. The index increased by 0.3% compared to the previous period and reached the level of 0.4%. An increase to 0.3% was expected, but the result higher than expected may raise some optimism. German GDP figures show the country’s economy has grown slightly more in the third quarter than anticipated on the back of consumer spending. Switzerland Employment Level The Employment Level measures the number of people employed during the previous quarter. As the current reading shows, the exemplary trend is successively maintained. Employment increased this time to the level of 5,362M. The previous reading was about 46M than (5,316M). Such results show the good condition of the economy, because employment increases household income, and thus these households are able to spend more, which drives the economy because money remains in constant circulation. ECB’s speeches Markets expect only two speeches at the end of the week, and this time only from the European Central Bank (ECB). The first speeches took place at 9:50 CET. The European Central Bank Supervisory Board Member Kerstin af Jochnick spoke. The second and final speech of the day will take place at 18:00 CET, with Luis de Guindos, Vice-President of the European Central Bank The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures. What's more, statements can give strength to the euro (EUR), or set it in the opposite direction. Summary: 0:30 CET Tokyo CPI 0:30 CET CPI Tokyo Ex Food and Energy (MoM) (Nov) 6:00 CET Singapore Industrial Production MoM 8:00 CET German GDP (Q3) 8:30 CET Switzerland Employment Level 9:50 CET ECB's Supervisory Board Member Jochnick Speaks 18:00 CET ECB's De Guindos Speaks Source: https://www.investing.com/economic-calendar/
The EUR/USD Pair: There Are Still No Sell Signals

The ECB Members Remained Concerned About Inflation Becoming Entrenched

Kenny Fisher Kenny Fisher 25.11.2022 14:32
US markets are open for limited hours today, and investors are focussed on the World Cup and Black Friday rather than the US dollar. EUR/USD is trading quietly at 1.0392, down 0.18%. German data has not been spectacular this week, but nonetheless is moving in the right direction, as the German economy is in decent shape. Germany’s GDP for Q3 was revised upwards to 0.4% QoQ, up from 0.3% and ahead of the consensus of -0.2%. This follows a 0.1% gain in GDP in Q1 and is all the more impressive, considering the headwinds on the global scene, in particular the war in Ukraine. Germany has made a mammoth effort to stockpile energy supplies and end its dependence on Russia, which should mean that an energy crisis can be avoided this winter. German Consumer confidence remains weak but improved slightly for a second straight month. The November reading rose to -40.2, up from -41.9, although shy of the consensus of -39.6. Business confidence also edged higher earlier this week, as did Business Expectations. ECB says more rate hikes needed The ECB minutes, released on Thursday, indicated that ECB members remained concerned about inflation becoming entrenched. Members were clear about the need to raise rates in order to bring inflation back down to the 2% target, and most members supported the 75-bp hike at the October meeting, with a few voting for a 50-bp move. The markets have priced in a 50-bp increase at the December 15th meeting, after ECB policymakers hit the airwaves and urged that the ECB slow down the pace of rate hikes. Still, with inflation at a crippling 10.6%, there’s little doubt that the ECB will have to continue raising rates, and the markets expect the deposit rate, currently at 1.5%, to hit 3.0% in 2023.   EUR/USD Technical 1.0359 and 1.0238 are providing support There is resistance at 1.0447 and 1.0568 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.  
ISM Business Surveys Signal Economic Softening and Recession Risks Ahead

Euro (EUR) Will Have To React To The European Central Bank's Discussion

InstaForex Analysis InstaForex Analysis 26.11.2022 15:44
Bulls on the EUR/USD pair are desperately trying to rise above the 1.0400 level: they repeatedly tried to attack the 4th figure in November, but failed each time. Traders fail to consolidate the success and, accordingly, are not able to develop it in order to claim the next, fifth price level. Their indecisiveness plays against them: as soon as the upward momentum fades, the bears come in, and they pull the price down. This "push-and-pull" takes place amid a contradictory news flow, which prohibits both bulls and the bears to dominate. In addition, the US celebrated Thanksgiving, which lasted through Wednesday, Thursday and most of Friday. The US trading floors were either closed or did work, but in a shortened period. Traders were "fishing in troubled waters", i.e. they took advantage of low liquidity and high volatility. It is obvious that next week, the market will operate the way it does normally, which means that the overall alignment of forces may change significantly, and probably not in favor of the bulls. The pair is now trying to stay within the framework of the 4th figure only by inertia. The market's interpretation of the minutes of the FOMC's November meeting, published on Wednesday, did not work in the dollar's favor: due to this fundamental factor, the bulls reversed the price, rising from 1.0225 to the 1.0450 target (high of the current week). But traders couldn't hold their positions and the pair went adrift. Bulls cannot move to the area of the 4th figure, bears cannot pull the price down to the area of the 2nd price level. Both parties need more information to push the pair. At the same time, all the previous information and events were played out, and some of them even twice. Thus, the aforementioned minutes confirmed traders' assumptions that the central bank is getting ready to slow down the rate of tightening the monetary policy. Actually, it was the only message that was dovish in nature. But it was enough for the pair to surge upwards. Traders were not confused by the fact that Federal Reserve Chairman Jerome Powell spoke about the slowdown of monetary policy at the beginning of November. In addition, some of the other Fed members repeatedly spoke about such intentions. And after the latest US inflation data reported growth, the probability of a rate hike by 50 points at the December meeting increased up to 80%. The Fed minutes that was released on Wednesday reminded the market of such intentions - nothing more. But amid low liquidity, traders decided to win back this fundamental factor by the second round. Given this disposition, the question arises: can the EUR/USD bulls develop their upward attack on such shaky grounds? Definitely not. Friday's price fluctuations show that the bulls are not confident in their own capabilities. Neither are the bears. And in my opinion, the bulls are definitely losing their grip. Figuratively speaking, you won't get far with just "one minutes", at the same time there are currently no additional arguments for a large-scale growth from the pair. But the U.S. currency may receive substantial support ahead of the December FOMC meeting. According to a number of currency strategists, estimates of the terminal rate are likely to be revised upwards in December's "dot-plot" compared to the previous forecast, which was published in September. Powell admitted such a possibility following the results of the November meeting. And if similar assumptions are made by other members of the Fed (before the 10-day "hush-hush" period), we could be witnessing another dollar rally. Again, this scenario is very likely, given Powell's previous rhetoric. In addition, the U.S. currency could receive support from the Nonfarm Payrolls report. If the unemployment rate returns to 3.5% and the growth rate of non-farm payrolls exceeds at least the 250,000 target, the dollar bulls will feel much more confident, even against the euro. The single currency (euro) will then have to react to the European Central Bank's discussion on the pace of monetary policy tightening. There are calls for the central bank to "moderate its enthusiasm" at the December meeting, that is, to raise the rate by just 50 points, and not 75. In particular, the chief economist of the ECB spoke in favor of this scenario. By the way, the preliminary data on inflation growth in the eurozone for November will be published next week. If the report shows at least minimal signs of a slowdown in CPI growth, then the euro will be under significant pressure, as in this case the issue of slowing down the pace of rate hikes can be considered a done deal. Thus, despite the bulls' attempts to settle within the framework of the 4th figure, they still have no good reasons to develop the uptrend at the moment. Long positions look risky - at least until the price stays above the resistance level of 1.0450 (the upper line of the indicator Bollinger Bands on the daily chart). In the medium term, it is better to consider short positions. The first bearish target is 1.0350 (Tenkan-sen line on the one-day timeframe). The main target is 1.0210 (at this price point, the bottom of the Bollinger Bands indicator coincides with the lower limit of the Kumo cloud on the H4 timeframe).       Relevance up to 23:00 2022-11-26 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/328215
The Outlook Of EUR/USD Pair For Long And Short Position

The Recession In The Eurozone Will Be Short-Lived

InstaForex Analysis InstaForex Analysis 26.11.2022 15:55
Thanksgiving day, the closing of the U.S. stock markets and the outflow of liquidity caused the EUR/USD pair to get bored at the end of the last full week of fall. Not surprising, given the tumultuous moves before that. The dollar started the week in good condition and ended it in grief, completely giving up the initiative to the euro. Thanks to the strong data and hawkish speeches of the European Central Bank officials, the euro reclaimed its spot by hitting its 5-month highs and looks forward to important data on eurozone inflation and the US labor market. Strong German GDP statistics for the third quarter also boosted the morale of the euro fans. Positive consumer sentiment, business activity and the business climate were followed by encouraging news from the German economy. It expanded not by 0.3%, but by 0.4%, i.e. it was more resilient to numerous troubles, including the energy crisis, than previously thought. The main driver of growth was the consumers, whose activity increased by 1%. German GDP dynamics The latest data suggest that the recession in the eurozone will be shallow and short-lived, which supports the single currency. The market is optimistic, however the Institute of International Finance decided to add a minor hitch. According to the trade association, which was one of the first to predict the parity in EURUSD, the armed conflict in Ukraine will develop into an eternal war. It will not end in 2023, and the countries that are close to it will suffer first. In particular, the eurozone, whose GDP will shrink 2% next year due to a sharp decline in consumer and business confidence. The U.S. economy will expand by a modest 1% as the Federal Reserve's tightening of monetary policy will have a noticeable effect. The main driver of global GDP will be China, which will defeat COVID-19 and finally open its economy. However, China's efforts will not be enough. The world gross domestic product in 2023 will increase by 1.2%, which will be its worst performance since 2009. It looks like the glass is half empty for the Institute of International Finance, which provides hope to the EUR/USD bears. If the world economy feels as bad next year as it has this year, or maybe even worse, then getting rid of the U.S. dollar is not a good idea. The greenback is the currency of the pessimists. In the short-term, the dynamics of the main currency pair will be determined by releases of data on European inflation and U.S. labor market. Slowing consumer prices in the eurozone and U.S. employment are the keys to reduce the speed of monetary easing by the ECB and the Fed, so EURUSD risks showing mixed dynamics. Technically, the pair has an opportunity to continue the rally towards the 161.8% target on the Crab pattern and to win back the 1-2-3 Reversal pattern. In this regard, let's sell the euro on a breakout of support at 1.038 and 1.033 and buy it in case it grows above 1.044.     search   g_translate     Relevance up to 13:00 2022-11-28 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/328180
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

There’s A Whole Host Of Lot Of Data Next Week

Craig Erlam Craig Erlam 26.11.2022 16:09
US Wall Street returns after the Thanksgiving holiday and what a week we have in store. The jobs report on Friday is the obvious highlight, with Fed policymakers keen to see further signs of inflationary pressures easing and less tightness in the labour market. There’s a whole host of other data due next week as well including the core PCE price index – the Fed’s preferred inflation measure – GDP, income, spending, jobless claims, and more. We’ll also hear from Fed policymakers throughout the week including Chair Jerome Powell on Wednesday. EU An action-packed week for Europe, with a plethora of key economic data and ECB policymaker appearances. In the run-up to the ECB rate decision on 15 December, that commentary is going to provide crucial insight into which way the committee is leaning, with another 75 basis points currently heavily priced in. With that in mind, the flash CPI release stands out as the one to watch on Wednesday. UK The UK has repaired some of its tarnished reputation in recent weeks but the economy is still likely in recession and it won’t be an easy road back. There isn’t much data next week to support or refute that but there are appearances from various BoE policymakers that will be of interest. Russia A few economic numbers of note next week include GDP, retail sales, unemployment, real wages, and the manufacturing PMI. Unemployment is expected to tick higher again to 4.1% from its September low of 3.8%. South Africa The SARB continued its aggressive tightening cycle in November with another 75 basis point hike, taking the repo rate to 7%. The central bank expects inflation to remain above its 3-6% target range until the second quarter of next year and only return to the mid-point in the second quarter of 2024. Next week brings the release of unemployment data on Tuesday. Turkey As expected, the CBRT cut rates by 1.5% in November and ended its easing cycle, leaving the policy rate at 9%. Next week its quarterly GDP and the manufacturing PMI on offer as traders look for clues as to the cost of the monetary policy experiment on the economy. Switzerland A data-heavy week that includes the PMI survey and inflation on Thursday – which the SNB has repeatedly stressed is too high – GDP on Tuesday, and KOF and ZEW surveys on Wednesday.  China Official Chinese manufacturing and non-manufacturing PMIs for November will be released on Wednesday as well as the Caixin Manufacturing PMI.  As these figures have been fluctuating above and below the 50-the threshold separating contraction from expansion for the past few months, they suggest that the Chinese economy is still hovering between contraction and expansion. However, the long-term positive fundamentals of the Chinese economy remain unchanged. Industrial profits figures are also released over the weekend. India A number of interesting economic releases next week including GDP on Wednesday and the manufacturing PMI on Thursday. Australia & New Zealand Inflation in Australia and New Zealand remains high, and the new Governor of the Reserve Bank of Australia, Philip Lowe, has said in a speech that he is determined to ensure that the current high inflation is temporary, while the RBA is expected to raise interest rates further in the future.  The RBNZ’s 23 November central bank rate meeting hawkishly raised rates by 75 basis points to 4.25% to continue the fight against inflation, and the market now expects the RBNZ’s terminal rate may rise to 4.75%.    Next week, the focus will be on Australian retail sales and CPI for October on Monday and the speech by the new RBA Governor Philip Lowe on Wednesday. Other data released throughout the week will also be of interest. Japan Coming up next week is data on unemployment, retail sales, and industrial production for October as well as the latest manufacturing PMI for November.  Singapore At the 29th APEC Economic Leaders’ Meeting on 17 November, President Xi Jinping met with Singaporean Prime Minister Lee Hsien Loong in Bangkok. The China-Singapore relationship is forward-looking, strategic, and exemplary, Xi said. Lee Hsien Loong said Singapore sees China’s development as positive, wishes the GDI well, and will explore ways to participate. Both countries expressed their willingness to continue to deepen their cooperative relationship and work together to promote new progress in the all-around partnership between the two countries as they move with the times. According to Caixin Global, on 22 November, Singapore police said it was investigating Binance. This comes after the Monetary Authority of Singapore noted that Binance was being investigated as it may have violated the Payment Services Act. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
ECB press conference brings more fog than clarity

The European Central Bank's Interest Rate Will Increase In the Upcoming Months

InstaForex Analysis InstaForex Analysis 27.11.2022 13:25
The wave marking on the euro/dollar instrument's 4-hour chart is convincing. The upward portion of the trend has corrected itself. Initially, I believed three waves would develop, but it is now abundantly clear that there are five waves. As a result, the waves a, b, c, d, and e have a complex correction structure. If this supposition is accurate, the building of this structure may have already been finished since the peak of wave e is higher than the peak of wave C. In this instance, it is anticipated that we will construct at least three waves downward, but if the most recent phase of the trend is corrective, the subsequent phase will probably be impulsive. Therefore, I am preparing for a new significant decline in the instrument. The market will be ready to sell when a further attempt to breach the 1.0359 level, which corresponds to 261.8% Fibonacci, is successful. The peak of the anticipated wave e was still present, so removing quotes from the lows this week did not violate the wave marking. As a new downward trend segment, most likely segment 2 or b, the most recent increase in quotes can be seen as an internal correction wave. Wave e and the upward portion of the trend will likely take a more extended form if an attempt to break through its current peak is successful. Rates will keep rising, according to an ECB vice president. This week, the euro/dollar instrument experienced positive dynamics. The demand for the euro currency was increasing despite the absence of reports and news. This allowed the instrument to develop an upward wave that still needed to deviate from the established wave pattern. However, the instrument's decline should start as early as Monday or Tuesday to preserve the integrity of the wave marking. A wave 3 or C is supposed to be built right now. The ECB Vice President Louis de Guindos' speech last week was the most interesting for the euro. There were two performances, though they were barely distinguishable from one another. According to De Guindos, the European Central Bank's interest rate will increase in the upcoming months because the European Union's inflation rate is still "indecently high," and the slowdown in economic activity cannot result in a decrease in the consumer price index. As no one who participated in the foreign exchange market questioned further tightening monetary policy, I cannot say that de Guindos' statement sparked a commotion there. The likelihood that the rate will increase further, though, is growing. The euro currency benefits from this, but wave analysis and the news background are now at odds. While the news background suggests an increase, the waves suggest a decrease. We may see both in the end. The tool can create a third wave of a descending trend before starting a new upward trend segment. However, a descending wave needs to be constructed first. If not, the wave markup might become much more difficult to read. Conclusions in general Based on the analysis, the construction of the upward trend section is complete and has become more complicated with five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. There is a chance that the upward section of the trend will become more complicated and take on an extended form, but this chance is currently at most 10%. The wave marking of the descending trend segment becomes more intricate and lengthens at the higher wave scale. The a-b-c-d-e structure is most likely represented by the five upward waves we observed. After the construction of this section is finished, work on a downward trend section may resume.     search   g_translate     Relevance up to 11:00 2022-11-28 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/328232
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

For Europe, The Outlook Is Even Bleaker – EU CPI Can Reach 10.7%

Kamila Szypuła Kamila Szypuła 27.11.2022 14:20
Inflation in the eurozone is expected to have reached a new record high of 10.7% in October. The outlook In September inflation amounted to 9.9%. The Baltic countries remain the hardest hit, with annual inflation above 20%. Estonia leads in comparison with estimates of 22.4%. This is mainly because they are particularly vulnerable to fluctuations in the energy markets. According to Eurostat, the price of natural gas for households increased by 154% and 110% respectively in Estonia and Lithuania between the first half of 2021 and the first half of this year. Meanwhile, France maintained its position as the country least affected by the crisis, although annual inflation in October was 7.1%. Forecast Euro inflation is expected to increase to 10.8% y/y from 10.6% y/y, but core inflation will remain stable at 5.0% y/y. These relative price shocks reflect the scale and extent of the energy, pandemic and war shocks. In such circumstances, standard measures of core inflation at the time may not accurately reflect the persistent component of inflation, while forward-looking wage growth rates may play a useful additional role in determining the medium-term inflation dynamics.Long-term inflation expectations now seem well anchored at the 2% target. Inflation and interest rates The European Central Bank, tasked with keeping eurozone inflation close to 2%, broke with more than a decade of negative interest rates this summer in an effort to contain price increases. Central banks use their interest rates to make money more expensive or cheaper to increase or reduce spending as they directly affect the interest rates offered to households and businesses by commercial banks. Central banks, having more and more signs of easing price pressure in the medium term, are increasingly considering slowing down the pace of rate hikes. Minutes from the last Fed meeting and Fed speeches suggest that the majority in the Fed is in favor of lowering the scale of interest rate hikes to 50 bp from 75 bp. However, before the meeting on December 14, we have yet another report on employment and inflation, which will be crucial for the scale of the rate hike. The ECB may also move to 50 bp, but much depends on how next week's November inflation will turn out. Another high printout would probably trigger a 75 bp hike at the meeting on December 15, but the specialists' baseline scenario assumes a 50 bp hike. Economic growth The eurozone economy is believed to have grown in the third quarter, but only by 0.2% from the previous quarter, according to Eurostat's preliminary data, also released on Monday. In the second quarter, the area of 19 countries increased by 0.8%. At least three countries are projected to contract quarterly. Growth in Latvia contracted by 1.7%, while Belgium and Austria grew by 0.1%. According to forecast of the head of the International Monetary Fund (IMF) offered her own grim prediction that half of the countries in the eurozone could enter into recession in the months to come. Europe's economy is projected to be badly hit by the energy crisis triggered by Russia's war in Ukraine. The IMF estimated the eurozone to expand by 3.1% in 2022 but just by a meagre 0.5% in 2023. Next year, Germany and Italy are projected to post -0.3% and -0.2% rates, respectively. Source: IMF, investing.com
The ECB President Christine Lagarde's Speech Could Bring Back Risk Appetite

This Week In The European Union Will Be Mass Of Events That Could Cause A Market Response

InstaForex Analysis InstaForex Analysis 28.11.2022 08:23
On Friday, the EUR/USD currency pair traded extremely calmly, exhibiting no sudden movements, volatility, or trend. However, the pair ended the day above the moving average, and both linear regression channels point upward. Therefore, the development of the European currency is entirely justified from a technical standpoint. Another concern is that it is obvious that the macroeconomics and foundation do not provide the euro currency with enough support for it to grow almost continuously. But since this issue has already been brought up several times, there is nothing new to add now. As we have repeatedly stated, any fundamental hypothesis should be supported by specific technical signals. It is not worthwhile to test this hypothesis if there are no signals. We can wait as long as we like for a correction, but if the majority decides to buy the euro for any reason, there won't be one. However, a correction could still start soon. The fact is that there are currently no fundamental or macroeconomic justifications for the appreciation of the euro currency. Of course, they can be "discovered" or "invented," but if that doesn't happen, how can one explain, for instance, why the European currency increased last week? Whatever it was, we are still watching for the pair to fall and consolidate below the moving average line. The most intriguing report of the week concerns inflation in the EU. The situation will be more intriguing this week than it was last week because of the macroeconomic backdrop. The European Union will host Christine Lagarde's speech on Monday. With the ECB's final meeting of the year scheduled for December, her speeches are gradually regaining importance. The market currently anticipates an additional 0.75% rate increase because, even if inflation slows by the end of November, it is unlikely that it will be able to return to 2% at the same rate level. As a result, several more significant increases are necessary, as Vice-Chairman of the ECB Luis de Guindos discussed last week. Lagarde will likely use "hawkish" language, which could theoretically support the euro. The word "theoretically" is because the market is confident that the rate will continue to grow at its fastest rate even without Lagarde's new rhetoric. There are numerous reasons why the Fed needs to catch up. First, a higher rate abroad causes an imbalance in cash flow and investment. Money comes to the US. Second, a higher Fed rate causes the dollar to rise while the euro declines. Thirdly, a high rate is necessary to reduce inflation, which is still very high and must be done. Therefore, increasing it at the fastest possible rate is necessary since it is ineffective for the European regulator to "pull the rubber." The November inflation report will be released on Wednesday. The consumer price index is expected to slow to 10.3–10.4% y/y, which can be seen as the first step toward success, according to forecasts made by experts. Nevertheless, since this is only a prediction, it might not pass. And now for something interesting. Recall that a few months ago, the US dollar started to decline relative to its rivals when US inflation started to slow down. Since the beginning of the decline in inflation, the likelihood of further aggressive tightening of monetary policy by the central bank has decreased. It can be concluded that a decrease in inflation = a fall in the exchange rate of the national currency. The European currency could lose market support if inflation in the European Union starts to decline. The European Union will release its unemployment rate and business activity index (manufacturing sector) on Thursday. There will be more significant events this week than these reports in the present context. Luis de Guindos and Christine Lagarde will perform as usual on Friday. It's more intriguing this way. As a result, there will be a lot of intriguing events this week in the European Union alone that could cause a market response. As of November 28, the euro/dollar currency pair's average volatility over the previous five trading days was 86 points, considered "average." So, on Monday, we anticipate the pair to fluctuate between 1.0310 and 1.0482 levels. A potential continuation of the upward movement will be indicated by the Heiken Ashi indicator turning back to the top. Nearest levels of support S1 – 1.0376 S2 – 1.0254 S3 – 1.0132 Nearest levels of resistance R1 – 1.0498 R2 – 1.0620 R3 – 1.0742 Trading Suggestions: The EUR/USD pair is still above the moving average. In light of this, we should now consider long positions with targets of 1.0482 and 1.0498 if the Heiken Ashi indicator reverses direction and moves upward or the price recovers from the moving. Only after fixing the price below the moving average line with targets of 1.0254 and 1.0132 will sales become significant. Explanations of the illustrations: Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.     search   g_translate     Relevance up to 05:00 2022-11-29 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328254
RBA Governor Announces Major Changes at RBA Board as US Inflation Expected to Decline

Elon Musk Introduces Verified Accounts On Twitter

Saxo Bank Saxo Bank 28.11.2022 08:57
Summary:  A pivotal post-holiday week ahead kicked off with risk-off due to protests in China over the Zero covid policy, and China PMIs due this week could potentially signal demand weakness as well. The week is also key for US data and Fed as financial conditions are the easiest since May and more pushback may be on the cards with the most hawkish members of the Fed board, Powell and Bullard, on the wires this week before the FOMC quiet period kicks in. We also get ISM manufacturing, PCE inflation and jobs data that will be key for the dollar. Eurozone inflation may soften, but that won’t be enough for the ECB to take the foot off the pedal, while Australian CPI will pressure the RBA to continue with its steady rate hikes. An important week ahead for incoming US data: ISM manufacturing, PCE inflation and jobs data to be key for the dollar This week will offer an interesting test for markets, including the US dollar, which trades at pivotal levels, as we have a look at the next important data macro data points out of the US, especially the PCE inflation data and the Friday November jobs report. Core PCE is forecast to rise 0.3% MoM in October from 0.5% previously. In addition, we’ll have a look at the ISM manufacturing survey for the month on Thursday, which is also expected to slip into contraction after the decline in S&P flash PMIs last week resulted in further easing of Fed tightening expectations. The question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Bullard and Powell speak – pushback against easing financial conditions? While the economic data continues to slow, and markets continue to cheer on that, it will key for Fed members to bring the focus back to easing of financial conditions and consider what that means for inflation. Chicago Fed national financial conditions index eased further in the week of November 18, bringing financial conditions to their easiest levels since May. Most of the Fed members that have spoken since that soft CPI release for October have pushed back against pivot expectations, but it hasn’t been enough. Further pushback is still needed if the Fed is serious about bringing inflation under control, and only the most hawkish members of the committee Bullard and Powell may be able to deliver that. Both will be on the wires this week. Bullard speaks on Monday while Powell discusses the economic outlook and labor market on Wednesday. Other Fed members like Williams, Bowman, Cook, Logan and Evans will also be on the wires. China PMIs likely to show demand weakness, Asia PMIs also due China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Likewise, the Caixin manufacturing PMI is expected to drop to 49.0 (Bloomberg survey) in November from 49.2 in October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. PMIs for other Asian countries are also due to be reported this week, and the divergence between the tech-dependent North Asian countries like Taiwan and South Korea vs. more domestic-oriented South Asian countries like India and Indonesia will likely continue, with the latter outperforming. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Australia’s economy continues to weaken. Retail slides. CPI data is the next catalyst Australia has continued to receive mostly weaker than expected economic data, that support the RBA’s dovish tone. Today Australian retail trade data unexpected fell, showing sales dropped 0.2% from the prior month. This reflects that consumers are feeling the strain of inflation and rising interest rates. As a house, Saxo thinks further weakness in spending is likely ahead in 4Q and into 2023, with the full impact of rate hikes passing through households, and increasing amount of Australian in financial duress. This view is somewhat supported by the RBA’s thinking. The data the RBA will be watching next is ; Australian inflation data for October, released Wednesday 30 November. Inflation is likely to have fallen over the month, however consensus expects inflation to have increase year on year, up 7.6% year on year. If the market thinking comes to fruition, this would show Australian inflation rose from the prior reading (whereby CPI rose 7.3% yoy). Regardless, if inflation does rise, we think the RBA will likely save face, and keep hiking rates by 0.25%, with its next hike due December 6. Twitter to launch its ‘Verified’ service After Musk acquired Twitter last month for $44 billion, he plans to "tentatively" roll out its verified service on December 2, with multiple colours for different types of users. Blue checks will be allotted to people, while verified company accounts will get gold checks and grey marks will be given to governments. Musk said all verified accounts will be manually authenticated, before the check activates, which will be cumbersome. Twitter recently halted the launch of its $8 verified service, as it failed to cease impersonation issues the company has been having. Key earnings to watch this week Peter Garnry highlights earnings results to watch in his note. Pinduoduo on Monday is the key earnings focus in China with analysts expecting Q3 revenue growth of 44% y/y and the EBITDA margin staying at healthy levels around 21.2%. The main menu next week is on Wednesday with earnings from US technology companies Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to decline to 14% y/y down from 27% y/y a year ago and analysts expect Snowflake to report FY23 Q3 (ending 31 October) revenue growth of 61% y/y down from 110% y/y a year ago. Expectations for both companies highlight the slowdown in technology enterprise spending that we have seen from other technology companies including Intel, HP etc. Key economic releases & central bank meetings this week Monday, Nov 28 Eurozone M3 (Oct)UK CBI Retail Sales (Nov)U.S. Fed Bullard at MarketWatch Live Event Tuesday, Nov 29 U.S.  Conference Board Consumer Confidence (Nov)U.S. St. Louis Fed President Bullard speechJapan Unemployment Rate (Oct)Japan Retail Sales (Oct) Wednesday, Nov 30 U.S. ADP Private Employment (Nov)U.S. JOLTS Job Openings (Oct)U.S.  Fed Chair Powell speechEurozone HICP (Nov, flash)Germany Unemployment Rate (Nov)Japan Industrial Production (Oct)Japan Housing Starts (Oct)China NBS Manufacturing PMI (Nov)China NBS Non-manufacturing PMI (Nov)India Real GDP (Q3)Thailand Bank of Thailand policy meeting Thursday, Dec 1 U.S. PCE (Oct)U.S. ISM Manufacturing (Nov)U.S. Initial Jobless Claims (weekly)Eurozone Unemployment Rate (Oct)Japan Capital Spending (Q3)Japan Consumer Confidence (Nov)China Caixin China PMI Manufacturing (Nov) Friday, Dec 2 U.S. Nonfarm Payrolls (Nov)U.S. Unemployment Rate (Nov)Eurozone PPI (Oct)   Key earnings releases this week Monday: Pinduoduo, Capitaland, H World Group Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-28-nov-2022-28112022
Behind Closed Doors: The Multibillion-Dollar Deals Shaping Global Markets

Stock Markets Opened The Week Lower | Apple Seeing Losses

InstaForex Analysis InstaForex Analysis 29.11.2022 08:08
Stock markets opened the week lower as investors worry that China may have to further tighten its Covid restrictions. That could undermine global economic growth prospects, and has led to protest across key cities. Data indicates that the S&P 500 cut its monthly rally, with Apple seeing losses after Bloomberg News reported that unrest at its key manufacturing center in Zhengzhou is likely to lead to a production shortfall of nearly 6 million iPhone Pro units this year. Meanwhile, Amazon made gains in retail sales, and analysts say the Cyber Monday results will paint a fuller picture of demand this holiday season. European stock indices also fell, following the US. The unrest in China is complicating the country's path to economic opening. This, along with the potential moderate rate hikes by the Fed in upcoming sessions, has spurred interest towards riskier assets. Analysts at Goldman Sachs have warned that the chances of a disorderly exit from Beijing's Covid Zero policy are also rising. Just as the S&P 500 was trying to break above its mid-November highs, sentiment turned negative, threatening the recent market momentum. The timing is most inconvenient here as the index is approaching an important technical zone in the form of both the 2022 downtrend and the 200-day moving average. If the bullish mood ends, short-term trades could trigger profit-taking. In Europe, ECB President Christine Lagarde said that she would be surprised if inflation in the region peaked. This would mean that interest rate hikes are not over. On the other hand, Fed Chairman Jerome Powell is expected to reinforce expectations that the central bank will slow the pace of rate hikes next month. However, the fight against inflation will last until 2023. Key news for this week: * US consumer confidence, Tuesday * EIA crude oil report, Wednesday * China PMI, Wednesday * Fed Chairman Jerome Powell's speech, Wednesday * Fed Beige Book, Wednesday * US GDP, Wednesday * US PMI, Thursday * US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday * Bank of Japan Governor Haruhiko Kuroda's speech, Thursday * US unemployment and nonfarm payrolls report, Friday *ECB chief Christine Lagarde's speech, Friday     search   g_translate     Relevance up to 19:00 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/328363
ECB press conference brings more fog than clarity

All ECB Members Agreed That It Was Important To Keep Raising The Rate

InstaForex Analysis InstaForex Analysis 29.11.2022 08:27
The euro's first trading day of the week proved surprisingly active. Although there was no news background on Monday, the movements started in the evening and continued throughout the day and into the evening. There was some news, though, and I will now consider them. The speech by Christine Lagarde, which offered nothing to the market, should be our first point of reference. The market now feels secure in its position and is clear on the actions the European regulator will take in the coming months due to the ECB speakers' appearances just last week. All ECB members agreed that it was important to keep raising the rate as long as inflation was still high. A preliminary report on EU inflation for November will be released this week, and the market now anticipates that it will start to slow down a bit. This might be an exceptional circumstance, or perhaps by the end of November, there won't be any slowdown. Predictions sometimes pan out. Additionally, Isabel Schnabel gave a speech in which she said something crucial. She pointed out that the ECB is currently powerless to halt the rate increase because budgetary initiatives will cause inflation to soar. Budget plans are viewed as various initiatives to reimburse European consumers for rising electricity costs over the past year. Schnabel also pointed out that faulty inflation forecasts by central banks could result in misguided monetary policy. She added that the ECB might need to increase the rate more than initially anticipated. This is reasonable rhetoric, given that budget incentives are almost identical to monetary incentives, which are the primary cause of the EU's (and other nations') current record-high inflation rates. Restrictive measures ought to be more stringent than they would be if the EU implements fiscal stimulus. Such rhetoric is advantageous for the euro. The market will have more justification to increase demand for the euro currency as rates in the European Union rise. We need at least three waves down based on the current wave layout. This is necessary for the markup to be completely unreadable and complex, making it much more challenging to predict something. I do not contest the possibility of a continued quote rise; even yesterday's example demonstrated this. But I'm still hoping to develop a clear trend correction section. The upward trend section's construction is complete and has increased complexity to five waves (or is nearing completion). As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. There is a chance that the upward section of the trend will become more complicated and take on an extended form, but this chance is currently at most 10%. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I can no longer recommend purchasing the instrument because the wave marking already permits the development of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form. Relevance up to 05:00 2022-11-30 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/328393
ISM Business Surveys Signal Economic Softening and Recession Risks Ahead

The EUR/USD Pair Still Hasn't Started A Downward Movement

InstaForex Analysis InstaForex Analysis 29.11.2022 08:30
M5 chart of EUR/USD On Monday, the euro/dollar pair showed certain movements that are quite difficult to explain. It started to sharply rise early in the morning and crossed a distance of 150 pips. Then it began to fall by the same amount in the afternoon. The only fundamental background was European Central Bank President Christine Lagarde's speech, which took place in the evening, so it could not have provoked such movements. Therefore, the pair has reached 1.0485, near which the previous local high was formed, and sharply fell. I believe that this pullback could be the start of the long-awaited bearish correction, which I already mentioned last week. The price may cross the critical line in the near future, which will be another technical factor for the fall. I expect the Senkou Span B line to be the first target, but the correction might be much stronger, since the euro's growth for the past few weeks was not quite logical and reasonable. As for trading signals, yesterday's situation was almost perfect. At the beginning of the European trading session, the price broke through the level of 1.0366, after which it rose to the nearest target level of 1.0485 and rebounded from it. Therefore, traders had to open a long position first, and then - a short position. They managed to earn about 90 pips on the first position, and also the same amount on the second one since the price went back to the level of 1.0366. As a result, two deals, good profit. COT report As for Commitment of Traders (COT) reports in 2022, they reflected bullish sentiment in the first six months of the year although the euro was bearish. Then, they illustrated bearish sentiment for several months with the euro being also bearish. Currently, the net position of non-commercial traders is again bullish and increasing. Meanwhile, the euro has hardly retreated from its 20-year lows. This is due to the fact that demand for the greenback is high amid a difficult geopolitical situation in the world. Therefore, despite a rise in demand for the euro, buoyant demand for the dollar does not allow the euro to strengthen. During the reporting week, the number of long positions held by non-commercial traders rose by 7,000 and that of short positions increased by 2,000. Consequently, the net position advanced by 5,000. The euro's recent growth is gradually coming in line with the figures illustrated in the COT report. Still, the greenback may resume growth under the influence of geopolitical factors or the lack of factors for further strengthening in the euro. The green and red lines of the first indicator moved far away from each other, which may indicate the end of the uptrend. The number of long positions exceeds that of short positions by 113,000. Therefore, the net position of non-commercial traders may continue to rise further, but without triggering a similar rise in the euro. When it comes to the total number of longs and shorts across all categories of traders, there are now 39,000 more short positions (635,000 vs 596,000). H1 chart of EUR/USD Lately, EUR/USD has shown absolutely inadequate movements on the one-hour chart. It still hasn't started a downward movement even after it crossed the ascending trend line. Yesterday, the pair updated its last local high, but failed to break through the important level of 1.0485. And now it may start a strong bearish correction, which we already expected a week ago. On Tuesday, the pair may trade at the following levels: 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0485, 1.0579, 1.0637, as well as Senkou Span B lines (1.0207) and Kijun Sen (1.0376). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On November 29, there are no important events planned in the EU and the U.S., but Monday showed us that the pair is ready to move in a volatile manner even without them. What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group.     search   g_translate     Relevance up to 01:00 2022-11-30 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/328371
The Outlook Of EUR/USD Pair For Long And Short Position

Lagarde (Head Of ECB) Said That The ECB Will Continue To Raise Rates

InstaForex Analysis InstaForex Analysis 29.11.2022 08:53
Another attempt to attack the 4th figure ended in failure. On Monday, EUR/USD bulls hit a five-month price high at 1.0498. However, the pair did not stay at this level for long - the price fell during the US session and finished the trading day at 1.0340. If the impulsive growth was unreasonable and unusual (despite the news from China), then the downward momentum was provoked by quite a specific person - European Central Bank President Christine Lagarde. Lagarde delivered her semi-annual report to members of the European Parliament Committee on Economic and Monetary Affairs. The theme of the report was directly related to monetary policy, so the speech triggered increased volatility in the pair. And it was not in favor of the euro. It's notable that Lagarde voiced quite contradictory rhetoric. There were different ways to evaluate her speech, both in its favor and against. In the end, traders chose the second option: as a result, the euro weakened not only against the greenback, but also in many cross-pairs. So, on the one hand, Lagarde said that the ECB will continue to raise rates, despite the slowdown in business activity in the eurozone. She acknowledged that high levels of uncertainty, tighter financial conditions, and declining global demand are putting pressure on economic growth in the European Union. But the record growth of inflation in the eurozone, according to her, is forcing the ECB to move on. Lagarde expressed doubt that the consumer price index in the eurozone has reached its peak values. She noted that the cost of wholesale energy supplies continues to rise (which is the main driver of headline inflation), so a slowdown in CPI growth in November seems extremely unlikely. Lagarde said that she "would be surprised" if inflation reached its peak in October. Certainly, the talking points are hawkish. In other circumstances, EUR/USD bulls would have taken advantage of the situation and rushed upwards, building on their success (i.e. in our case they would have settled in the area of the 5th figure). If it were not for one "but". The fact is that Lagarde made it clear in the European Parliament that slowing down the pace of interest rate increases in December is still a matter of debate. In doing so she took a neutral position in the corresponding dispute of many ECB representatives. Mario Centeno, Philip Lane, Francois Villeroy de Galo and Klaas Knot, among others, spoke publicly in favor of a lower rate of monetary policy tightening. Whereas the hawkish wing of the central bank, such as Robert Holzmann, Isabelle Schnabel and Joachim Nagel, came out in favor of a 75-point rate hike in December. Lagarde stayed "above the fray." According to her, the central bank will make an appropriate decision based on many factors: "...it will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of the transmission of our policy stance". Based on a comprehensive analysis of these factors, the ECB will decide how far rates should be raised and how fast. Such statements sobered up the EUR/USD bulls and then the price rolled back and headed to the daily lows, to the area of the third figure. Even in the first half of Monday, the ball was on the side of euro-dollar pair bulls, which took advantage of the weakening of the greenback and the strengthening of the hawkish mood regarding the ECB's further actions. But the diplomatic wording of Lagarde, which allows for various scenarios (both dovish and hawkish) did not allow the bulls to consolidate their success. The bears took the initiative and pulled the price back to its previous positions. On top of that, in the afternoon, the market finally reacted to events in China, which unfolded too dynamically and unexpectedly. First, the number of coronavirus cases in China is surging. Last Thursday, Beijing reported 31,000 new infections, noting that this was the strongest daily rate of increase in the history of the pandemic. But a little later, it turned out that PRC anti-records are updated almost daily. For example, the number of diseases has already exceeded the 40,000 mark on Monday. COVID outbreak in China is fraught with another wave of lockdowns. Strict quarantine has already been imposed in many cities across the country, with millions of people locked in their homes. Enterprises and firms have moved their employees to remote work schedules (where this is possible due to the nature of their work). China is known to have a "zero tolerance" policy for the Coronavirus, so it is not surprising that the authorities reacted to the situation with the utmost severity. And this circumstance gave rise to a second problem: Anti-Coronavirus protests broke out in China. At the moment, it is difficult to talk about the prospects of the protest movement. In most cases, people are protesting against the "zero Covid" policy, which, in their opinion, does not bring results, but hits hard on the pocket. However, in some cases, demands for the resignation of Chinese leader Xi Jinping are also heard among the demonstrators. In any case, these protests are already considered the largest in China for the last 33 years, since the 1989 protests (the events on Tiananmen Square). Judging by the dynamics of the dollar index, traders are wary of the unfolding events. The situation is, in a sense, a stalemate: on one side of the coin - possible turbulence in the markets due to the protests, on the other side of the coin - negative consequences from large-scale lockdowns in major cities of China. Thus, the current fundamental background is clearly not favorable for the euro's upward movement (first of all, if we speak about a stable development, but not an impulsive breakthrough). Therefore, it is better to either take a wait-and-see position or consider short positions. The main bearish target is still at 1.0210 (the middle line of the indicator Bollinger Bands on the daily chart). Crossing this target will pave the way for the bears to reach the parity level.     search   g_translate     Relevance up to 01:00 2022-11-30 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/328381
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

The Euro Area Is Nearing Recession | Investors Are Looking For Hints About The ECB's Decision

InstaForex Analysis InstaForex Analysis 29.11.2022 09:00
EUR/USD lost 1,500 points after ECB President Christine Lagarde said she would be surprised if inflation in the eurozone peaked. "I would like inflation to peak in October, but I'm afraid I won't go that far," she noted on Monday. "There is too much uncertainty, particularly in the shifting of high electricity costs from the wholesale level to the retail level'. This suggests that interest rate hikes are far from over. Although consumer price growth has slowed in November, the figure remains above 10%. Investors are obviously looking for hints that the ECB will ease its interest rate increases, especially since the Euro area is nearing recession. Some members of the governing council have already called for a slower pace, following the plans to start writing off around €5 trillion ($5.2 trillion) of bonds that were bought during the recent crises. Others, however, do not see any reason to give up as inflation is more than five times the 2% target. Dutch central bank governor Klaas Knot said earlier that Europe should be prepared for a "protracted period", during which the ECB would return inflation to target. Bundesbank president Joachim Nagel said the ECB should not ease measures "too soon".     search   g_translate     Relevance up to 19:00 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/328367
The US PCE Data Is Expected To Confirm Another Modest Slowdown

Dallas Fed Manufacturing Index Came In Less Bad Than Expected

Saxo Bank Saxo Bank 29.11.2022 09:06
Summary:  A slew of Fed speakers remained hawkish on Monday, with Bullard saying that markets were under-pricing the risk of a more aggressive Fed This added to the risk-off tone from the protests in China ahead of the focus turning to an array of key US data due in the week. The US Dollar found a fresh bid into the US close, while the yen is being supported by safe haven demand and shifting tone from BOJ officials. Sharp swings in oil prices as well amid demand weakness concerns being reversed by hopes of an OPEC+ production cut, as the cartel meets over the coming weekend. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on China Covid protests and hawkish Fedspeak U.S. equities slid on the outbreak of protests against Covid lockdowns across large cities in China and hawkish comments from Fed officials. Nasdaq 100 dropped 1.4% and the S&P500 lost 1.5%. The selloff was board-based as all 11 sectors of the S&P500 declined on Monday. Energy and materials stocks took a hit as oil and other commodity prices retreated. Apple (AAPL:xnas) fell 2.6% as the iPhone maker could fact a production shortfall of as many as 6 million handsets as a result of the labour unrest in the Foxconn factory in Zhengzhou. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) pared early gains and finished Monday little changed U.S. treasuries caught a risk-off bid in Asian hours as the Covid protests in China triggered buying in safe-haven assets. The gains were pared when New York came with the St. Louis Fed President Bullard saying that the Fed is “is going to need to keep restrictive policy…to continue through -- as least through – next year.” The 10-year finished unchanged at 3.68%. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Mainland China and Hong Kong stock markets retreated as investors were wary about the surge in daily new Covid cases across China and the outburst of anti-strict-control protests in several mega cities, including Beijing and Shanghai. The cut in reserve requirement ratio by the central bank on Friday evening did not give the market much of a boost. Hang Seng Index declined 1.6% and CSI 300 lost 1.1%. The China internet space fell 2%-4% except for Meituan (03690:xhkg) which gained 2% on strong Q3 results reported last Friday. Macao casino stocks bucked the trend and rallied following the Macao SAR Government’s announcement to renew casino licenses with all incumbent operators. Wynn Macau (01128:xhkg) jumped nearly 15%. Stocks of the Chinese catering chains listed in Hong Kong gained some market speculation of earlier exit from the dynamic zero-Covid policy due to the now hard-to-contained outbreaks of inflection across the country. Haidilao (06862:xhkg) surged 6.8%. Buying on Hang Seng Index futures emerged in overnight trading in New Your hours and saw the futures contract jump 1.2% and the Nasdaq Golden Dragon China Index rise 2.8%. FX: USDJPY getting a safe haven bid, but there’s more! Choppy moves in the US dollar on Monday amid risk off and volatility in the US yields. But hawkish Fed speak, with Williams and Bullard both hinting at higher rates than the September dot plot, supported a final leg higher in the USD in the late US session. EURUSD touched highs of 1.0500 but reversed all of the day’s gains later with focus on inflation numbers due tomorrow. USDJPY also touched lows of 137.50 before reversing but a clear shift in tone in BOJ officials is being seen in the last few weeks keeping the BOJ pivot narrative alive into early 2023 before Kuroda or just after Kuroda retires. Kuroda referred to wage gains as being supportive of more stable levels of inflation which gave the yen a boost on Monday. Crude oil (CLZ2 & LCOF3) reversed losses on OPEC cut hopes Crude oil prices made a sharp u-turn on Monday after dipping lower earlier in the session on concerns from protests in China which delayed the hopes of a reopening further and a hawkish commentary from Fed speakers (read below). WTI futures fell to lows of $74/barrel while Brent was down to $81. However, losses were reversed later as OPEC+ delegates said deeper production cuts could be an option when they meet this weekend. OPEC+ is scheduled to meet this Sunday to review its current production plan. At the last meeting it cut output quotas by 2mb/d. Saudi Energy Minister Prince Abdulaziz bin Salman said that OPEC+ was ready to intervene with further supply reductions if it was required to balance supply and demand. Meanwhile, European talks on a price cap have stalled.   What to consider? Fed speakers press for higher rates James Bullard (2022 voter) said markets are underestimating the chances that the FOMC will need to be more aggressive next year, adding tightening may go into 2024. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. John Williams (voter) said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. The central bank isn't near a pause, Loretta Mester (2022 voter) told the FT. Richmond Fed President Barkin also spoke about higher-for-longer rates, despite moving slower BlockFi – another casualty in the FTX saga BlockFi Inc. filed for Chapter 11 bankruptcy, the latest crypto-industry operator to seek court protection in the wake of FTX’s collapse. It sold $239 million of crypto ahead of its filing. ECB’s Lagarde maintains tightening stance ECB President Lagarde repeated her previous comments that the ECB will raise rates further but nothing on how much further, and on how fast they need to go. She said the bank will be data-dependent, adding the ECB may need to move into restrictive territory. She also said that she will be surprised if inflation in the Eurozone (due to be reported on Wednesday 30/11) peaked last month. Even if the November print cools slightly, most likely driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Dallas Fed manufacturing signals job stress is building Dallas Fed manufacturing index came in less bad than expected at -14.4 for November, but the underlying metrics indicated a softening in labor markets. 16% of the factories surveyed indicated net layoffs in November, up from 9% previously, and comments suggested more layoffs may be coming as the backlog and holiday season get over. While it may still be early to see any significant signs of softening in Friday’s jobs report, the jobs data remains key to monitor to see if consumers may be vulnerable to a faster-than-expected pullback in spending. Apple production risk is on the rise Reports suggested that the protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro units this year, roughly about 7% of all iPhones scheduled to be delivered this quarter. Apple shares fell 2.6% on Monday on these reports. Pinduoduo (PDD:xnas) beat expectations, Bilibili up next Pinduoduo, after a strong beat in the prior quarter, surpassed again analyst estimates and delivered a strong Q3 beat. The Chinese eCommerce platform’s revenues grew 65% Y/Y, outperforming its peers, for example, Alibaba”s 3% and JD.COM’s 11% revenue growth in Q3. Adjusted operating margin came in at 34.6% vs 33.5% in Q2. 2022 , and 15.2% in Q3 last year. Adjust EPS of RMB 7.33 was much higher than the RMB4.75 consensus. Bilibili ((09626:xhkg) is scheduled to report today.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Hawkish Fedspeak; OPEC+ to consider production cut – 29 November 2022 | Saxo Group (home.saxo)
Russia Look Set To Double Its Exports For The First Half Of 2023

Russian Wheat Continues To Be Offered At About The Cheapest Prices | The ECB Will Be Data-Dependent

Saxo Bank Saxo Bank 29.11.2022 09:13
Summary:  Markets have been on edge as we await further signs of the official stance in China on Covid restrictions after civil unrest on the issue at the weekend, with signs this morning from Chinese officialdom that a cautious easing will remain underway. This has inspired a comeback in some commodities and the Chinese renminbi after sharp weakening moves yesterday, but there is no profound sense of relief across markets as we also await incoming US data ahead of the December 14 FOMC meeting.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are stuck in a tight range between 3,926 on the downside and 4,054 on the upside as the market is struggling to find a clear signal and direction. The noise is filled by the back-and-forth news stream out of China related to it Covid policies and backstop plans for its struggling real estate sector. Meanwhile, the US 10-year yield is also stabilising and earnings releases are minimal except for tomorrow with reports expected from Salesforce and Snowflake. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equity markets rallied strongly with Hang Seng Index and the CSI300 Index each rising more than 3%. The market sentiment was buoyed by new measures from the Chinese securities regulator to relax its restriction on property developers from equity financing. Leading Chinese developers listed in Hong Kong jumped by 5%-12%. In the mainland’s A-share markets, real estate names led the charge higher. Tourism stocks rose on speculation that pandemic control restrictions might be relaxed further. China’s pandemic control regulators are holding a press conference later today. USD firms, but then retreats overnight on hopes China’s reopening prospects Concerns surrounding China’s reopening status after civil unrest at the weekend sparked considerable volatility across FX yesterday, with a US dollar rally yesterday eventually emerging as the dominant development after choppy action. The USD was a bit weaker again overnight, particularly against the USDCNH, which dropped back below the important 7.20 area ahead of a press briefing in China thought to make clear the official central government position on Covid policies. Expect the most volatility in commodity currencies and the Japanese yen depending on how clearly China either a) signals that the path is open to easing restrictions on an accelerated time frame or b) that restrictions will remain in place and could even tighten if virus numbers don’t fall. Crude oil (CLF3 & LCOF3) made a sharp U-turn on Monday ...as one survey after another pointed to an elevated risk that OPEC+, partly depending on the price when they meet next week, will opt to agree on another production cut in order to stem the recent price drop. Having fallen by more than 15 dollars during the past two weeks, a downturn in Chinese demand has been more than priced in, with technical selling and momentum having taken over. Overnight Brent briefly traded $86 after Chinese health authorities announced they would hold a press conference at 7am GMT. At their last meeting OPEC+ cut output quotas by 2mb/d with Saudi Energy Minister Prince Abdulaziz bin Salman saying the group was ready to intervene with further supply reductions if it was required to balance supply and demand. Meanwhile, European talks on a price cap have stalled. Wheat (ZWH3) in Chicago dropped to a three-month low …on Monday on a combination of ample and cheap supply from Black Sea suppliers increasing competing with US origin wheat, and on concerns about the impact of protests in China on growth and demand. Following a bumper crop this summer, Russian wheat continues to be offered at about the cheapest prices in world export markets which is negative for the export prospects of U.S. wheat. In the week to November 22 speculators increased bearish bets on CBOT wheat to the highest since May 2019. Gold (XAUUSD) has recovered from another stronger dollar driven attempt to challenge support ...in the $1735 area after Fed speakers said more rate hikes are coming. pressed for higher rates. Investors will watch this week’s economic data, including ISM on Thursday and Friday’s nonfarm payrolls and US jobs report, for signs the US central bank may soon ease its monetary-tightening trajectory. Total holdings in bullion-backed gold ETFs rose 6 tons last week, the biggest weekly increase since April. During this time investors sold a total of 397 tons, still less than the 400+ tons bought by central banks during the third quarter. After finding support in the $1735 area last week, a break above $1765 may signal a return to key resistance at $1788. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) Weak risk sentiment after the weekend news of civil unrest in China due to restrictive Covid policies there saw a dip in the 10-year yield benchmark yesterday to new local lows below 3.65%. But there was little energy in the move as the market awaits important incoming US data starting with today’s November Consumer Confidence survey, but more importantly this Friday’s November jobs numbers on Friday. What is going on? The wave of takeover bids continues at the Paris Stock Market This is mostly happening in Euronext Growth – the market segment for small and medium-caps. Yesterday, Abeille Insurance (member of Aema Group, the fifth largest insurance player in France) acquired the small bank Union Financière de France (a bank mostly specialized in wealth management advisory). Abeille Assurance bought the company at a price per action of 21 euros. This represents a premium of 51 %. With the sharp drop in values that has happened since January, we have seen a wave of takeover bids at the Paris Stock Market. This will likely continue in the short-term, especially in the segment of wealth management advisory where there is an ongoing process of consolidation happening. Fed speakers press for higher rates James Bullard (2022 voter) said markets are underestimating the chances that the FOMC will need to be more aggressive next year, adding tightening may go into 2024. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. John Williams (voter) said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. The central bank isn't near a pause, Loretta Mester (2022 voter) told the FT. Richmond Fed President Barkin also spoke about higher-for-longer rates, despite moving slower China relaxes its restrictions on developers from attaining equity financing The China Securities Regulatory Commission (CSRC) fired the so-called “third arrow” to ease some of the restrictions previously imposed on property developers from attaining equity financing. While property developers are still barred from doing IPO in the domestic equity market, they are now domestically listed A-share developers and some Hong Kong-listed H-share developers to issue new shares to raise capital as long as the proceeds are used for restricting, M&A activities, refinancing, buying existing property projects, repaying debts, and project construction. However, proceeds are not allowed to be used in land acquisition. Pinduoduo shares rally 12% Strong Q3 results pushed the shares of the Chinese e-commerce platform to the highest level since November 2021. Q3 revenue was CNY 35.5bn vs est. CNY 30.9bn and adj. EPS at 8.62 vs est. 4.75 driven by tailwinds from the strict Covid policies in China. BlockFi – another casualty in the FTX saga The crypto lender BlockFi Inc. filed for Chapter 11 bankruptcy, the latest crypto-industry operator to seek court protection in the wake of FTX’s collapse. It sold $239 million of crypto ahead of its filing. ECB’s Lagarde maintains tightening stance ECB President Lagarde repeated her previous comments that the ECB will raise rates further but nothing on how much further, and on how fast they need to go. She said the bank will be data-dependent, adding the ECB may need to move into restrictive territory. She also said that she will be surprised if inflation in the Eurozone (due to be reported on Wednesday 30/11) peaked last month. Even if the November print cools slightly, most likely driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Dallas Fed manufacturing signals job stress is building Dallas Fed manufacturing index came in less bad than expected at -14.4 for November, but the underlying metrics indicated a softening in labor markets. 16% of the factories surveyed indicated net layoffs in November, up from 9% previously, and comments suggested more layoffs may be coming as the backlog and holiday season get over. While it may still be early to see any significant signs of softening in Friday’s jobs report, the jobs data remains key to monitor to see if consumers may be vulnerable to a faster-than-expected pullback in spending. What are we watching next? US November Consumer Confidence, September home prices up today The Conference Board’s monthly Consumer Confidence survey has historically correlated most closely with the strength of the US labour market, although after a strong recover from the pandemic lows by mid-2021, confidence fall sharply, hitting a 95.3 local low in July of this year, likely due to steeply rising inflationary pressures (the other major US confidence survey, the University of Michigan sentiment survey, hit the lowest level in its 44-year history in July, likely as the survey contains questions more closely linked to inflation). Confidence then bounced strongly from that July local low, hitting 107.80 in September before dropping sharply to 102.50 last month. The November reading is expected at 100.00. With inflationary pressures easing relative to their peak, a weaker than expected confidence reading today could suggest rising insecurity in the labour market. The September S&P CoreLogic Home Price data is expected to show an ongoing drop in US home prices of some –1.2% MoM after 30-year mortgage rates rose 400 basis points this year to 20-year highs. Apple production risk is on the rise The protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro which was a Morgan Stanley estimate and was published before the intensified issues at the Apple manufacturing site. Earnings to watch Today’s earnings focus is Crowdstrike with analysts expected FY23 Q3 (ending 31 October) revenue growth expected at 51% y/y with operating margin expected to demand as pricing power and demand remain robust in the cyber security industry. Today: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0800 – Spain Nov. CPI 0930 – UK Oct. Mortgage Approvals/Consumer Credit 1000 – Eurozone Nov. Confidence Surveys 1300 – Germany Nov. Flash CPI 1330 – ECB's Schnabel to speak 1330 – Canada Sep. GDP 1400 – US Sep. S&P CoreLogic Home Prices 1500 – UK Bank of England Governor Bailey to testify 1500 – US Nov. Consumer Confidence 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Oct. CPI 0130 – China Nov. Manufacturing and Non-manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – November 29, 2022 | Saxo Group (home.saxo)
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

ECB Is Fighting Hard To Prevent Markets From Undoing The Tightening Of Financial Conditions

ING Economics ING Economics 29.11.2022 11:17
Lagarde is the latest of a string of central bankers warning against drawing too many conclusions from a single inflation reading. Her warnings, and those of her peers, would make higher eurozone inflation readings today and tomorrow a more market-moving event than a lower print In this article Don’t read too much into a single inflation print Robust control suggests the ECB should err on the hawkish side Today’s events and market view     Don’t read too much into a single inflation print The European Central Bank is fighting hard to prevent markets from undoing the tightening of financial conditions that has been achieved this year. Even once inflation is on a downward trajectory, and once the eurozone is in a recession, any central bank would be loath to let market interest rates dip too quickly, lest inflation fails to fully converge with its 2% inflation target. But this is a consideration for once inflation is already on a downward trajectory. The November inflation readings (Spain and Germany today, the eurozone tomorrow) could bring a down tick but might not be enough to conclude that inflation has peaked. November inflation readings might not be enough to conclude that inflation has peaked This, at least, was the view expressed by ECB President Christine Lagarde in her testimony in front of the European parliament. The core of her message is not new: the ECB will continue tightening policy even as the economy weakens into 2023. This may require taking rates into restrictive territory. This is a vague concept but that is widely understood to mean the deposit rate rising above 2%. Between the lines, it seems the central bank’s communication is increasingly preparing markets for a recession, and for the risk that hikes have to continue regardless. Even after inflation has peaked, the ECB faces an uphill battle to keep real rates positive Refinitiv, ING Robust control suggests the ECB should err on the hawkish side That rates ‘may’ have to rise above 2% may come across as a quite moderate stance when compared to the Fed’s relentless insistence that over-tightening presents less risks than under-tightening. There is also a growing contingent of hawks who argue for forceful action in fighting inflation, illustrated by Isabel Schnabel advocating a ‘robust control’ approach to monetary policy where the ECB would minimise the risk of even more drastic action in the future if inflation fails to quickly converge to target. The likelihood of a further 75bp hike has crept up with the curve now attributing it a 50% chance Until recently, this was not seen as a contradiction with the ECB hiking 50bp at the December meeting, after a cumulative 200bp of tightening since July. The likelihood of a further 75bp hike has crept up with the curve now attributing it a 50% chance. We still think a smaller move is most likely but CPI prints today and tomorrow could make 75bp a clearer market favourite outcome. The result would be a further flattening of the EUR curve relative to its USD equivalent, and also an unwind of the rally in risk assets that last week took Italy-Germany 10Y spreads to their tightest level since the spring. A high inflation print today would flatten the EUR curve further Refinitiv, ING Today’s events and market view Today’s batch of Spanish and German inflation data are a prelude to the release of the eurozone-wide indicator tomorrow. Both EU-harmonised measures are expected to tick down compared to the previous months. The European data docket also features EU confidence indicators, including consumer confidence which is a final release. Given the scale of the rally in bonds and risk assets into this week’s inflation print, we think the most impactful outcome would be an upside inflation surprise. Combined with repeated hawkish ECB and Fed warnings, we expect rates to be skewed upwards today and for the rest of the week. Supply takes the form of the Netherlands selling an 8Y bond and Italy 10Y and floating rates notes. Conference board consumer confidence is the main US release today, alongside mortgage applications and house prices. 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
Belgium: Core inflation rises, but the peak is near

Belgians Are Looking For Savings To Cope With The Rising Cost Of Living

ING Economics ING Economics 29.11.2022 11:27
A new ING survey on a representative panel shows that nine in ten Belgians are reducing their energy consumption and six in ten are even saving on daily expenses. Over the next six months, they plan to step up their efforts. Online spending is also under pressure, even more so than in other countries. This will adversely impact economic activity In this article High inflation prompts six in ten Belgians to save on daily expenses Four in ten Belgians see energy bill more than doubling in last six months Decline in online purchases for all spending categories Belgians are much more cautious than their neighbours when it comes to budgeting Belgian economy dives into the red     High inflation prompts six in ten Belgians to save on daily expenses Belgians are looking for savings to cope with the rising cost of living. An international ING survey, conducted in early November in Belgium, the Netherlands, Germany, Romania, Poland, Turkey and Spain, shows that almost six in ten Belgians are saving on fresh food and groceries (see chart 1). A slight majority of Belgians also cut their clothing expenses. The Belgian urge to save is also slightly higher than in Germany for most product categories. While in Belgium, 58% already save on daily expenses, in Germany this is 'only' 50%. Remarkably, about half of Belgians also cut back on their spending on catering, travel and leisure activities, sectors that benefited greatly from the end of the pandemic. Compared to the results of the same survey in March 2022, the number of households cutting back on their consumption has risen sharply. In addition, many households plan to reduce their spending further in the coming months. While this was only 44% in March, 57% of Belgians say they are already saving on daily expenses and 60% expect to do so in the next six months. More and more Belgians are cutting back on their spending Due to rising prices, I try to save on... (% of respondents) ING consumer survey November 2022 Four in ten Belgians see energy bill more than doubling in last six months The extreme caution of households is obviously due to the energy crisis. According to the survey, the energy bill has more than doubled for four out of ten Belgians over the last six months. For almost one in ten, it has increased more than fivefold. In this context, the number of households taking measures to save energy and try to reduce the impact of the price increase has risen sharply, from 77% in March to 86% today. More than six out of ten Belgians say they are cutting back on heating, while four out of ten respondents say they are more economical with the use of electrical appliances, such as dishwashers (see chart 2). Six in ten Belgians turn down heating In what ways do you try to reduce your energy bills? (% of respondents) ING consumer survey November 2022 Decline in online purchases for all spending categories During the pandemic, Belgians appeared to be very active online shoppers, but the unusually sharp increase during the pandemic seems to be normalising somewhat. Almost a quarter (23%) of respondents say they have been buying online less often since the end of the pandemic, compared to only 15% who say they are buying online more often. When asked whether they expect to spend more online during the holidays than last year, one in four Belgians (25%) said they would spend less. The survey results show that the decline is mainly due to a general deterioration in the economic climate and not to consumers buying more in physical shops since the relaxation of health restrictions. Indeed, the percentage of respondents saying they spend relatively more in physical shops than online (21%) is balanced by the percentage saying they buy relatively more online than in physical shops (23%). Moreover, a significant proportion of the households also say they plan to further reduce their online purchases in the coming year. For instance, only 9% of respondents plan to buy more clothes online in the coming year, while 28% plan to buy less (see chart 3). Although the decline seems stronger for electronics and clothing, the trend is clearly felt across all product categories. It is therefore likely that the decline in online spending will be widespread in the coming months. No sector seems to be able to escape the economic downturn. Lots of families plan to further cut online budgets next year Do you plan to purchase more online in the coming months (% of respondents)? ING Consumer Survey November 2022 Belgians are much more cautious than their neighbours when it comes to budgeting The share of households planning to reduce their online spending is significantly higher in Belgium than in the Netherlands and Germany, and this is true for almost all product categories (see chart 4). While, for example, 28% of Belgian respondents said they would like to buy fewer clothes and shoes online, this is only 14% in the Netherlands and 23% in Germany. Although Belgians' purchasing power is much better protected compared to other eurozone countries thanks to the automatic indexation of wages, the crisis seems to have a greater impact on consumption patterns in Belgium than in other countries. Belgians seem much more cautious and willing to economise more to get through this difficult period. More Belgians cut online budget than neighbouring countries Do you plan to buy less online in the coming months (% of respondents)? ING Consumer Survey November 2022 Belgian economy dives into the red Belgians are massively looking to save money to cope with the rising cost of living. This will have an impact on economic growth in Belgium. The Belgian economy has already contracted slightly (-0.1%) in the third quarter, and this is expected to continue in the coming quarters. We expect economic growth to be negative in 2023. The full study is available in Dutch and French. TagsGDP Eurozone Energy crisis Consumption Belgium 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
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

ING Economics ING Economics 29.11.2022 11:32
Spain's inflation figure fell again sharply in November and is now already four percentage points below its peak level in July. The decline will continue in the coming months In this article Spanish inflation falls for the fourth month in a row Spanish inflation now significantly below eurozone average The light at the end of the inflation tunnel is getting brighter     Spanish inflation falls for the fourth month in a row Spanish inflation was 6.8% year-on-year in November, down from 7.3% in October. Over the month, consumer prices fell by 0.1%. The harmonised index was 6.6%, down from 7.3% in October. This development was mainly due to a fall in fuel prices last month, while they rose in November last year. Also, price increases for clothing and footwear were more moderate last month than in November 2021. Spanish inflation now significantly below eurozone average Spanish inflation has generally been above the eurozone average since the beginning of the year, but has fallen sharply since peaking at 10.7% in July. The weight of food in Spain is much higher than the eurozone average, which turbocharged the sharp price increases within this component. Hospitality also contributed more to price increases than the eurozone average, through a combination of faster rising prices but also a greater weight in the inflation basket. After its peak level, Spanish inflation has fallen sharply, making it unique in the euro area. Energy inflation has fallen sharply and is well below the eurozone average. Energy prices in Spain rose sharply in autumn 2021, making the year-on-year comparison much weaker this year.  Also the VAT cut on gas and electricity eased energy inflation. Details by component for November are not yet available, but October data showed that electricity inflation already turned negative last month (-15.4%) while also gas inflation fell sharply to 13.3% in October from 24.3% a month earlier. This decline will manifest itself further in the coming months. Spain’s inflation slowdown has set in earlier INE, Eurostat The light at the end of the inflation tunnel is getting brighter Price pressures higher up the production chain are starting to ease. Both commodity prices, freight costs for transport and factory prices are starting to fall sharply from their recent peak levels. Last Friday, Spain's statistics office INE announced that producer prices fell again in October. While producer price inflation was still 42.9% in August, it fell to 26.1% in October, its lowest level since September 2021. Moreover, it is also becoming increasingly difficult for companies to implement new price increases as demand has fallen and inventories have risen sharply. Inflation will gradually continue to normalise in 2023, but it will probably take until 2024 before inflation hovers around 2% again, the ECB's target. The development next year will depend on several factors, such as the prices of energy and other inputs on international markets, the fall in demand, the euro-dollar exchange rate and the speed at which falling prices higher up the production chain lead to lower prices for consumers. We expect inflation to reach 4.4% on average next year. TagsSpain Inflation Eurozone 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
RBA Pauses Rates, Australian Dollar Slides 1.3% on Economic Concerns; ISM Manufacturing PMI Expected to Remain Negative

Switzerland Gross Domestic Product (GDP) And Spanish CPI Fell Sharply

Kamila Szypuła Kamila Szypuła 29.11.2022 12:09
Markets await the release of the EU CPI, but before that event we are looking at the CPI reports in Germany and Spain. From North America there are also reports from both the USA and Canada. Switzerland Gross Domestic Product Switzerland Gross Domestic Product fell again. This time it was a drastic drop from 2.2% to 0.5%. On the other hand, the quarterly change in this indicator was higher than the previous reading. GDP Q/Q increased from 0.1% to 0.2%, but was lower than expected (0.3%). Spanish CPI At the beginning of the day, the inflation report from Spain appeared. The readings turned out to be lower than expected and also down compared to previous readings. CPI Y/Y dropped from 7.3% to 6.8%. Natmosiat CPI from month to month fell by as much as 0.6% and reached the level of 6.6%. Growth was expected in both cases. A decrease in this indicator may suggest an improvement in the situation, i.e. prices are not rising but have started to fall. Another reading may confirm this direction. Harmonised Index of Consumer Prices, is the same as CPI, but with a joint basket of products for all Eurozone member countries. The HICP also fell to 6.6%. German CPI The German CPI report is yet to come. CPI Y/Y is expected to maintain its previous level of 10.4%. On the other hand, CPI M/M will fall from 0.9% to -0.2%. As for the German HICP, it is expected to fall in both cases, ie year-on-year and month-on-month. The HICP M/M is expected to reach a horizontal 0.1% and if confirmed, it will be lower than the previous one by 1%. HICP Y/Y is expected to decline slightly by 0.3%. The previous reading was 11.6%. Canada GDP Canada's Gross Domestic Product report comes out today. The monthly change in GDP is expected to be at the same level as last time, ie 0.1%. This may mean that the Canadian economy is stagnating. Source: investing.com On the other hand, the quarterly change shows that the goposadraka is shrinking as it is expected to fall from 0.8% to 0.4%. Speeches Today, markets and traders are also waiting for speeches from the ECB and from the UK. Luis de Guindos, Vice-President of the European Central Bank has already given speeches. This speech took place at 9:10 am CET. The next speech from the European Central Bank is scheduled for 14:30 CET. Isabel Schnabel, member of the Executive Board of the European Central Bank, is set to speak. Two speeches are also scheduled from the Bank of England. The first will take place at 13:25 CET. Dr Catherine L Mann, a member of the Monetary Policy Committee (MPC) of the Bank of England, will speak. The next speech is scheduled for 16:00 CET. This time will be Bank of England (BOE) Governor Andrew Bailey. Bailey has more influence over sterling's value than any other person. Traders scrutinize his public engagements for clues regarding future monetary policy. CB Consumer Confidence The level of consumer confidence in economic activity expects a drop from 102.5 to 100.0 It is a leading indicator as it can predict consumer spending, which plays a major role in overall economic activity. Higher readings point to higher consumer optimism. But this time pessimistic sentiment is expected, once again. The last worsening took place in October and it may happen again this time. Summary: 9:00 CET                Spanish CPI (YoY) 9:00 CET                Switzerland Gross Domestic Product 9:10 CET                ECB's De Guindos Speaks 13:35 CET                BoE MPC Member Mann 14:00 CET                German CPI (Nov) 14:30 CET                Canada GDP 14:30 CET                ECB's Schnabel Speaks  16:00 CET                BoE Gov Bailey Speaks 16:00 CET                CB Consumer Confidence   Source: https://www.investing.com/economic-calendar/
The EUR/USD Pair Is Still In A High Position On The 1H Chart

Market Reactions To Inflation Reports In The European Union Are Significantly Weaker

InstaForex Analysis InstaForex Analysis 30.11.2022 08:00
On Tuesday, the EUR/USD currency pair was already trading considerably more steadily than it had the day before. We are still unsure of what caused those "roller coasters" that we saw. Yes, there were several unscheduled speeches by Fed officials on Monday, but for some reason, it is hard for us to recall the last time Bullard or Williams gave a routine speech that resulted in such "flights." Furthermore, none of them provided any brand-new, crucial information. Recall that a few weeks ago, Jerome Powell said that the Fed rate could rise a little bit longer than initially anticipated. If the market had previously set a rate of 5% for the pair, the upper limit is now gradually moving in the direction of 5.25% or even 5.5%. But given that this year's expectations for the rate have only increased, what is surprising about this? Remember how one of the Fed's most vocal "hawks," James Bullard, suggested raising the interest rate to 3% at the beginning of the year? Then, as time went on, this value increased gradually to 3.5%, then to 4.5%, and now we are discussing "5% or more." As a result, rates are expected to rise throughout the year, but inflation has only recently started to fall and is doing so at a slow pace. As a result, we are not surprised by the upcoming increase in the "upper limit" of the rate. Furthermore, the market had to figure out these performances in a convoluted manner if at all. The dollar should increase in strength and speed if there is a growing likelihood that new monetary policy tightening will occur. Remember that we have been anticipating a significant downward correction since early last week, but the market has been looking for any justifications to avoid purchasing US currency. The moving average line needs to fix below for the US dollar to start strengthening. In two attempts, the pair was unable to surpass the Murray level of "6/8" - 1.0498, and the total increase from its 20-year lows is already close to 1000 points. Although we still anticipate a sharp decline, we think the euro currency has grown sufficiently to this point. The euro currency may be under stress as a result of the EU inflation report. To start, market reactions to inflation reports in the European Union are significantly weaker than those to comparable reports in the United States. It so happened that in 2022, market participants received a larger share of any news and messages coming from abroad. So, from the outset, we don't anticipate a significant response to this report. Additionally, it is now quite challenging to comprehend how the market decides anything at all. Perhaps the decline we observed on Monday evening and Tuesday during the day is the market's "advance" response to the inflation report? After all, the European Union's consumer price index may slow down for the first time in a long time. At least, this is what the most recent official forecasts indicate. The rate of price growth is anticipated to decrease from 10.6% y/y to 10.3-10.4% y/y. Let it be a modest triumph nonetheless. This situation might be the start of the end for the euro as a currency. Remember that the dollar started to lose value precisely after US inflation started to slow down a few months ago. The market perceived a sharp decline in the likelihood of a Fed rate hike as a result of the slowdown in price growth. The euro currency is now capable of the same thing. The ECB will no longer need to raise interest rates as quickly as possible if inflation in the EU starts to decline. Of course, the Fed increased the rate by 0.75% twice more following the initial slowdown, so the ECB may follow. But we're attempting to predict how the market might respond. As soon as the market realized that inflation was decreasing, it started to reject buying dollars. Therefore, it makes no difference when the ECB slows the rate of tightening; the market can start selling off the euro right away or has commenced this process. Given the current technical landscape and historical context, we think that this course of events would be the most logical. As of November 30, the euro/dollar currency pair's average volatility over the previous five trading days was 97 points, which is considered to be "high." So, on Wednesday, we anticipate the pair to fluctuate between 1.0262 and 1.0454. A potential continuation of the upward movement will be indicated by an upward turn of the Heiken Ashi indicator. Nearest levels of support S1 – 1.0254 S2 – 1.0132 S3 – 1.0010 Nearest levels of resistance R1 – 1.0376 R2 – 1.0498 R3 – 1.0620 Trading Suggestions: The EUR/USD pair is still positioned close to the moving average. In light of this, we should now consider opening new long positions with targets of 1.0454 and 1.0498 if the Heiken Ashi indicator reverses its trend upward. No earlier than fixing the price below the moving average line with targets of 1.0254 and 1.0132, sales will become significant. Explanations of the illustrations: Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is strong now. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.     Relevance up to 01:00 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/328512
Decarbonizing Steel: Contrasting Coal-based and Hydrogen-based Production Methods

Forex Market: The Inflation Print Will Be Key For The Polish Zloty (PLN)

ING Economics ING Economics 30.11.2022 09:20
Fed Chair Jerome Powell will remind the market of the central bank's hawkish determination today, supporting the dollar. Meanwhile, softer inflation is trimming expectations in the eurozone. Polish inflation will test the central bank's decision not to raise rates. And the EC will publish a statement on Hungary and its rule-of-law progress In this article USD: Holding pattern EUR: Inflation plays second fiddle to Powell GBP: Lack of domestic drivers CEE: Polish inflation will test central bank dovish camp   Federal Reserve USD: Holding pattern Despite geopolitical challenges to the East, it has been a quiet start to the week for FX markets. The trade-weighted dollar index DXY is tracing out a relatively narrow range in the 105.30 to 108.00 area. The next clear catalyst on the agenda is a speech by Fed Chair Powell tonight at 1930CET discussing the economy and the labour market. This comes at a time when the buy-side report two of their top three tail risks as: i) inflation staying high and ii) central banks staying hawkish. (The third being geopolitics.) We would say that Chair Powell has recently shown to be at the more hawkish end of the spectrum and that tonight’s event risk is a positive one for the dollar. Dollar price action after Chair Powell’s speech should also tell us something about FX positioning. If the dollar fails to rally on a hawkish speech it may continue to tell us that the market is caught long dollars at higher levels and that some further consolidation may be due into December. For the time being, however, we think the macro environment continues to favour the dollar and see Powell’s speech, the October PCE price data (Thursday) and November jobs data (Friday) as upside risks to the dollar. Chris Turner EUR: Inflation plays second fiddle to Powell Spanish and German inflation came in lower than expected yesterday. The German CPI fell 0.5% to 10.0% in November, thanks primarily to the energy base effect and lower prices for leisure and entertainment following the autumn holiday period, while food prices continued to rise. Our economics team remains sceptical that this is the series' peak, and we expect inflation to accelerate again in December. Yesterday’s numbers mean that markets are expecting a lower reading in the eurozone-wide CPI today. However, some impact on European Central Bank rate expectations has already occurred, as markets have trimmed around 7bp from December pricing, which is now at 54bp. President Christine Lagarde is scheduled to speak at least twice more before the 15 December policy announcement, but she may not change markets' expectations of a 50bp hike. The impact of the inflation story on the EUR/USD has been, predictably, limited. External factors and dollar dynamics continue to drive the pair's performance, and we see downside risks today given that Fed Chair Powell is scheduled to speak later. A break below 1.0300 could fuel more bearish momentum, bringing EUR/USD back to the 1.0200/1.0250 levels seen earlier this week. This morning, Norges Bank will publish daily FX sales for the month of December. Higher-than-expected NOK sales in 3Q22 contributed to NOK weakness, but the Bank unexpectedly reduced them in November from NOK 4.3 billion to 3.7 billion. Any further reductions may support the currency today. Francesco Pesole GBP: Lack of domestic drivers Yesterday’s testimony by Bank of England Governor Andrew Bailey did not yield any market-moving headlines. Today we’ll hear from Chief Economist Huw Pill, who recently pushed back against a 75bp hike and may therefore keep BoE rate expectations in check. Cable to test 1.1800 as Powell’s speech may support the dollar today. Francesco Pesole CEE: Polish inflation will test central bank dovish camp Today's calendar offers November inflation in Poland, the first print in the CEE region. We expect inflation to be unchanged at 17.9% year-on-year, close to market expectations. However, as usual, the range of surveys is wide, and in addition, Polish inflation has by far posted the biggest surprise in the region over the past three months. Given the pause in the National Bank of Poland's hiking cycle, we can expect a lot of market attention. We will also see the second release of Poland's 3Q GDP, which surprised positively in the flash reading (0.0% vs 0.9% quarter-on-quarter) a few weeks ago. In Hungary, PPI for October will be published and later today the European Commission is expected to release a statement on the progress made in the rule of law dispute and Hungary's access to EU funds. The statement should have been published last week; however, the EC requested more time. Reports from journalists suggest that the EC will recommend freezing part of the cohesion funds with conditions to be met by Hungary but will also recommend approval of the Recovery Plan. Yesterday's reports also suggest that the Ecofin decision will be postponed from 6 December to 12 December, but Hungarian officials remain optimistic about the final decision. In the Czech Republic, the Czech National Bank will publish its semi-annual Financial Stability Report including possible changes to macroprudential tools. We do not expect significant changes to the current mortgage rules or capital requirements for the banking sector, but we will see a press conference later today, which should be attended by the governor, who has not been seen in public very often in recent months. In the FX market, the inflation print will be key for the Polish zloty, which could revive market expectations and support the zloty in the short term. However, unchanged inflation would leave the zloty under pressure from a stronger dollar, moving back above 4.70 per euro, in our view. The Hungarian forint should benefit from the normalisation of EU relations and the end of the risk of a permanent loss of EU money. This should help the forint below 405 per euro. Frantisek Taborsky 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
FX Daily: Upbeat China PMIs lift the mood

The Chinese Authorities To Prepare For Further Easing In Its Covid Policy

Saxo Bank Saxo Bank 30.11.2022 09:31
Summary:  A dash of optimism on Tuesday with Chinese officials continuing their commitment to ease the Zero Covid policies, but US economic data continued to disappoint and focus remains on how hawkish Fed Chair Powell can get today. Along with that, a slew of pivotal US data in the week ahead kept the US dollar range-bound. Crude oil market however continued to see volatility despite easing China demand concerns, as OPEC+ production cut hopes were shattered with the weekend meeting moving online. Eurozone CPI on watch today while the softer Australia CPI for October paves the way for RBA to maintain its slower rate hike path next week. What’s happening in markets? The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) continue to retreat The major US indices ended weaker, with NASDAQ100 sliding 0.7% and the S&P500 edging down 0.2% as investors are awaiting Fed Chair Powell’s speech later Wednesday. Powell will likely underscore the Fed’s desire to keep interest rates at elevated levels until inflation eases. The latest US consumer confidence reading (released Tuesday) for November showed US consumer confidence fell to a four-month low. The biggest drag on US markets on Tuesday, were information technology, utilities, and consumer discretionary. Apple (AAPL) shares fell 2.1% after the company said that it would deliver 6 million fewer iPhone Pro units in Q4 due to production disruption in Zhengzhou, China. The real estate, energy, financials, industrials sectors outperformed. United Parcel Services (UPS:xnys) gained 2.8% after the Biden Administration called on Congress to prevent a U.S. rail strike. Apple (AAPL) shares fell 2.1%, continuing their three-day pull back, which totals almost 5% ..on the back of the covid lockdown fallout in China. Apple relies heavily on the key manufacturing hub of Zhengzhou, which is now in lockdown. And as a result Apple’s production shortfall could be close to 6 million iPhone Pro units this year (this is according to people who know about Apple’s assembly operations). These reports are swirling at a time when Apple previously dropped its overall production target to about 87 million units (down from the prior 90 million estimate) on the back of demand slowing. However, Apple and the Foxconn facility are allegedly planning to make up the shortfall in lost output in 2023. But, looking at Apple shares from a technical perspective, its trading 8% lower than its 200 day moving average and the indicators suggest Apple shares could see further downward pressure - as suggested by the weekly and monthly charts. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rose in yields ahead of Fed Chair Powell’s speech Yields edged up across the yield curve with those in the long-end rising the most. The 2-year yield rose 4bps to 4.47% while the 10-year was 6bps cheaper at 3.74%. Large supply from corporate issuance put some upward pressure on yields. There were about 11 deals with a total amount of about USD18 billion, including USD8.25 billion from Amazon, on Tuesday. Fed Chair Powell is scheduled to speak on the economy and labor market at a Brookings Institution event today on Wednesday at 1:30 U.S. eastern time (2:30am SG/HK). Investors are concerned if Powell would give hints of a terminal Fed Fund rate higher than the 5% being priced in by the market. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) surged on renewed optimism about reopening and additional support to the property sector Hang Seng Index surged 5.2% and Hang Seng TECH Index jumped 7.7%. All sectors gained, with information technology, consumer discretionary, and properties leading the charge higher. The CSI 300 gained 3.1%. The market sentiment was first buoyed by new measures from the Chinese securities regulator to relax its restriction on property developers from equity financing. Then the renewed optimism about China reopening from stringent pandemic control added to the market rally. Leading Chinese developers listed in Hong Kong jumped by 3-14%. In the mainland’s A-share markets, real estate, financials, and food and beverage led the charge higher. The strong revenue and margin beat of Pinduoduo (PDD:xnas) aided the surge of Alibaba (09988:xhkg) by 9.1% and JD.COM (09618:xhkg) by 10.9%. The ADR of Bilibili (BILI:xnas) jumped 22% overnight after reporting results beating market expectations. FX: Dollar range-bound ahead of Powell’s speech While the commodity currencies gained on Tuesday after a relief that China officials maintained their commitment to ease the Zero covid policies despite the protests and a recent rise in cases, cyclical currencies like CAD weakened as crude oil futures traded lower. Overall the dollar was range-bound with expectations around a hawkish Powell today picking up given the substantial easing in financial conditions. EURUSD remained stuck below 1.0400 while USDJPY has gains above 139 getting limited. Crude oil (CLZ2 & LCOF3)volatile with large inventory drawdown ahead of OPEC The relief from continued commitment of China officials to ease zero covid restrictions helped crude oil prices gather some momentum early on Tuesday, but the cheer was short-lived as other concerns still clouded the outlook. US economic data showed economic momentum is weakening, while Fed Chair Powell’s speech today will be key for the dollar and the markets. On the supply side, API survey reported a larger than expected crude draw, with inventories down 7.80mm b/d (exp -2.49mm b/d) but production cut expectations from OPEC (read below) this weekend eased as the meeting moved online. WTI futures traded around $79/barrel, while Brent traded lower after touching $86/barrel earlier. Technical update on Brent crude oil from Kim Cramer, our Technical Analyst. The update also takes a closer look at WTI crude oil, Dutch TTF gas and Henry Hub natural gas.   What to consider? US data disappoints, all eyes on Powell Consumer confidence pared back in November to 100.2 from 102.5 (exp. 100.00); the Present Situation Index decreased to 137.4 from 138.7 last month, while the Expectations Index declined to 75.4 from 77.9. Meanwhile, home prices in 20 large cities slipped 1.2% in September, according to the S&P CoreLogic Case-Shiller gauge. More critical data from ISM to PCE to NFP is lined up for the second half of the week, but before we get there, Fed Chair Powell’s speech will be the one to watch. Easing financial conditions raise concerns about inflation shooting back higher, but pushback from Fed officials so far hasn’t been enough for the markets yet. It remains to be seen what more Fed Chair Powell can deliver today. Reopening optimism returned in China While the daily new cases continued to surge and anti-restriction protests sprang up across major cities, investors took comfort from the light-touch reactions from the Chinese authorities and hints of preparing to ease the pandemic control measures further. A Party-controlled newspaper in Beijing published a long article reporting the stories of people having recovered from Covid, which seemingly aimed at easing people’s worries about the disease. The National Health Commission issued a memo pledging to increase the vaccination rate of the country’s senior population. In a press conference later in the afternoon, health officers again emphasized increasing the senior population’s vaccination rate as a priority and highlighted the Omicron variants as being less severe than the original virus. Officials and the state-controlled media have taken a light-touch approach to the recent protests and have not put any political stigma on the incidents. Putting these together, investors are taking the development as hints of the Chinese authorities to prepare for further easing in its Covid policy. China relaxes its restrictions on developers from attaining equity financing The China Securities Regulatory Commission (CSRC) fired the so-called “third arrow” to ease some of the restrictions previously imposed on property developers from attaining equity financing. While property developers are still barred from doing IPO in the domestic equity market, they are now domestically listed A-share developers and some Hong Kong-listed H-share developers to issue new shares to raise capital as long as the proceeds are used for restricting, M&A activities, refinancing, buying existing property projects, repaying debts, and project construction. However, proceeds are not allowed to be used in land acquisition. Softer Australia CPI paves the way for a dovish RBA next week Australian inflation data for October showed inflation is continuing to fall, and far more than expected which supports the RBA’s dovish tone and only hiking rates by 0.25% next week (December 6). Trimmed mean CPI which excludes volatile items, rose 5.3% year-on-year in October, which marks a fall in price rises, compared to the prior read, 5.4% YoY. This also shows prices for consumer goods and services in Australia are falling less than the market expects as Trimmed CPI was expected to rise 5.7%. Meanwhile, headline inflation also rose less than expected, showing consumer prices rose 6.9% YoY, which was cooler than prior 7.3% read, and less than the 7.6% expected. This follows a suite of Australian economic data that supports the RBA remaining more conservative with rate hikes. Earlier in the week, Australian retail trade data unexpectedly fell, showing consumers are feeling the strain of inflation and rising interest rates. As a house, we think spending will likely continue to slow into 2023, with the full impact of rate hikes passing through households under financial duress giving deb to income ratios are some of the highest in the world. China PMIs likely to show demand weakness China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. OPEC+ weekend meeting goes virtual Instead of meeting in Vienna as planned earlier, OPEC+ has now moved its December 4 meeting online which is downplaying expectations of any significant policy change after production cut expectations gathered hopes this week with crude oil prices falling to test key support levels. Some delegates also suggested that the cartel is leaning towards approving the same production levels agreed in October, when a 2mb/d cut in output was announced. Bilibili (BILI:xnas/09626:xhkg) Q3 beat expectations Bilibili reported 11% Y/Y revenue growth in Q3 and net loss came in at a smaller amount of RMB1.7 billion. User growth was solid, with average daily active users growing 25% Y/Y to 90.3 million, average monthly active users growing 25% to 332.6 million, and average monthly paying users increasing 19% to 28.5 million. Operating margin improved to -31.9% in Q3 from -44.63 in Q2 and -51.1% in Q3 last year. The company guides for a 4-7% Y/Y increase in Q4 revenue, below the consensus estimate of 8% Y/Y. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Crowdstrike (CRWD:xnas) tumbled on guidance miss The shares of Crowdstrike plunged 18.7% in the extended-hour trading after the cybersecurity provider issued Q4 revenue guidance below market expectations. For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/apac-market-insights-30-nov-2022-30112022
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

U.S. Interest Rates Could Reach Their Peak In 2024

Conotoxia Comments Conotoxia Comments 30.11.2022 09:55
Financial markets may focus on two events today. The first may be the inflation reading for the Eurozone for November (estimates), and the second will be a speech by Federal Reserve Chairman Jerome Powell. Yesterday's inflation data from Germany showed that German consumer prices rose 10.0% year-on-year in November, slightly less than the 10.3% predicted by analysts, according to data released by the Federal Statistical Office (Destatis). A month earlier, in October, inflation was 10.4%. On a monthly basis, consumer prices fell by 0.5%, the BBN service reported. The softer inflation reading from Germany may carry over into today's inflation publication for the eurozone as a whole. The consensus calls for a reading of 10.4% versus 10.6% a month earlier. Investors in the interest rate market, along with lower inflation readings, have pushed back their expectations for action by the European Central Bank. As Bloomberg calculates, interest rate traders now see only a 24% chance of a move greater than 50 basis points at next month's ECB meeting, while as recently as Tuesday it was as high as 52%. Inflation data from the zone will be released at GTM+1. Source: Conotoxia MT5, EURUSD, Daily Markets ahead of Jerome Powell's speech According to Bloomberg, implied volatility in the FX options market is rising in the shorter term, as investors position themselves ahead of Fed Chairman Jerome Powell's key speech on the economy and labor market. The speech is scheduled to begin at 7:30 pm GTM+1 at the Brookings Institution. Investors could expect the speech to offer clues on further action on interest rates or where the current cycle would end, as well as whether an interest rate cut in 2023 is possible. According to Bloomberg data, the peak of the U.S. hike cycle is priced by the market for May or June 2023 at a level close to 5 percent, while the federal funds rate is expected to fall to 4.4 percent by January 2024. This would mean that U.S. interest rates could reach their peak in the same year, and then, according to the market, the Fed could opt for two cuts of 25 bps each. Source: Conotoxia MT5, US30, Daily Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
French strikes will cause limited economic impact

France: Stabilisation Of Inflation Can Be Seen As Good News

ING Economics ING Economics 30.11.2022 10:26
Inflation stabilised at 6.2% in France in November, but it has not reached its peak. Inflationary pressures are likely to intensify further in 2023 We expect French inflation to be around 5% for the whole of 2023   Consumer price inflation stood at 6.2% in France in November, unchanged from October. The monthly variation in prices was +0.4% against +1% in October. The less dynamic evolution of the price of petroleum products, after October was marked by fuel shortages, made it possible to compensate for the drop in the fuel rebate, which went from €0.30/litre to €0.15/litre in mid-November. As a result, energy inflation stood at 18.5% compared to 19.1% in October. A considerable level, but still much lower than in other European countries. The various measures taken by the government, including the tariff shield on the price of gas and electricity, have removed 2.5 points from inflation. In addition, food prices continue to accelerate, by 12.2% over one year, against 12% in October, as do those of manufactured goods (4.4% against 4.2% the previous month). Services inflation is stable, and comparatively low, at 3%. The harmonised index, important for the European Central Bank (ECB), remained stable at 7.1%. Overall, while this stabilisation of inflation can be seen as good news, it does not mean that inflation has peaked. On the contrary, the peak of inflation in France is still to come. A further acceleration of prices for December It is likely that inflation will rise again in December, probably reaching 6.5%. Indeed, the fuel rebate will be less important during the whole month of December than it was on average in November. In addition, past sharp increases in producer prices will continue to be passed on to consumer prices for manufactured goods and food. According to statistics published today by INSEE, the national statistics bureau of France, producer prices rose at a slower pace in October, with an annual increase of 21.4% compared to 26% in September. Although producer prices appear to have peaked, producer price inflation remains historically high, and this should continue to be reflected in the consumer price index in the coming months. Inflationary pressures will intensify further in 2023 Inflation in France is expected to rise further in early 2023. Indeed, due to regulations and contracts, many price revisions can only take place once a year, usually at the beginning of the year. This is particularly the case in the transport sector. These price revisions will significantly boost inflation in the first quarter of 2023. Moreover, companies seem confident in their ability to pass on past cost increases to their prices. In November, according to the European Commission's survey, companies' expectations regarding selling prices rose again, both in industry and in the services sector, despite the context of slowing demand. Strong inflationary pressures therefore still seem to be on the cards and core inflation is likely to rise further in early 2023. Furthermore, the energy inflation faced by households in 2023 will be influenced by the tariff shield, which foresees a 15% increase in the price cap for gas and electricity (compared to a 4% increase in 2022). The revision of the cap and the end of fuel rebates could add up to one percentage point to French inflation from January. As a result, energy inflation in France will continue to rise sharply next year, while it will start to fall in other European countries due to more favourable base effects. The peak of inflation in France should therefore only be reached later in 2023, and French inflation will fall much less rapidly than in neighbouring countries. The "delayed" peak in French inflation is bad news for the ECB, as average inflation in the euro area is likely to fall less quickly than expected. We expect French inflation to be around 5% for the whole of 2023, after 5.3% in 2022.  TagsInflation France Eurozone 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
Spanish economy picks up sharply in February

Spaniards Are Looking To Save On Energy Consumption

ING Economics ING Economics 30.11.2022 10:33
Falling inflationary pressures and energy prices that are well below their peak levels led to a cautious rise in consumer confidence in November. However, this is not enough to prevent a contraction in the fourth quarter Inflation and high energy prices are forcing 40% of Spaniards to cut their daily expenses Spanish consumers slightly more upbeat, but still at depressed levels Spanish consumer confidence rose to -28.7 in November, from -31.6 in October, as published by the Ministry of the Economy and Finance this morning. A faster-than-expected fall in inflation and energy prices that are well below their peak levels is providing some relief for consumers. As reported yesterday, the Spanish inflation rate fell in November for the fourth month in a row and is now already four percentage points below its July peak level. The fall is likely to continue as price pressures higher up the production chain are starting to ease. Both commodity prices, freight costs for transport, and factory prices have already decreased considerably. Energy prices have also moderated somewhat since the end of the summer. Despite this, the index remains at recessionary levels. Inflation and energy prices force four in ten Spaniards to cut daily expenses Despite the improvement, the negative economic impact of high inflation and energy prices remains in place. A new ING survey on a representative panel conducted by IPSOS in early November shows that almost four in ten Spaniards are saving on daily expenses, like fresh food and groceries. More than half of Spaniards are also cutting back on restaurant visits, travel, and leisure activities to cope with the rising cost of living. With high energy prices, Spaniards are also looking to save on energy consumption. Almost half of the respondents say they are more economical with the use of electrical appliances, such as dishwashers, while a third say they are cutting back on heating. Many Spaniards are cutting back on their spending Due to rising prices, I try to save on... (% of respondents) ING consumer survey November 2022 Not out of the danger zone yet The Spanish economy has already slowed significantly in the third quarter and is likely to contract in the fourth quarter. The cost-of-living crisis leads households to consume less, which slows down economic activity. The less tight energy markets and a faster-than-expected drop in inflationary pressures are likely to ease the winter contraction, allowing Spain to narrowly avoid a recession. However, the overall outlook for next year remains subdued. Some favourable factors, such as mild weather and lower liquefied natural gas (LNG) demand from China, have brought some relief this year, but the situation remains very precarious. Next year will be a lot harder to replenish gas supplies, given the reduction in Russian supply. A strong recovery in China is also likely to put strong pressure on the oil and gas market, which could cause another jump in energy prices. The resulting loss of competitiveness of European businesses, together with ECB interest rate hikes that will not take full effect until 2023, will limit Spain’s growth potential next year. Therefore, we expect the Spanish economy to grow by less than 1% next year. TagsSpain GDP Eurozone Consumption Consumer 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
The EU Will Move Forward With The Implementation Of The Digital Euro

The EU Will Move Forward With The Implementation Of The Digital Euro

InstaForex Analysis InstaForex Analysis 30.11.2022 14:42
  The collapse of FTX and its implications for the entire ecosystem of the crypto sector prompted lawmakers around the world to pay more attention to the regulation of the nascent asset class. The U.S. House of Representatives announced they would launch an investigation into the FTX collapse at a hearing scheduled for December 13. The hearing was titled "Investigating the Collapse of FTX, Part I" and is expected to be the first in a series of hearings examining the exchange, its business operations, and the broader implications of its closure. Senate lawmakers are also keen to take a closer look at the FTX crisis, with the Senate Agriculture Committee due to hold a hearing on Thursday, and the Senate Banking Committee is working to schedule its own hearing in the near future.     Lagarde reiterates calls for regulation of cryptocurrencies European Central Bank President Christine Lagarde said that the "stability and reliability" of cryptocurrencies "has been exposed in the most obvious way recently" when answering questions from politicians in the European Parliament concerned about the impact of FTX's downfall. This line of questioning prompted Lagarde to reiterate a previous call for stronger cryptocurrency legislation as parliament awaits a final vote on its Markets in Crypto-Assets (MiCA) regulation, which is expected to pass in early 2023. According to her, the introduction of MiCA will allow Europe to become "pioneers in this world of great inventivity and great unreliability," but added that "here will have to be a MiCA II" to strengthen control over cryptocurrency. "Europe aims to be a leader in that respect," she said. During previous discussions on the topic of MiCA II, Lagarde suggested that the expanded framework should take into account risky connections to traditional finance as well as crypto activities beyond MiCA, such as decentralized finance (DeFi). Lagarde also stressed the need for an alternative to digital payments, which will offer EU citizens unlimited access to the digital euro. "We have to be able to offer that, otherwise somebody else will take that place," Lagarde warned. A decision on whether the EU will move forward with the implementation of the digital euro is expected by September 2023. Relevance up to 09:00 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/328569
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

Eurozone: November CPI Fell Sharply To 10.0%

Kenny Fisher Kenny Fisher 30.11.2022 15:09
It continues to be a quiet week for the euro. In the European session, EUR/USD is trading at 1.0363. Eurozone inflation falls to 10.0% The ECB’s number one priority has been bringing down inflation, which has hit double-digits. ECB policy makers are no doubt pleased that November CPI fell sharply to 10.0%, down from 10.6% a month earlier. This beat the consensus of 10.4%, and the euro has responded with slight gains. The drop in eurozone inflation was the first since June 2021, and investors will be hoping that this indicates that inflation is finally peaking. On Tuesday, German CPI showed a similar trend, falling to 10.0%, down from 10.4% (10.3% est). Still, eurozone Core CPI remained unchanged at 5.0%, matching the forecast. One inflation report is not sufficient to indicate a trend, and with inflation still in double digits, nobody is declaring victory in the battle against inflation. Still, the drop in German and eurozone inflation increases the likelihood of a 50 basis-point increase at the December 12th meeting, following two straight hikes of 75 basis points. With market direction very much connected to US interest rate movement, a speech from Fed Chair Jerome Powell later today could be a market-mover. Powell is expected to discuss inflation and the labour market, and his remarks could echo the hawkish stance that Fed members have been signalling to the markets over the past several weeks. The market pricing for the December meeting is 65% for a 50-bp move and 35% for a 75-bp hike, which means that the markets aren’t all on the Fed easing rates. Even if the Fed does slow to 50 bp in December, it will still be a record year of tightening, at 425 basis points.   EUR/USD Technical EUR/USD is testing resistance at 1.0359. Above, there is resistance at 1.0490 There is support at 1.0264 and 1.0131 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.  
Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

Hong Kong’s Hang Seng Had Its Best Month | EU Inflation Slowed

Saxo Bank Saxo Bank 01.12.2022 09:08
Summary:  Fed Chair Powell signaled the moderation of the tightening pace could start as soon as December and the terminal Fed Fund rate would be “somewhat higher” than the FOMC’s September projections. His tone was overall less hawkish than feared. S&P 500 rose to its two-month high and Hong Kong’s Hang Seng had its best month since 1998. Bond prices surged with the 10-year treasury yield falling to 3.61%. Crude oil and commodity currencies gained. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) surged on Powell’s speech and signs of China relaxing Covid-19 restrictions Fed Chair Powell signaled that the Fed would start to moderate the pace of rate hikes as soon as December and the terminal rate might just be “somewhat higher” than the September FOMC’s projections. The less-than-feared comments stirred up another round of risk-on buying in equities. The sentiment was also bolstered by more signs coming out of China on the country’s course to ease Covid restrictions gradually despite the recent outbreaks. The S&P 500 rose by 3.1% to a two-month high. All sectors within the S&P 500, led by information technology and communication services, each rising by around 5%. Nasdaq 100 surged 4.6% to 12,030. The Dow Jones Index rose 2.2% and was said to have technically entered a bull market, after rising more than 20% from is September closing low. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on the lack of new hawkishness in Powell’s speech Yields edged up a few basis points after a mixed bag of data in the morning until Fed Chair Powell’s speech hit the wire in the New York afternoon, seeing yields reversing and yields of the 2-year up to the 5-year tumbling by more than 15bps almost immediately from the intra-day highs. The 5-year performed the best and finished the day 19bps richer at 3.74%. The 2-year yield dropped 16bps to 4.31% and the 10-year yield was 14bps lower to settle at 3.61%.  Powell reiterated his well-telegraphed higher-for-longer message but did not add additional hawkish pushback as some feared. He said that it makes sense to moderate the pace of rate increases as the Fed “approach[es] the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting”. Further, his remark of terminal rate being “somewhat higher” than the Fed’s September projection was less hawkish than feared. Australia’s ASX200 (ASXSP200.1) about 3% away from its record high The Aussie market is up 12% from its October low, with commodities back in focus and rallying after the Fed signals a possibly smaller pace of rate hikes ahead. That has pressured the US dollar, with the US dollar index now down 5.4% from its peak, and that’s supported commodity prices higher, plus, as above, there is forward looking optimism on China. Locally, equites also appear supported in Australia as monthly inflation data came out weaker than expected yesterday, which supports the RBA remaining dovish and likely only hiking by 25bps (0.25%) next week. However, the important inflation read (quarterly CPI) is due early next year, which will be a more accurate reflection of price rises, and will likely show inflation in Australia is more sticky than monthly inflation read alluded to. Also consider if the best performers of late (who are all commodity companies) can continue to build momentum if stimulus continues in China’s property sector. In November, copper-gold company Sandfire (SFR) rose 45%, energy business Origin Energy gained 41% while Australia’s fourth biggest iron ore company, Champion Iron (CIA) rose 35%, with Nickel company Nickel Industries (NIC) following up 33%. So, it’s clear to say we are watching commodity companies closely as we believe the world will still struggle with the lack of tangible supply. Hong Kong’s Hang Seng (HIZ2) gained on the removal of lockdown in four Guangzhou districts Hong Kong stocks surged on Wednesday afternoon after Guangzhou lifted the lockdown in four districts even when the number of new cases was still rising in the city. Hang Seng Index climbed 2.2% with consumer discretionary, consumer staples, and industrials rising the most. In the consumer space, food and beverage names surged, with Haidilao (06862:xhkg) up 15.5% and Xiabuxiabu Catering (00520:xhkg) up 10.9%. Bilibili (09626:xhkg) jumped nearly 17% on the earnings beat. The three Chinese airlines listed in Hong Kong gained around 5% each on reopening optimism. The share prices of automakers jumped 4% to 11% on speculation for an extension of purchase tax credits for petrol vehicles. EV maker XPeng (09868:xhkg) surged 16% ahead of earnings. Another EV maker, Li Auto (02015) surged 8.9%. Hang Seng finished November up more than 26%.  It was the best monthly performance since October 1998 at the end of the Asian financial crisis. After Hong Kong market closed, XPeng reported Q3 results, missing analyst estimates but the share price of its ADRs jumped 46%. In A shares, CSI 300 was flat with auto names outperforming. FX: NZDUSD broke above 0.63, USDJPY below 137.50 Lower yields drove the US dollar lower after Powell’s speech lacked any hints of keeping the door open for 75bps in December or laying out a path for rate hikes through the course of 2023. The Euro was supported by Powell's dovish speech taking EUR/USD back above 1.04, but lacked conviction as hawkish ECB bets also retreated after a softer Eurozone CPI for November. The biggest gainers were NOK and NZD, and NZDUSD broke above the pivotal 0.63 which is the 200dma. USDJPY heading lower for a test of 137 with 200dma next in sight at 134.50. Crude oil (CLZ2 & LCOF3) higher on weaker USD and lower US inventories Crude oil markets extended recent gains amid signs of strong demand. US crude oil inventories fell by 12.6mbbl last week, the biggest decline since June 2019, according to EIA data. Meanwhile, Chinese authorities announced relaxation of Zero Covid policies in Guangzhou despite worsening Covid outbreak, signalling a better demand outlook as well. The lack of escalation in Powell’s speech also turned the dollar lower. WTI futures rose to $81/barrel while Brent futures rose above $85. The focus is now shifting to the weekend OPEC meeting, with some expecting a cut while others suggest a rollover of the current deal is more likely. Breakout in Silver (XAGUSD), Gold (XAUUSD) up as well Silver broke above the key 22 level to its highest levels since May this year as Powell signalled that the pace of interest rate hikes will slow in December. Gold edged higher as well and finished the month up over 8%, the biggest gains since July 2020. Next key levels to watch in Gold will be the 200dma and key level at 1808 while Silver may likely be heading to the 0.618 retracement at 23.35.   What to consider? Jerome Powell sticks to the script Fed Chair Powell repeated his comments from the November FOMC and what we have heard more generally from the Fed speakers over the course of the month. He said it makes sense to moderate the pace of interest rate hikes and the time to moderate the pace of hikes may come as soon as December, while he added it seems likely that rates must ultimately go somewhat higher than what was thought in the September SEPs. Powell also said they have made substantial progress towards sufficiently restrictive policy but have more ground to cover and they will likely need to hold policy at a restrictive level for some time. While his comments still tilted towards the hawkish side but there was no escalation that the markets had hoped for. His comment that he does not want to over-tighten but cutting rates is not something to do soon was a slight contrast to his earlier acceptance that risk of tightening less is greater that the risk over-tightening. Fed's Cook (voter) also said it is prudent for the Fed to hike in smaller steps as it moves forward and how far the Fed goes with hikes depends on how the economy responds, overall sticking to the consensus. US economic data broadly weaker, focus now on PCE prices and ISM manufacturing The private ADP jobs report showed US payrolls rose 127,000 this month, the slowest pace in nearly two years, as wage gains moderated. Job openings also fell in October to 10.334mln from September's 10.687mln, reversing a surprise jump in the prior month but still remaining elevated, according to the JOLTS report. The biggest downside surprise came in Chicago PMI for November which came in at 37.2 against an expected 47.0, falling from a prior 45.2. While monthly surveys can be noisy, but this one is now flirting with pandemic lows and puts the focus on ISM manufacturing due today. The only ray of positive news came from the Q3 GDP release which was upwardly revised by to 2.9% from 2.6% previously. Softer EU CPI weakens hawkish ECB bets Euro inflation slowed for the first time in 1.5 years to 10% in November from 10.6% YoY in October. ECB officials have highlighted the data will be key for their next rate decision, suggesting lower chance of another 75bps rate hike at the December 15 meeting. Still, it remains hard to say that inflation in the Eurozone has peaked. ECB members also remain broadly hawkish and suggest that the commitment to bring inflation back to target will stay. Guangzhou lifted the lockdown of several districts as a sign of easing restrictions even as new cases at elevated levels Guangzhou, the third largest city in China and the capital of the southern province of Guangdong, removed the “temporary control areas” restrictions of several districts even though the city’s daily new cases of Covid-19 stayed at nearly 7,000. It was an encouraging sign pointing to China’s willingness to continue the fine-tuning measures that it had recently started despite the surge in new cases across the country. Speaking at a pandemic control policy workshop, Vice Premier Sun Chunlian emphasized the importance of gradually fine-tuning the pandemic control measures in response to the lower fatality of the Omicron, higher vaccination rate, and the accumulation of experience in containing the spread of the virus. Equities in focus that could benefit from rate hikes not being as aggressive, and from the festive season spending It’s the world’s first festive season not in lockdown (excluding China), so we are watching retailer shares given they will likely benefit from retail shopping rising. It’s worth watching travel and tourism companies with the market forward looking and seeing that travel-services revenue could likely continue to gain momentum. Carnival shares are up 44% from October with the company seeing some of its strongest sales since pre-covid, Royal Caribbean shares are up 83% from July. We are also watching other travel affiliated companies do well, like Boeing, which is up 48% from September, as well as airlines, such as Singapore Airlines, Qantas, Air New Zealand. However, we think although the travel and tourism sector, especially airlines, will likely see a pick-up in sales amid the seasonality, we wonder if airlines will be able to extend their share price rally into 2023 as fuel costs are not expected offer respite into 2023. This means, those larger companies or those with a wide moat, might be more in focus, as they will be more likely able to sustain the costs pressures.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Powell’s lack of new hawkishness; Guangzhou restrictions eased – 1 December 2022 | Saxo Group (home.saxo)
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The ECB Members Also Remain Broadly Hawkish | US Payrolls Rose This Month

Saxo Bank Saxo Bank 01.12.2022 09:46
Summary:  The US equity market exploded higher yesterday in the wake of a Fed Chair Powell speech that outlined the Fed’s view on inflationary risks and the preferred course of monetary policy. Powell confirmed the market view that the Fed willl downshift to a smaller 50-bp hike at the December FOMC meeting. Weak US data added to the sense that an economic slowdown is underway, taking long US treasury yields to new local lows.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities exploded higher yesterday after Fed Chair Powell’s speech failed to push back against easing financial conditions and as US yields dropped further. This gives the impression that further soft data from the US (see preview below) that takes yields lower still will see an extension of this market squeeze higher, despite the implications from softer data that a recession draws nearer. The Nasdaq 100 index closed clear of the important 12,000 level for the first time since September yesterday and may extend its rally to the 200-day moving average, currently near 12,550 for the cash index. The S&P 500 spiked to new highs since September as well and cleared its 200-day moving average at 4,050, closing at 4,080 on the day. This is the first time that moving average has fallen since the March-April time frame. THe next major resistance there is the pivot high near 4,325 from August. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed 1.7% and CSI300 Index gained 1.5% following the less-hawkish-than-feared speech from the U.S. Fed Chair Powell overnight and China’s Vice-Premier Sun Chunlan, who oversees containing the spread of Covid-19, acknowledged in a pandemic control export workshop that the Omicron variant is less deadly. Mega-cap China internet stocks surged 4-5%. EV maker XPeng (09868:xhkg) jumped 13% after reporting Q3 earnings. Caixin China PMI Manufacturing came in at 49.4 in November, above the consensus estimate of 48.9 and October’s 49.2. USD blasted after Fed Chair Powell’s speech craters US treasury yields, sparks risk-on rally Fed Chair Powell failed to make any notable pushback against easing financial conditions in his speech yesterday (more below), and US Treasury yields downshifted sharply all along the curve after he confirmed the likely downshift to a 50-basis point hike at the December FOMC meeting, with weak US data also pushing US yields lower. The US dollar was lower across the board: EURUSD rushed back higher, and trades this morning not far below the pivotal 1.0500 area, which could open up for 1.0600+, while the action in US yields was a particular tailwind for USDJPY bears, as that pair fell to new local lows well south of the former 137.50 low water mark, hitting 136.21 overnight and possibly on its way for a test of the 200-day moving average near 134.50. Gold trades higher supported by a breakout in silver Silver’s impressive 16% rally last month extended overnight following Powell’s speech in which he signaled a slowdown in the pace of future rate hikes. It trades around $22.25, the 50% retracement of the March to September selloff, and a close above could see it challenge $23.35 next. In addition, the recent dollar and yield slump, the metal has also been supported by improved supply and demand fundamentals.  Gold has built on last month's impressive 8% gain and has now returned to challenging a key area of resistance between $1788 and $1808. Focus on the dollar and incoming US data starting with today’s ISM and Friday’s job report. Crude oil (CLF3 & LCOF3) supported by weaker USD and lower US inventories Crude oil’s three-day recovery has been supported by a weaker dollar and traders assessing signals that China may soften its Covid Zero policy after China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly. Developments that have forced a reduction in recently established short positions ahead of Sunday’s OPEC+ meeting. A meeting that is likely to be strong on words but low on actions, not least considering the unclear impact of an EU embargo on Russian oil starting next week. In addition, US crude stocks fell by 12.6mbbl last week, the biggest decline since June 2019, while the net crude and product export hit a record, highlighting continued strong demand amid Russian sanctions. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) With Fed Chair Powell confirming a likely downshift to a smaller hike in December and not pushing back against easing financial conditions, the entire US Treasury yield curve fell sharply yesterday, with treasury buying also encouraged by weak US data, including a terrible Chicago PMI and weak ADP private payrolls growth number. The 10-year treasury yield benchmark hit a new local low near 3.60% and is now only 10 basis points above the pivotal 3.50% area, which was the major pivot high from June. What is going on? Jerome Powell sticks to the script Fed Chair Powell repeated his comments from the November FOMC and what we have heard more generally from the Fed speakers over the course of the month. He said it makes sense to moderate the pace of interest rate hikes and the time to moderate the pace of hikes may come as soon as December, while he added it seems likely that rates must ultimately go somewhat higher than what was thought in the September FOMC projections. Powell also said they have made substantial progress towards sufficiently restrictive policy but have more ground to cover and they will likely need to hold policy at a restrictive level for some time. While his comments still tilted towards the hawkish side, there was no specific hawkish pushback against the markets pricing of significant rate cuts in 2024 that the markets feared. His comment that he does not want to over-tighten but cutting rates is not something to do soon was a slight contrast to his earlier acceptance that risk of tightening insufficiently is greater than the risk over-tightening. The Fed's Cook (voter) also said it is prudent for the Fed to hike in smaller steps as it moves forward and how far the Fed goes with hikes depends on how the economy responds, overall sticking to the consensus. US economic data broadly weaker, focus now on PCE prices and ISM manufacturing The private ADP jobs report showed US payrolls rose 127,000 this month, the slowest pace in nearly two years, as wage gains moderated. Job openings also fell in October to 10.334mln from September's 10.687mln, reversing a surprise jump in the prior month but remaining elevated, according to the JOLTS report. The biggest downside surprise came in Chicago PMI for November which came in at 37.2 against an expected 47.0, falling from a prior 45.2. While monthly surveys can be noisy, but this one is now flirting with pandemic lows and puts the focus on ISM manufacturing due today. The only ray of positive news came from the Q3 GDP release which was upwardly revised by to 2.9% from 2.6% previously. Softer EU CPI weakens hawkish ECB bets Euro inflation slowed for the first time in 1.5 years to 10% in November from 10.6% YoY in October. ECB officials have highlighted the data will be key for their next rate decision, suggesting lower chance of another 75bps rate hike at the December 15 meeting. Still, it remains hard to say that inflation in the Eurozone has peaked. ECB members also remain broadly hawkish and suggest that the commitment to bring inflation back to target will stay Guangzhou lifted the lockdown of several districts as a sign of easing restrictions even as new cases at elevated levels  Guangzhou, the third largest city in China and the capital of the southern province of Guangdong, removed the “temporary control areas” restrictions of several districts even though the city’s daily new cases of Covid-19 stayed at nearly 7,000. It was an encouraging sign pointing to China’s willingness to continue the fine-tuning measures that it had recently started despite the surge in new cases across the country.   China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly Speaking at a pandemic control policy workshop, Vice Premier Sun Chunlan emphasized the optimization measures of the pandemic control were supported by a lower fatality rate caused by the Omicron variant, an increasing vaccination rate, and the accumulation of experience in containing the spread of the virus. She called for the acceleration of vaccination and preparation of therapeutic drugs and the news report did not quote her mentioning the dynamic zero-Covid policy What are we watching next? Melt-up in risk if US data remains tepid or worse? The reaction to Fed Chair Powell’s speech yesterday and soft US data comes ahead of a string of US data through tomorrow’s November US jobs report. If the data is in-line or especially if it is a bit softer than expected, the market may continue to celebrate the implications of a lower peak for the Fed policy rate, as well as for the impact on valuations if longer US treasury yields also continue falling. Despite Chair Powell specifically indicating that peak Fed rates next year are likely set to rise above the Fed’s own forecasts from the September FOMC meeting, the market dropped its forecast for peak rates yesterday by several basis points in the wake of his speech. Eventually, market may begin to fret the impact of an incoming recession on asset valuations, but for now, the one-dimensional focus on the monetary policy outlook and rates persists. For the risk-on to continue, we would likely need to see a benign PCE Core inflation data point today, in-line or below expectations of +0.3% MoM and +5.0% YoY (vs. +5.1% in September and Feb. peak of 5.4%). The ISM Manufacturing survey today (expected: 49.7, which would be first sub-50 reading since 2020) is less important than Monday’s ISM Services, but the jobs report tomorrow is important, as a slackening US jobs market will be a key ingredient to confirm a slowdown (and the weekly jobless claims usually give off a warning for many weeks before the evidence shows up in the monthly report – the latest weekly number is up today and it will take some time for this indicator to point to weakness in the US jobs market. The market will be in for significant churn if we get a hotter core inflation reading and a strong jobs report. Earnings to watch A heavy focus on Canadian banks today, as three are reporting, including the largest of them all, Toronto-Dominion. Marvell Technology is a significant semiconductor company with 5G solutions and has been on the comeback trail, up some 30% from its lows ahead of today’s report after the market close, as will Veeva Systems. Today: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final November Manufacturing PMI 0930 – UK Final November Manufacturing PMI 1000 – Eurozone Oct. Unemployment Rate 1230 – US Nov. Challenger Job Cuts 1330 – US Oct. PCE Inflation 1330 – US Weekly Initial Jobless Claims 1420 – US Fed’s Logan (Voter 2023) to speak 1500 – US Nov. ISM Manufacturing 1530 – US Weekly Natural Gas Storage Change 1645 – ECB Chief Economist Lane 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 – December 1, 2022 | Saxo Group (home.saxo)
Rates Reversal: US Long Yields on the Rise as Curve Dis-Inverts

Increases In European And Chinese Manufacturing PMI

Kamila Szypuła Kamila Szypuła 01.12.2022 12:36
At the beginning of the last month of the year, and thus the last month of the quarter, a lot of reports appear. The focus today is on the Manufacturing PMI reports. Japan Capital Spending The change in the overall value of capital investment made by companies in Japan has increased significantly. The current reading is at 9.8%, an increase of 5.2%. Australia Private New Capital Expenditure The change in the total inflation-adjusted value of new capital expenditures made by private businesses dropped significantly from 0.0% to -0.6%. So new capital expenditures made by private businesses have decreased and this may affect the economic situation of the country. UK Nationwide HPI The National House Price Index shows that the average change in house prices across the country has slowed year-on-year and month-on-month. Nationwide HPI (YoY) dropped from 7.2% to 4.4% while MoM fell below zero at -1.4%. This monthly decline was significant as it was expected to rise from -0.9% to -0.3%. To put it simply, the average houses dropped significantly in the analyzed periods. This study is carried out by the National Housing Association. Retail Sales Reports published by two countries of the old continent show a significant decrease. In Germany, M/M retail sales fell from 1.2% to -2.8%. Which shows that the German economy is not in good shape and retailers are exposed to financial difficulties because fixed costs such as rent and energy bills will not change, and if they sell less they may not earn. In Switzerland, the situation is similar to Germany, but the decline was larger. Sales fell from 2.6% to -2.5%. Growth was expected, and a significant fall may affect the condition of the country's currency (CHF). Switzerland Consumer Price Index In Switzerland, inflation remained at the previous level of 3.0%. However, there was a change in CPI M/M. CPI M/M fell from 0.1% to 0.0% In the monthly change, we can expect a return to the level below zero, ie deflation. Source: investing.com Speeches There won't be many speeches today. The first one took place at 7:00 CET and was addressed by a member of the Bank of Japan, Governor Haruhiko Kuroda. Traders watch his speeches closely as they are often used to drop subtle hints regarding future monetary policy and interest rate shifts. Speeches by members of the European Central Bank attract further attention. At 9:00 CET, Andrea Enria, Chair of Supervisory Board of the European Central Bank, spoke. Further speeches will take place in the second part of the day. At 17:45 CET, Philip R. Lane, member of the Executive Board of the European Central Bank will speak, followed by a speech at 18:30 CET Frank Elderson, member of the Executive Board and Vice-Chair of the Supervisory Board of the European Central Bank. These speeches may give clues to the future of the eurozone's monetary policy. Manufacturing PMI The main report from the European, American and Chinese economies today is the Manufacturing PMI. In China, the report appeared first. The current reading is positive, the current level is 49.4 and is higher than the previous one (49.2) and also higher than expected (48.9). In Europe, the first report came from Spain and was positive. In Spain, it rose from 44.7 to 45.7. In Italy it also rose to 48.4. France and Germany also saw growth, but it was lower than those economies expected. In France, the current readings showed a level of 48.3, and an increase to 49.1 was expected. In Germany, a larger increase to 46.7 was also expected, but the readings showed a level of 46.2. In all countries of the European Union and the euro area, there was an increase in the PMI index, and thus also for the EU Manufacturing PMI. For the Eurozone, it increased from 46.4 to 47.1. And similarly to the main economies (Germany and France) of this region, a larger increase was expected to the level of 47.3 Also in the UK there was an increase in the Manufacturing PMI. The current level of 46.5 is higher than the expected (46.2) and the previous reading (46.2). We have to wait until 16:00 CET for the reading from the United States, but it is expected that the U.S. The ISM Manufacturing Purchasing Managers Index will drop to 49.8 from the previous reading of 50.2. EU Unemployment Rate The unemployment rate fell slightly in the EU from 6.6% to 6.5%. Brazil GDP (YoY) (Q3) Brazil's economy expects GDP growth from 3.2% to 3.7%. US Core PCE Price Index Report about the changes in the price of goods and services purchased by consumers for the purpose of consumption, excluding food and energy will also appear today. It is expected to fall from 0.5% to 0.3%. The Core Personal Consumption Expenditure (PCE) Price Index measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation. Initial Jobless Claims The weekly report on the number of individuals who filed for unemployment insurance for the first time during the past week will also appear today. The last reading was very negative and showed a significant increase in the number of people applying for this insurance (240K). This reading is expected to be better and drop to 235K. Summary: 0:50 CET Japan Capital Spending (YoY) (Q3) 1:30 CET Australia Private New Capital Expenditure (QoQ) (Q3) 2:45 CET Caixin Manufacturing PMI 7:00 CET BoJ Governor Kuroda Speaks 8:00 CET UK Nationwide HPI 8:00 CET German Retail Sales 8:30 CET Switzerland Retail Sales 8:30 CET Switzerland Consumer Price Index 9:00 CET ECB's Enria Speaks 9:15 CET Spanish Manufacturing PMI 9:45 CET Italian Manufacturing PMI 9:50 CET French Manufacturing PMI 9:55 CET German Manufacturing PMI 10:00 CET EU Manufacturing PMI 10:30 CET UK Manufacturing PMI 11:00 CET EU Unemployment Rate 13:00 CET Brazil GDP (YoY) (Q3) 14:30 CET US Core PCE Price Index 14:30 CET Initial Jobless Claims 16:00 CET ISM Manufacturing PMI 17:45 CET ECB's Lane Speaks 18:30 CET ECB's Elderson Speaks Source: Economic Calendar - Investing.com
For What It Is Worthy To Pay Attention Next Week 23.01-29.01

Saxo's Hallmark Outrageous Predictions Ahead

Saxo Bank Saxo Bank 02.12.2022 14:36
Summary:  Saxo's hallmark Outrageous Predictions will be out next week. The provocative publication has never been about being right - it has always been about being outrageous. Still, sometimes the world catches up and becomes just the right amount of outrageous for the predictions to become true. We've checked our archives to find out which Outrageous Predictions from the past were much closer to the truth than anticipated. All large market moves are driven by something that surprises expectations - sometimes outrageously. Crystal gazing with this in mind is the core of our annual Outrageous Predictions, as we try to suggest what events that seem unlikely right now could unfold and cause outrage in our world and financial markets - and provoke you to think differently along the way," says John J. Hardy, Head of FX strategy in Saxo.In this article, we thought it would be fun to go back in time and see which of the past predictions came true even though truth isn't a measure of success with these: "Our Outrageous Predictions are not our baseline forecasts for what will happen in the New Year. Rather, they are meant as an exercise in provoking thought on what unanticipated developments can shock our world and financial markets," says Hardy. 2013 Outrageous Prediction: Gold corrects to USD 1,200 per ounce "Our $1,200 call, at the time of writing, signaled a one-third drop in the price," says Head of Commodity Strategy, Ole S. Hansen who, in 2013, had the first correct Outrageous Prediction. Here's what he had to say about it: "Gold corrected to and actually went below USD 1,200 per ounce in 2013, as investors increasingly turned their attention to stocks and the dollar as central banks supported a post-GFC recovery in global growth. A major trigger was the April 2013 break below key support at $1,525 - a move that in our mind raised the risk of a bear market taking the price down towards $1,100," says Hansen. 2015 Outrageous Prediction: Brexit in 2017 In the Outrageous Predictions for 2015, our Strats wrote that the UK Independence Party (UKIP) would win 25% of the national vote in Britain’s general election on 7 May, 2015, sensationally becoming the third largest party in parliament. UKIP would then join David Cameron’s Conservatives in a coalition government and calls for the planned referendum on Britain’s membership of the EU in 2017. UK government debt suffers a sharp rise in yields. The timing was a bit off, but the circumstances around it were pretty accurate. “We had a very strong sense that ‘protest votes’ would be coming both in the US election and also ultimately in a vote on Brexit” said Steen Jakobsen, CIO at Saxo.“We, to some extent, correctly talked about the ‘social-contract being broken’ – meaning society no longer benefitted as a whole with monetary policy, creating increased gap in equality. “This call was too early, but context and reasoning was spot on. The split in the Tory Party could not be healed and the modus operandi of ‘Talking down to the voters’ was blatant mistake, which we used for this call.” 2017 Outrageous Prediction: Huge gains for Bitcoin as the cryptocurrencies rise As cryptocurrencies, particularly Bitcoin, began to gather momentum in the public eye, our Strats predicted that the then leading currency would have a huge bump in value. The rationale behind the jump was justified by the Trump regime overspending, causing high national debt to rise and inflation to skyrocket. Combining this with the global public wanting to break away from the currencies of central banks, Bitcoin would become a preferred alternative. The Outrageous Prediction ended up coming to fruition and more, with the price of Bitcoin growing to almost USD 20K at its 2017 peak.However, the circumstances around the prediction weren’t entirely correct for the time. It wasn’t as much due to the macroeconomic movements of the Trump era, but rather the speculation around Bitcoin that fueled its initial meteoric rise. However, when looking at the more recent spikes in cryptocurrencies, particularly Bitcoin in 2021, the justifications outlined in the 2017 Outrageous Prediction held true.   2018 Outrageous Prediction: Volatility spikes after flash crash in stock markets "We did not get a 25% drop in a single 1987-like event, but we did get two dramatic events in 2018 that vindicated our point," says Peter Garnry, Head of equity strategy. He further explains how the prediction came about: "We got the idea about this Outrageous Prediction in late 2017, as the year was about to end with astonishingly low volatility and Bitcoin had gone from just below $1,000 in late 2016 to around $10,000 in November 2017 (Bitcoin eventually rose to almost $20,000 before year end). Everyone speculated in Bitcoin and selling volatility in currencies and equities were heralded as easy predictable money. That's where we got this super awkward feeling from that the entire euphoria and these types of positions can have dramatic outcomes if conditions change even the slightest."Garnry says that the volatility started in February and ended in dramatic fashion over Christmas: "The ‘Volmageddon’ event in February 2018 almost completely wiped out short volatility funds including some famous ETFs in these strategies as the VIX Index exploded from 13.64 to 50.30 in just two trading sessions. The event changed the short volatility complex in the subsequent years. Later in 2018, the market was trying to tell the Fed that it was doing a policy mistake by hiking its policy rates because the economy was deteriorating. It led to a selloff of 20% from the peak in October to the intraday bottom on 26 December 2018 with the most dramatic trading sessions happening over the Christmas holiday period when liquidity was drying up. Dramatic events that set the stage for the crazy bull-run in 2019 as investors again forgot everything about risk." 2022 Outrageous Prediction: The plan to end fossil fuels gets a rain check As we headed into 2022, Ole S. Hansen, Head of Commodity Strategy, wrote that policymakers would kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest, while rethinking the path to a low-carbon future. The overarching prediction also came into fruition, but it was regrettably fueled even further by the unforeseen invasion of Ukraine by Russia."Little did we know last November that the world was galloping into an energy crisis triggered by Russia’s war in Ukraine," says Ole S. Hansen, Head of Commodity Strategy, who explains how he then caught on to the idea that fossil fuels would become relevant again in 2022:"Lack of investments and an increasingly urgent need to support gas over coal led us to come up with the 'The plan to end fossil fuels gets a rain check' which basically envisaged a more investor friendly environment for (up until then) shamed investment in so-called 'dirty energy production.  A move that supported a decision by the EU to classify gas and nuclear as green investments," he says. Read next: Steen Jakobsen: ECB strategy is praying, hoping and waiting... not exactly action which gives hope for real economy| FXMAG.COM How will the Outrageous Predictions turn out for 2023? Not all of our Strats' predictions come true, but they are guaranteed to be Outrageous. If you want to read what they have to say about 2023, be sure to check back with Saxo on December 6, 2022, or open an account to get the Predictions sent straight to your inbox.      Source: https://www.home.saxo/content/articles/thought-starters/outrageous-predictions-that-werent-so-outrageous-02122022
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

The European Commission Expects The Eurozone Economy To Decline

Kenny Fisher Kenny Fisher 02.12.2022 12:16
EUR/USD is unchanged on Friday, trading at 1.0524. US nonfarm payrolls expected to drop to 200K The week wraps up with one of most important releases on the calendar, US nonfarm payrolls. The robust labour market is showing signs of cooling down, as rising interest rates have slowed economic activity. Nonfarm payrolls have been falling and the trend is expected to continue, with a consensus of 200,000 for November, down from 261,000 a month earlier. With the Fed holding its policy meeting on December 14th, the NFP report will be closely watched by policy makers, who have relied on a strong job market to press ahead with an aggressive rate cycle. The US dollar has been in retreat since Jerome Powell’s speech on Wednesday. The speech was balanced, with Powell reiterating that inflation remained too high and rates would continue to rise higher. Still, the markets focussed on the fact that Powell strongly hinted the Fed would ease rates at the December meeting with a 50-bp hike, and the optimism sent equities higher and the dollar lower. The euro has made the most of the dollar’s weakness, and EUR/USD posted its best month since 2012, with gains in November of 5.3%. Still, the euro has been on a prolonged decline and started 2022 close to 1.14. The outlook for the euro is weak, as the European Commission expects the eurozone economy to decline in Q4 2022 and Q1 2023. The driver of the expected decline is the huge jump in energy prices caused by the war in Ukraine. The eurozone has been hit hard by double-digit inflation, and the ECB will have to continue raising rates, despite weak economic conditions, until it is convinced that inflation has peaked. Read next: If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya| FXMAG.COM EUR/USD Technical EUR/USD faces resistance at 1.0583, followed by a monthly line at 1.0683 There is support at 1.0490 and 1.03537 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.  
Russia Look Set To Double Its Exports For The First Half Of 2023

Commodities Outlook: Part Of The Supply Gap In 2023 Will Remain

ING Economics ING Economics 03.12.2022 12:03
Fertiliser supply decreased in 2022 and prices rose to record highs causing a global drop in demand. High gas prices, sanctions, and export restrictions have resulted in a shift in trade which will continue into 2023. Meanwhile, the lower use of fertilisers will weigh on crop yield expectations for the upcoming season In this article High prices create ripple effects Considerable shifts in fertiliser trade Prospects for 2023 Impact on food production   High prices create ripple effects The war in Ukraine, Western sanctions on Russian and Belarussian exports, and Chinese export restrictions have created turmoil in fertiliser markets. The surge in fertiliser prices that started in 2021 led to deteriorating farmer affordability during 2022 and lower demand. Uncertainty about the amount of fertiliser that farmers are going to need for the upcoming season leads to a more muddied outlook for next year’s crop yields. This has an upward effect on commodities futures. Although the urgency of the situation for global food security is increasingly being recognised, there are reasons to be cautious about any quick improvements in the situation. History shows that unwinding sanctions often prove to be quite a sticky process against a backdrop of geopolitical tensions. Fertiliser prices are still high despite recent falls Monthly prices per metric ton Refinitiv, ING Research*DAP = Diammonium phosphate Considerable shifts in fertiliser trade Buyers have been busy this year finding alternative suppliers due to the sharp drop in fertiliser exports from Russia (nitrogen, potash), Belarus (potash), China (nitrogen, phosphate) and the EU (nitrogen). In the EU, lower local ammonia and urea production in combination with a reduced inflow of Russian products has been partially offset by imports from other countries such as Egypt and Algeria. This is also happening with potash where Belarussian exports to the EU have ceased and Russian imports dropped by more than 70% up until September. Those decreases are partially made up by a 25% increase in potash imports from Canada. In the process, European buyers are crowding out other buyers, similar to what has been happening in liquefied natural gas (LNG) markets. Meanwhile, other large importers, including Brazil, China, India and the US, have not turned away from Russian fertilisers and absorbed some of the flows that have become available, as they have generally worked out how to deal with any additional red tape. The EU is turning to other countries for ammonia imports Import volume in tonnes, 3-month average, January 2020 to September 2022 Eurostat, ING Research Prospects for 2023 High prices drive producers across the globe to ramp up production at existing sites and increase investments in new capacity which has a downward effect on prices. Still, it’s likely that part of the supply gap in 2023 will remain. Geopolitics is a major factor in how the market will evolve in 2023 as European sanctions on exports from Russia and Belarus are particularly influential. Both a de-escalation of the war in Ukraine and global pressure to reduce restrictions on fertiliser trade flows for the sake of food security could lead to a winding down in sanctions. This could, for example, result in the reopening of the Tolyatti-Odessa ammonia pipeline (output: 2.5 million tonnes, 1.5% of global production) and the release of fertiliser cargoes stuck in European ports. However, further tightening of sanctions cannot be completely ruled out in case the war in Ukraine escalates. Impact on food production In our view, the impact of the increase in fertiliser prices on crop yields has been soft this year as many farmers buy fertiliser ahead of the season and affordability was still quite favourable at the start of 2022 due to high commodity prices. But during the course of 2022 fertiliser imports in major markets such as India and Brazil have dropped below the levels of the previous year. The impact on yields could become more pronounced in 2023, especially in African and Asian countries where farmers have generally fewer means to adapt and get less government support compared to their counterparts in Europe, the US and China. Still, the process is likely to be gradual for two reasons. First, while the lower application of nitrogen fertilisers is directly affecting yields, the reduced use of phosphate and potash has a longer lag before it kicks in. Second, some of the impact can be mitigated by farmers and such mitigation can also be in the interest of food traders and manufacturers. Farmers could invest in the more precise application of (liquid) fertilisers, increase the use of organic fertilisers (like biochar) or opt to shift to crops that require less fertiliser (such as legumes or cassava). All of these have their drawbacks and limitations. Shifting to a different crop, for example, requires specific knowledge to be successful. So overall it will be hard to match the effectiveness of synthetic fertilisers. As always, favourable weather in the major growing regions during the season can ease some of the impact of under-fertilisation, while bad weather can cause more problems. TagsUS Food & Agri European Union Emerging Markets Commodities Outlook 2023 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
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

Final PMIs, Revised GDP, CPI And Retail Sales Ahead

Craig Erlam Craig Erlam 04.12.2022 10:16
EU There are a number of economic releases on the calendar next week but it’s almost entirely made up of tier two and three data. That includes final PMIs, revised GDP and retail sales.  The most notable events for the EU over the next week are speeches by ECB policymakers ahead of the last meeting of the year a week later – including President Lagarde on Monday and Thursday – and the final negotiations on the Russian oil price cap as part of a package of sanctions due to come into force on Monday. UK  Compared with the soap opera of the last few months, next week is looking pretty bland from a UK perspective. A couple of tier two and three releases are notable including the final services PMI, BRC retail sales monitor and consumer inflation expectations. I’m not convinced any will be particularly impactful, barring a truly shocking number. Russia The most notable economic release next week is the CPI on Friday which is seen moderating further to 12% from 12.6% in October, potentially allowing for further easing from the CBR a week later. South Africa Politics appears to be dominating the South African markets at the moment as efforts to impeach President Cyril Ramaphosa go into the weekend. The rand has seemingly been very sensitive to developments this week, with the prospect of a resignation appearing to trigger sharp sell-off’s in the currency and the country’s bonds. Under the circumstances, that could bring weekend risk for South African assets depending on how events progress over the coming days.  On the data front, next week brings GDP on Tuesday and manufacturing production on Thursday.  Turkey Ordinarily, especially these days, inflation releases are widely followed but that is less the case for a country and central bank that has such little interest in it. Official inflation is expected to ease slightly, but only to 84.65% from 85.51% in October, hardly something to celebrate. The central bank has indicated that its easing cycle will now pause at 9% so perhaps another reason to disregard the inflation data. Switzerland A quieter week after one of repeated disappointment on the economic data front. Whether that will be enough to push the SNB into a slower pace of tightening isn’t clear, although it has repeatedly stressed the threat of inflation and need to control it. The meeting on 15 December remains this months highlight while next week has only unemployment on Wednesday to offer. China The PBOC announced on 25 November its decision to cut the reserve requirement ratio for banks by 25 basis points, lowering the weighted average ratio for financial institutions to 7.8% and releasing about 500 billion yuan in long-term liquidity to prop up the faltering economy.   In response to the various property crises that have emerged in the real estate sector over the past year or so, i.e. debt defaults by real estate companies, mortgage suspensions leading to unfinished buildings, and real estate-related non-performing loan crises, the Chinese government has issued a new 16-point plan. Focus next week will be on the Caixin services PMI, trade data, CPI release and the protests. China’s strict zero-Covid measures are hammering growth and the public is clearly becoming increasingly frustrated. It will be a fine balance between managing protests and easing Covid-zero measures to support growth in a country not used to the former. India The RBI could potentially bring its tightening cycle to a close next Wednesday with a final 35 basis point hike, taking the repo rate to 6.25%. While the outlook remains cloudy given the global economic outlook, there is some reason to be optimistic. The tightening cycle may soon be at an end, the economy exited recession in the last quarter and Indian stock hit a record high this week, something of an outlier compared with its global peers. Australia & New Zealand Recent figures show that inflation (YoY) in Australia rose to 7.3% in the third quarter, compared to the target range of 2%-3%. The RBA began to weaken their hawkish stance in the past two months, raising rates by just 25 basis points each time to bring the official rate to 2.85%. The market is currently expecting a 25 basis point rate hike next week as well. Also worth noting is Australia’s third quarter GDP trade balance figures. New Zealand inflation (YoY) surged 7.2% in the third quarter, compared to the RBNZ’s inflation target range of 1%-3%. Previously, the RBNZ had been raising rates by 50 basis points but that changed last month as they ramped it up with a 75 basis point hike. The current official rate is now 4.25%. Japan The Japan Tokyo CPI rose by 3.8% year-on-year in November, up from 3.5% in October and the 3.6% expected. Ex-fresh food and energy it increased by 2.5%, up from 2.2% and above the 2.3% expected. Japan’s manufacturing PMI fell to 49.4 in November, the worst in two years, with both new export orders and overall new orders declining and falling below 50 for the fifth consecutive month, which alines with the unexpected 0.3% fall in Japanese GDP in the third quarter. Japan department store sales rose 11.4% year-on-year in October, down from 20.2% in September.    The poor PMI and retail sales data may have reinforced the BOJ’s view that domestic demand is weak and CPI inflation is largely input and cost driven and, therefore, unsustainable. The central bank will likely continue to pursue an accommodative monetary policy, especially in light of the current poor global economic outlook. Final GDP for the third quarter is in focus next week, with the quarterly figure expected to be negative meaning the economy may be in recession. Lots of other releases throughout the week but the majority, if not all, are tier two and three. Singapore Singapore’s CPI for October was 6.7% (YoY), below expectations of 7.1% and the 7.50% reading. GDP for the third quarter (YoY) was 4.1%, below expectations of 4.2% and 4.40% previously. On the quarter, it was 1.1% down from 1.50%. Next week the only release of note is retail sales on Monday. Economic Calendar Saturday, Dec. 3 Economic Events ECB President Lagarde chairs a roundtable on “The Global Dimensions of Policy Normalization” at a Bank of Thailand conference Sunday, Dec. 4 Economic Data/Events Thailand consumer confidence OPEC+ output virtual meeting ECB’s Nagel and Villeroy appear on German television Monday, Dec. 5 Economic Data/Events US factory orders, durable goods orders, ISM services index Eurozone Services PMI Singapore Services PMI Australia Services PMI, inflation gauge, job advertisements, inventories China Caixin services PMI India services PMI Eurozone retail sales Japan PMI New Zealand commodity prices Singapore retail sales Taiwan foreign reserves Turkey CPI European Union sanctions on Russian oil are expected to begin ECB President Lagarde gives a keynote speech on “Transition Towards a Greener Economy: Challenges and Solutions” ECB’s Villeroy speaks at a conference of French banking and finance supervisor ACPR in Paris ECB’s Makhlouf speaks in Dublin EU finance ministers meet in Brussels The US Business Roundtable publishes its CEO Economic Outlook survey Tuesday, Dec. 6 Economic Data/Events US Trade Thailand CPI RBA rate decision: Expected to raise Cash Rate Target by 25bps to 3.10% Australia BoP, net exports of GDP Germany factory orders, Services PMI Japan household spending Mexico international reserves South Africa GDP Georgia’s US Senate runoff The first-ever EU-Western Balkans summit is held in Albania Goldman Sachs Financial Services conference Wednesday, Dec. 7 Economic Data/Events US Trade MBA mortgage applications China reserves, Trade Australia GDP, reserves Eurozone GDP Canada central bank (BOC) rate decision: Expected to raise rates by 25bps to 4.00% India central bank (RBI) rate decision: Expected to raise rates by 25bps to 6.15% Poland central bank rate decision:  Expected to keep rates steady at 6.75% Singapore reserves Germany industrial production Japan leading index BOJ’s Toyoaki Nakamura speaks in Nagano EIA crude oil inventory report Foreign policy forum is held in Moscow with Russian Foreign Minister Lavrov speaks at a foreign policy forum in Moscow. Thursday, Dec. 8 Economic Data/Events US initial jobless claims Australia trade Indonesia consumer confidence Japan GDP, BoP Mexico CPI New Zealand heavy traffic index South Africa current account, manufacturing production ECB President Lagarde speaks at the European Systemic Risk Board’s sixth annual conference SNB’s Maechler participates in a panel discussion ECB’s Villeroy speaks at the Toulouse School of Economics European Defence Agency holds its annual conference in Brussels Friday, Dec. 9 Economic Data/Events US PPI, wholesale inventories, University of Michigan consumer sentiment China CPI Russia CPI  China PPI, aggregate financing, money supply, new yuan loans Japan M2 New Zealand card spending, manufacturing activity Spain industrial production Thailand foreign reserves, forward contracts Portuguese PM Costa, Spain PM Sanchez, and French President Macron attend a meeting in Spain Sovereign Rating Updates United Kingdom (Fitch) EFSF (Moody’s) ESM (Moody’s) Netherlands (Moody’s) Saudi Arabia (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
Bank of England survey highlights easing price pressures

The ECB And The Bank Of England Still Have A 75% Chance Of Tightening Monetary Policy

InstaForex Analysis InstaForex Analysis 04.12.2022 10:38
The wave marking for the pound/dollar instrument currently appears quite confusing, but it still needs to be clarified. We have a five-wave upward trend section, which has taken the form a-b-c-d-e and may already be complete. As a result, the instrument's price increase may last a while. Therefore, both instruments are still in the process of developing an upward trend segment, which will be followed by the start of a mutual decline. Recently, the British pound's news background has been so varied that it is challenging to sum it up in one word. The British pound had more than enough reasons to rise and fall. As you can see, it primarily went with the first option. The internal wave structure of wave e has become more complicated this week due to the rise in quotes over the previous week. I am currently waiting for the decline of both instruments. Still, these trend sections may take an even longer form because the wave marking on both instruments allows the ascending section to be built up to completion at any time. The Fed is indicating that monetary policy will be tightened. The pound/dollar exchange rate on Friday increased by 45 basis points. The dollar displayed positive dynamics for a brief period, and all three US reports were positive, but it wasn't enough to support further gains. The market did not react as it should have on Friday. Given that the number of payrolls turned out to be high, unemployment did not rise, and wages increased more than anticipated, it was anticipated that demand for US currency would increase significantly. However, as I previously stated, the US dollar could not take hold of the hard-won positions. Thus, yet another excellent opportunity to finish building the suggested wave e, and the upward portion of the trend has yet to be recovered. Even though the news context is not calling for sales for the first time, we are once more observing an increase in the instrument. The ECB, Fed, and Bank of England meetings will occur in December. In anticipation of these meetings, the market is already moving its instruments. Recall that the Fed will raise interest rates by only 50 basis points, or almost 100%, while the ECB and the Bank of England still have a 75% chance of tightening monetary policy. As a result, the market favors the euro and the pound more. However, the ECB and the Bank of England will raise their interest rates by 50 basis points and abandon their aggressive stance. In this instance, the recent spike in instrument sales was unfounded. Even though the news background does not support it, I anticipate the development of a new downward trend segment. The market's reluctance to raise demand for the dollar contradicts this. As a result, the current wave markup fails, and sometimes it is difficult to explain why the US dollar is falling. Conclusions in general The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the construction of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form. The euro/dollar instrument and the picture look very similar at the larger wave scale, which is good because both instruments should move similarly. The upward correction portion of the trend is currently almost finished. If this is the case, a new downward trend will soon develop.   Relevance up to 13:00 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/328884
The EUR/USD Pair: There Are Still No Sell Signals

Investors Began To Buy The Euro With Renewed Vigor After ECB President Christine Lagarde's Speech

InstaForex Analysis InstaForex Analysis 05.12.2022 10:20
Markets prefer to shoot first and then think later. Otherwise, they would miss the moment. When ECB President Christine Lagarde said that central banks should pursue policies that would anchor inflation expectations, investors began to buy the euro with renewed vigor, pushing EURUSD quotes to the highest levels since June. In reality, however, Lagarde's phrase does not guarantee that the deposit rate will rise by 75 bps in December. No matter how this shot turned out to be a blank. The logic of investors selling the U.S. dollar is clear: inflation is slowing and will continue to do so, which means the Fed does not need to take giant steps down the road of tightening monetary policy. The factor of an aggressive federal funds rate hike, along with U.S. exceptionalism and high demand for safe haven assets, was the key driver of the EURUSD rally. If the ECB starts to catch up with the Fed, the dollar has one less trump card to play. Lately, the macrostatistics of the euro area has been pleasantly surprising, which is reflected in the growth of the index of economic surprises. It is quite possible that the currency bloc will either manage to avoid recession or the recession will be quick and insignificant. It looks like the U.S. is not as far from the eurozone as previously thought. A change in investors' outlook on the matter has given EURUSD a helping hand. Dynamics of Economic Surprise Indices In fact, the U.S. dollar has only one trump card left—its status as a safe-haven asset, and even that fails. When the yield of Treasury bonds grew, the competitors of the grenback in the face of gold, yen and franc were in disgrace. However, the decline in interest rates on debt has turned them from outsiders into favorites. As a global recession approaches, investors will no longer park their money in North America, but will prefer Japan, Switzerland, or a perpetual asset. Jerome Powell had a chance to turn things around. Had he voiced his dissatisfaction with financial conditions, the EURUSD pair would hardly have been able to soar above 1.05. The weakening of the latter makes it difficult for the Fed to fight inflation, but the central bank also seems to believe that the PCE will continue to slow. Dynamics of financial conditions in the USA Unlike Lagarde, who believes that the global economy is entering an era of volatile inflation. That is why central banks should anchor inflation expectations at the target level of 2%. Households must trust that their work will lead to price stability. That's the only way to win. Volatile inflation makes it doubtful that EURUSD will continue to go further upward in the same way as in October and early December. Most likely, it will be stormy. In technical terms, the euro approached the target by 161.8% by the Crab pattern within an arm's length. It is located near the $1.061 mark. A rebound may follow from it or from the 1.057 pivot point, which will allow to partially take profits on the longs formed above 1.0395. Subsequently, we use pullbacks to buy EURUSD Relevance up to 06:00 2022-12-10 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/328928
UK Inflation Expected to Slow Sharply in July: Market Analysis and Insights - August 16, 2023

Chinese And European Services PMIs Fell

Kamila Szypuła Kamila Szypuła 05.12.2022 11:25
Today, the focus is on the Services PMI from multiple economies. ECB President Lagarde Speaks and Eurogroup Meetings This morning (2:45 CET) there was one and only speech of the day. the speaker was European Central Bank (ECB) President Christine Lagarde. As head of the ECB, which sets short term interest rates, she has a major influence over the value of the euro. Services PMI (Nov) At the beginning of the day data from Asia appeared, followed by data from Europe. The Japanese Services PMI rose slightly from 50.0 to 50.3. The Caixin China General Services PMI fell to 46.7 points in November 2022 from 48.4 in October, marking the third straight month of decline. It was also the biggest contraction in the services sector since May, due to Covid containment measures that could impact demand and service activity. Looking at the PMI results from the European Union, there was a decrease in the main economies of Reginau, and an increase in two others. Growth occurred in Spain and Italy. Spain's services PMI rose to 51.7, above the expected 50.5, and in Italy it rose significantly from 46.4 to 49.5. The German and French Services PMIs fell and were lower than expected. For Germany, the result was only 0.4 lower than the previous one and reached the level of 46.1, while in France there was a greater decrease from 51.7 to 49.3. Thus, there was a slight decrease in the euro area from 48.6 to 48.5. In the UK, the Services PMI (Nov) and Composite PMI (Nov) held their previous reading at 48.8 and 48.2 respectively. The United States will also release data on this indicator today. It is expected that the level will be the same as last time, i.e. 46.1. Eurogroup Meetings Today the Eurogroup brings together ministers from the euro area to discuss matters relating to their common currency. EU Retail Sales (MoM) (Oct) Retail sales in the European Union fell significantly. The current level of M/M retail sales is -1.8%, down from 0.8%. The level achieved is lower than expected. ISM Non-Manufacturing PMI (Nov) U.S. The ISM Non-Manufacturing Purchasing Managers Index (PMI) expects another decline. The last reading was at e54.4, also down from 56.7. The reading is expected to fall to 53.3 this time. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting. Currently, it remains above 50, but as the data shows, the downward trend continues, i.e. the sector is starting to contract. BCB Focus Market Readout and RBI MPC Meeting Minutes Brazil and India publish reports on the state of their economies or expectations. The Focus Market Report provides weekly mean market expectations for inflation over the following month, while The Monetary Policy Meeting Minutes are a detailed record of the Reserve Bank of India's policy setting meeting, containing in-depth insights into the economic conditions that influenced the decision on where to set interest rates. Canada Building Permits (MoM) (Oct) Canada awaits improvement in the change in the number of new building permits issued by the government. Canada Building Permits MoM is forecast to reach 3.9%, a large increase from the previous reading which was -17.5%. This may mean that the real estate market has improved in the analyzed term. Summary: 1:30 CET Japan Services PMI 2:45 CET ECB President Lagarde Speaks 2:45 CET Caixin Services PMI (Nov) 9:15 CET Spanish Services PMI (Nov) 9:45 CET Italian Services PMI (Nov) 9:50 CET French Services PMI (Nov) 9:55 CET German Services PMI (Nov) 10:00 CET EU Services PMI (Nov) 10:30 CET Services PMI (Nov) 11:00 CET Eurogroup Meetings 11:00 CET EU Retail Sales (MoM) (Oct) 12:25 CET BCB Focus Market Readout 12:30 CET RBI MPC Meeting Minutes 14:00 CET Canada Building Permits (MoM) (Oct) 15:45 CET Services PMI (Nov) 16:00 CET ISM Non-Manufacturing PMI (Nov) Source: Economic Calendar - Investing.com
Rates Spark: Italy's Retail Bonds and Their Impact on Government Funding

The Retail Environment Remains Very Tricky In Near Term

ING Economics ING Economics 05.12.2022 13:43
A weak start to the fourth quarter as the retail correction continues. Expect the trend to continue with real wage growth still negative   The declining trend in retail sales continued at the start of the fourth quarter after a brief uptick in September. The drop of 1.8% month-on-month was broad-based. We saw declines for both food and non-food retail trade with only fuel sales ticking up. We saw a broad-based decline by country, too. Germany and France both experienced drops of almost 3% while the Netherlands saw a small dip. Spain was the exception among bigger countries with an increase of 0.4%. The peak in sales was in the fourth quarter last year but we’ve seen a correction since. This is because of slowing demand related to the large purchasing power squeeze Europeans are experiencing, as well as the shift in the consumer's preference from goods to services since the economy reopened post-Covid lockdowns. The retail environment remains very tricky for the months ahead. We don’t expect an immediate recovery as real wages remain deep in negative territory. Inventories in retail were depleted in 2021 as shortages and high demand resulted in a struggle to keep the shelves filled for retailers. Now this situation is quickly reversing. Retailers have been stocking up as supply-side problems have been fading, but demand has also quickly started to fade. That has resulted in quickly filled storage sites and uncertainty about whether sales will live up to expectations in the holiday period. The number of retailers that expects to raise prices fell in November. Read this article on THINK TagsGDP Eurozone 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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The Pace Of Interest Rate Increases Will Be Slowed Down In The Near Future

InstaForex Analysis InstaForex Analysis 06.12.2022 08:28
After a string of similarly bizarre days, Monday was very strange. Many people are already perplexed as to why the euro and the pound continue to rise even on days without justification. If almost all factors point in this direction, why isn't the creation of a correction set of waves for both instruments started right away? If there is no explanation, why is the demand for US currency decreasing almost daily? Remember that last week, although he said nothing fundamentally novel in his speech, Jerome Powell brought down the dollar's value, demonstrating the validity of these questions. The dollar rose for an hour before falling again, making Friday's payrolls appear paradoxical. Additionally, nonfarm payrolls revealed that everything is fine with the US labor market. There is no need to worry about a recession, and the Fed can keep raising rates to the currently planned level of 5%. What do we ultimately have? The ECB may increase the interest rate by 2% or 2.5%, but there is little difference between those increases. The Fed will increase interest rates by at least 1%, and the Bank of England and ECB will likely do so. All three central banks will increase interest rates to slow inflation, at least for the foreseeable future. The pace of interest rate increases will be slowed down in the near future by all three central banks following the same trend. The situation is unchanged, but demand for US dollars is steadily declining while demand for the euro and the pound is rising. When it was widely believed in the market a few weeks ago that only the Fed would slow the tightening of monetary policy in December, more and more analysts are now inclined to think that the Bank of England and the ECB will do the same. All three banks are now anticipated to increase rates by 50 basis points. In this scenario, there will be even fewer factors supporting the rise of the euro and pound, as one of the few causes of the dollar's decline at the moment could be characterized as the highest likelihood of convergence with the most abrasive PEPP tightening strategy. The euro and the pound will lose this advantage if the ECB and the Bank of England do not raise their rates by 75 basis points. Even without the abovementioned condition, I have long anticipated a quote decline. With the circumstances mentioned above, it ought to be even faster and stronger. The further both instruments go, the more painful and powerful their eventual fall will be. The market may trade in very challenging ways to comprehend, but eventually, everything returns to equilibrium. Additionally, the European and British currencies might not find this balance appealing. I conclude that the upward trend section's construction is complete and has increased complexity to five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. The likelihood of this scenario is increasing, and there is a chance that the upward portion of the trend will become more complicated and take on an extended form. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the current structure of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form Relevance up to 06:00 2022-12-07 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/329040
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The ECB Takes Decisive Steps Towards Unwinding Its Bond Portfolio

ING Economics ING Economics 06.12.2022 09:50
We expect pre-FOMC profit-taking on Treasury longs. The ECB shouldn’t take the calm in peripheral bond markets as a sign that QT is no big deal The Treasury rally stalls at 3.5% 10Y Treasuries bounced on the 3.5% resistance level after a surprising rally that took them down 75bp from the 4.25% reached as recently as the end of October. The rally occurred with no encouragement from the Fed. On the contrary, the Fed has been at pains to stress that, if anything, it saw a higher terminal rate than in its September projection. Since then, data has been mixed, with a slowdown in various measures of inflation being balanced by still strong labour market indicators. What’s skewed market reaction in favour of a dovish interpretation to the recent data flow has been the Fed signalling a downshift to 50bp hikes. Momentum towards lower rates has indeed stalled Market participants may see a vindication of their recent dovish inclinations if US PPI does slow down on an annual basis as is expected in Friday’s release, but we feel the lack of other ‘tier one’ economics publications this week and the proximity of the 14 December FOMC meeting, suggest momentum towards lower rates has indeed stalled. We think 3% is a reasonable forecast for 10Y yields in 2023. The recent rally from 4.25% to 3.5% has taken rates more than halfway towards that level so we suspect many short-term investors will consider that the risk-reward balance of chasing the rally further is poor and will take profit. That profit-taking should mean yield will rise into next week. The November rally has taken bond yields too close to our end-2023 forecast Source: Refinitiv, ING Calm in the bond market can breed complacency The Fed is now in the midst of its pre-meeting quiet period, meaning we’re expecting no policy guidance until next Wednesday’s press conference. The ECB’s start on Thursday, which leaves two more days for its officials to skew expectations. So far, only a minority has pushed for a 75bp hike at the 15 December meeting, thus cementing expectations of a smaller 50bp move. Instead, focus has been on the timing and size of its bond portfolio reduction (QT), with little noticeable market impact so far. Indeed, 10Y Bund yields have rallied 50bp since their October peak, and 10Y Italy has outperformed them by more than 60bp. Focus has been on the timing and size of its bond portfolio reduction (QT), with little noticeable market impact so far Hawkish voices have pushed in favour of a QT start as soon as early 2023 with, for instance, Gabriel Makhlouf arguing for end Q1/early Q2 2023. Whilst we would expect QT to take the form of a progressive phasing out of APP (one of the two ECB QE portfolios) redemptions, Joachim Nagel said last week that markets were able to handle an abrupt end. We expect this view to be in the minority but it does illustrate an important point: it’s not just central bank policies that influence markets, the reverse is also true. The decreasing dispersion between euro sovereign yields has given the impression that QT is no big deal, and has emboldened the hawks. Italy-Germany 10Y spreads standing below 190bp is probably below where most would have put them just one week before the ECB takes decisive steps towards unwinding its bond portfolio. This tool has been instrumental in compressing spreads, most would expect that its going into reverse would put widening pressure to spreads, even if the effect might not be felt immediately. Sovereign and credit spreads have tightened into the ECB QT announcement Source: Refinitiv, ING Today's events and market view Construction data features prominently on today’s calendar, with construction output from Germany and the UK’s construction PMIs all to watch out for today. In bond supply, Germany is scheduled to sell €5bn of 2Y debt. Lack of supply and data has favoured bond bulls in recent weeks but we think the Treasury rally has stalled at a psychologically important level, and will now run into pre-FOMC profit taking. 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 German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

Encouraging Signals From The German And European Economies Is Suggesting That The Recession Might Be Less Severe

ING Economics ING Economics 06.12.2022 09:54
Industrial orders rebounded slightly in October, on the back of strong bulk orders. However, Germany's descent into an industrial recession continues   German industrial orders rebounded somewhat in October but were unable to reverse the negative trend. After the sharp fall in August and September, industrial orders increased by a meagre 0.8% month-on-month in October, from -2.9% MoM in September. Excluding bulk orders, industrial orders would have dropped by 1.2%. Over the year, industrial orders were down by almost 3.2%. Since the start of the year, German order books have shrunk by almost 15% and have fallen in seven out of ten months. Despite the ongoing order deflation, order books are still filled and the reported backlog is high. Supply chain frictions are still disrupting industrial production. According to a recent Ifo survey, more than half of all German industrial companies are still affected by supply chain problems. In recent weeks, there had been some encouraging signals from the German and European economies, suggesting that the recession might be less severe than many had thought. The jury is obviously still out but the collapse in German industrial orders is one important signal that shows that the long slide into (industrial) recession continues. Read this article on THINK TagsIndustrial propduction Germany Eurozone 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
Industrial Metals Outlook: Assessing the Impact of China's Stimulus Measures

Should The EU Borrow Money From The US? A Significant Role Of Gig Workers In The Future Of Shopping

Kamila Szypuła Kamila Szypuła 06.12.2022 12:04
The end of this year is extremely intriguing. It shows how economies cope with rising inflation and what lies ahead. Despite the difficulties, there is still development in many areas of our lives. In this article: Prospects of Norwegian companies EU and borrowing money from the US Gig Workers US economy Norwegian companies can Reuters company, in its tweet, writes about the deteriorating prospects of Norwegian companies. Norway companies see weaker outlook, central bank survey shows https://t.co/Hs0kOmgOee pic.twitter.com/KlWSqICCBq — Reuters Business (@ReutersBiz) December 6, 2022 The Norwegian market is also deteriorating. Inflation significantly reduces activity. Data on the condition of firms provide key information for the future policy of the central bank. Norges Bank raised interest rates, which are currently at 2.5% and it looks like they will continue to rise. Further actions may worsen the situation of companies that are already struggling with difficulties. EU and borrowing money from the US CNBC tweets about Germany's stance on borrowing money from the US. Germany says borrowing more money to compete with the U.S. would be a 'threat' to Europe https://t.co/4R6jZqWVRT — CNBC (@CNBC) December 6, 2022 Germans believe that borrowing can threaten competitiveness  The EU is vocal about its concerns about the US Inflation Reduction Act (IRA) that threatens European businesses. Of course, there are advantages to borrowing money, but the greater the dependence can have a negative effect. For this reason, there may be skeptical attitudes as to further sources of financing. The rise of digitization J.P. Morgan tweets about gig workers Through the rise of digitization, gig workers are enhancing many shopping experiences. Learn how payments can help to attract and retain these workers. — J.P. Morgan (@jpmorgan) December 5, 2022 The future of shopping will require different types of employees to provide a topnotch customer experience. For many businesses, gig workers will serve a significant role in the future of shopping experience. These workers are becoming more and more common for two reasons. First, they redefine many roles and responsibilities in companies' business models (discussed below). Second, they provide structure to an otherwise disorganized labor pool; these workers now have a platform and business model to perform ad hoc tasks. In short, the development of employees means better quality of work and thus the development of the company. US economy may soft landing in 2023 Morgan Stanley tweets about US economy. While 2022 saw the fastest pace of policy tightening on record, has the Fed’s hiking cycle properly set the U.S. economy up for a soft landing in 2023?Read more about this episode: https://t.co/RSjBBIX7xm pic.twitter.com/7Qa248UKIW — Morgan Stanley (@MorganStanley) December 5, 2022 This year has undoubtedly been full of events. From the continuation of the fight against the effects of the pandemic, through the war in Ukraine to the fight against inflation. Central banks around the world are trying to fight inflation so as not to worsen the state of their governments and lead to a recession. While many economies believe they are already entering a recession cycle, it is believed that the US economy may land softly in this situation. Increases in interest rates in the fight against inflation cause difficulties for companies, as well as for households. Many experts believe that the Fed has prepared its economy for all eventualities. The coming months will be crucial to confirm this. Share price performance in metals and trading UBS tweets about its report results. Can measures to hold down cost of equity help drive share price performance in metals and trading? Find out how in our #UBSResearch report. #shareUBS — UBS (@UBS) December 6, 2022 UBS conducts numerous studies that are important to many markets as well as their sectors. UBS believe efforts to control COE are now likely to become a more important factor in maintaining and expanding multiples against this backdrop. Its analysis indicates several cases wherein CoE has functioned as a key share price driver.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

US Inflation Is Clearly On A Path Towards Reaching The Fed’s Target

ING Economics ING Economics 07.12.2022 08:39
Appetite for high beta fixed income has allowed the ECB to reduce its overweight in peripheral bonds. There is no sign of US curve dis-inversion yet - we think this is most likely to occur with a long-end sell off. ECB reduces its peripheral bond overweight The ECB didn’t use the flexibility offered by the PEPP’s redemption to lean against wide sovereign spreads in the months of October and November. On the contrary, data show that it increased its holding of core (eg Netherlands and Germany) and reduced its holding of periphery (eg Spain, Portugal and Italy). The changes may be explained in part by different timing between redemption and reinvestment of the proceeds but there seems to be a trend here: the overweight in peripheral countries is at least being partially unwound. The higher-beta sovereign bond markets require less of the ECB’s support Looking at market moves of late, this is understandable. Spreads have been on a tightening spree, suggesting the higher-beta sovereign bond markets require less of the ECB’s support. This is good news, until it isn’t anymore. As long as the ECB retains the flexibility to lean against volatility in the sovereign bond markets all should be well. The looming QT announcement is one key risk to this. So far, spreads have tightened alongside the improvement in global risk sentiment. That tightening cannot be entirely explained by the rally in core rates, and suggests instead genuine risk appetite for high beta fixed income. The ECB has partially unwound its summer intervention in peripheral markets Source: Refinitiv, ING No sign of re-steepening yet If the bond rally has stalled, which itself is still unsure, there is no sign yet of curve re-steepening. In the US in particular, where the Fed has presumably the most room to cut rates, the curve remains as inverted as ever. Dis-inversion can occur for two reasons. Firstly, front-end rates can drop on expectations of imminent Fed easing. In our view, this is only realistic once inflation is clearly on a path towards reaching the Fed’s target, and the economy is near a recession. We think these conditions will only be met by mid-2023. It is not yet clear that the Fed is near the end of its cycle The other reason for a curve dis-inversion is if long-end rates reverse some of their November rally. This looks a more realistic scenario in the near-term. Risk appetite, from stock to credit, has received a boost once it became clear that the Fed was easing off on the pace of hikes. This has also boosted demand for duration on the Treasury curve as investors look more kindly to any kind of investment risk. The problem is that it is not yet clear that the Fed is near the end of its cycle. Fed Funds forwards are steeply inverted from late 2023, implying the odds of a rate cut are rising. We think this is right but that pricing may be reversed soon if data doesn’t worsen quickly. The rally in long-end bonds has come with Fed Funds forwards pricing rate cuts in 2024 Source: Refinitiv, ING Today's events and market view The headline Q3 Eurozone is less liable to surprise markets, this being the third and final release but the details of the report, including employment, will be of interest. The EU has mandated banks for the sale of a new 15Y bond for €6.5bn. The same deal will also features a smaller tap of a 30Y bond. The deal may weigh on bonds but supply this week is otherwise light. Today is the last day before the start of the pre-ECB meeting quiet period. Fabio Panetta and Philip Lane, both doves, are scheduled to speak. Any hawkish comment would catch the market off guards and push yields higher. The US Q3 unit labour cost publication is also a final release but, as it is key to the Fed’s decision-making, any revision will be of importance. 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 Australian Dollar Failed To Hold Its Gains, The Pound Strengthened Against The US Dollar

The Australian Dollar Failed To Hold Its Gains, The Pound Strengthened Against The US Dollar

Kamila Szypuła Kamila Szypuła 07.12.2022 13:14
The darkening economic outlook drove fresh safe-haven demand for the US Dollar on Wednesday. The US dollar changed little after some of America's biggest banks warned of an impending recession The Fed, Bank of England (BoE) and European Central Bank (ECB) will set interest rates next week and central bankers will enter a period of silence before meetings. Positive reports appeared in the euro zone. Policymakers enter a period of calm ahead of key meetings of the Bank of England, the Federal Reserve and the European Central Bank Australian Dollar is facing renewed pressure. BoJ board member Nakamura once again encouraged the JPY bears Read next: Euro: Is There A Broader Correction To Be Feared? Aussie Got Little Support From The RBA Decision | FXMAG.COM EUR/USD may be bearish? The EUR/USD pair trades close to 1,050. Any breakout lower than 1.045 will be considered bearish. Economists at ING note that the pair could move lower to 1.0400. The European currency is expected to closely follow the dynamics of the dollar, the impact of the energy crisis on the region and the divergence between the Fed and the ECB. Additionally, the markets' overestimation of the potential Fed policy reversal remains the sole driver of the pair's price action for now. There were further concerns about the impact of colder winter conditions, especially in the context of the still uncertain energy situation. Positive reports appeared in the euro zone. Employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. Speeches by members of the European Central Bank will also take place today, but they are not expected to have a significant impact on the euro exchange rate. GBP/USD holds gains above 1.2150 The GBP/USD pair is trading around 1.2190. The pound strengthened against the dollar on Wednesday to a nearly six-month high as policymakers enter a period of calm ahead of key meetings between the Bank of England, the Federal Reserve and the European Central Bank. There are no significant macroeconomic events for the pound today. The Bank of England raised interest rates from 0.1% to 3.0% in the current monetary policy tightening cycle, with markets pricing in an interest rate peak of around 4.6% next year. Economists predict the Bank of England will decide to raise interest rates by 50 basis points next Thursday. One BoE policymaker said higher interest rates could lead to a deeper and longer recession. Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1% The Australian dollar failed to hold its gains and it is facing renewed pressure after data showed that the Australian economy expanded less than expected in the third quarter. Annual GDP by the end of July was 5.9% instead of the expected 6.3% and the previous reading of 3.6% was revised down to 3.2%. Overall, national data show a strong economy. Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade, and further tightening is expected to bring down inflation. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature The currency pair is trading around 137.3590. BoJ board member Nakamura once again encouraged the JPY bears with his statement. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature. Source: dailyfx.com, investing.com, finance.yahoo.com
Oanda expect next rate hikes as Bundesbank and ECB predicts will accelerate

The European Currency (EUR) Has Already Grown Too Much

InstaForex Analysis InstaForex Analysis 08.12.2022 08:02
On Wednesday, the EUR/USD currency pair kept moving. Since there are no fundamental or macroeconomic backgrounds, such a movement today shouldn't be considered surprising in theory. Yesterday, the pair was able to adjust to the moving average line once more but failed to get past it. As a result, the upward trend is still present, and the US dollar still needs to grow, as we have been hoping for more than two weeks. Despite the technical picture, we do not even see general signs that the pair is ready to start correcting, as all indicators continue to signal an upward movement. Typically, as an impulse approaches completion, each peak moves steadily closer to the previous one. Nothing comparable can be found today. In the absence of significant news or events, the market pauses but does not close long positions. And for that reason, there is no correction. Similar circumstances existed with the US dollar for a protracted period, as the pair could not move higher by more than 400 points. The situation is now reversed. The lack of current growth factors in the euro currency is what I find most intriguing. If they could have been located a week or two ago (and then only with a strong desire), they are now impossible to locate. There were two more or less important reports this week, one on Monday and two on Wednesday. Retail sales in the European Union fell short, and the US ISM index turned out to be stronger than expected. This week's overall score is 2:1 in favor of the dollar as a result of yesterday's report on the third quarter of EU GDP coming in slightly higher than expected. However, the US dollar could not reap any particular benefits from this. It is currently unable to gain a foothold beneath the moving. The market has forgotten the "tough" stance taken by the Fed. The European currency did not increase in value over the past month for unique reasons, as we have recently stated on numerous occasions. Some factors support the US dollar, but you can find individual reports that back the euro, and you can recall the Fed's readiness to start easing up on the pace of tightening monetary policy. The European currency has grown too much compared to the available resources, even though it has grown reasonably. There is now a lull, but the two cannot start adapting. In light of this, it is currently unnecessary to consider and analyze macroeconomics' "foundation." Why would you do this if the market is already buying? This is sarcasm because no one can predict when market participants will realize that you can sell and buy. We need to pay attention to upcoming meetings of the Fed or the ECB in light of recent changes in the foreign exchange market. It is well known that the ECB will most likely increase rates by 0.75% and that the Fed will only increase rates by 0.50%. Even considering this factor, the euro has already grown too much. It may, however, currently support the euro currency. In any case, a correction is overdue at this point. We will wait for a downward correction even if it turns out tomorrow that the ECB tightens monetary policy more than the Fed. However, we also want to remind you that with specific technical indicators and support, it would be a good idea to sell the pair right now. The situation is as follows: you must wait for a correction and be prepared for it, but it is also advised to only open short positions in the presence of signals. The market is currently trading irrationally, and this irrationality might last for a while. Additionally, it brought about the unjustified strengthening of the euro. As of December 8, the euro/dollar currency pair's average volatility over the previous five trading days was 115 points, which is considered "high." So, on Thursday, we anticipate the pair to fluctuate between 1.0378 and 1.0609. The Heiken Ashi indicator's turning downward indicates a new phase of the corrective movement. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0864 Trading Suggestions: The EUR/USD pair is still in an upward trend. So, until the price is fixed below the moving average, new long positions with targets of 1.0742 and 1.0620 should be taken into consideration. No earlier than fixing the price below the moving average line with targets of 1.0376 and 1.0254 will sales become relevant. Explanations of the illustrations: Linear regression channels help determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-12-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329243
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The ECB Is Less Advanced Into The Hiking Cycle Than Its Peers

ING Economics ING Economics 08.12.2022 09:04
The bond rally continues and finds more confirmation in the Bank of Canada seeing itself close to the end of its hiking cycle. Against that backdrop the Fed's narrative becomes increasingly hard to sell, but it is especially the European Central Bank that finds itself in an uncomfortable position More competition to the Fed's narrative 10y USTs rallied further towards 3.40% with the 2s10s curve touching -85bp. Some have pointed to the third quarter US unit labor costs being revised to 2.4% from 3.5%, but our economist would downplay the significance of the data. It seems more that the market is not done squaring positions into year-end. At the same time the market is increasingly adding to the rate cut expectations in the second half of 2023, further inverting this part of the money market curve. This goes directly against the messaging of the Fed, which has sought to convey the message that key interest rates will stay elevated for some time. And the northern neighbour is making it even more difficult to sell this narrative. Yesterday the Bank of Canada hiked by 50bp, the second 50bp in a row after previously hiking by 100bp and 75bp. While still a larger hike than some had expected, it was the forward-looking message that proved more market moving. Bank of Canada is "considering whether the policy rate needs to rise further" The Bank’s accompanying statement pointed to "growing evidence that tighter monetary policy is restraining domestic demand", citing softer consumer spending growth and a weakening housing market. The expectation is that "growth will essentially stall through the end of this year and the first half of next year". And as for the key topic, which is inflation, it suggests "price pressures may be losing momentum". All this led the Canadian central bank to suggest that it is now very close to the end of the tightening cycle. The dovish shift was crystallized in the Bank now "considering whether the policy rate needs to rise further" whereas it had expected ”that the policy interest rate will need to rise further" at the October meeting. The dovish mood in financial markets has mostly benefitted the 5Y part of the curve Source: Refinitiv, ING ECB position becoming more uncomfortable EUR rates are largely caught in the global current, pulling 10Y Bund yields below 1.80%. The 1y1y ESTR OIS swap is close to 2.5% again the lower end of its trading range since mid-September. For the ECB this premature loosening of financial conditions seems to become increasingly uncomfortable as well, especially given that it is less advanced into the hiking cycle than its peers. The ECB consumer inflation expectations survey still pointed higher Isabel Schnabel’s speech from late November where she saw little room to slow down the pace of interest rate adjustments still reverberates. Only yesterday the ECB’s consumer inflation expectations survey, one of the measures Schnabel also referenced, pointed to an increase of inflation expectations over the next 12 months. Median expectations for three years ahead were stable at an elevated 3%, though the mean still climbed higher. Chief Economist Lane in his latest interview sounded less convinced about having seen the peak in inflation just yet, and only yesterday Slovakia’s Kazimir – admittedly not the most influential ECB member – stated clearly that 10% inflation was no reason to slow hikes. Markets still think otherwise, having priced the December forward at around 52bp, which reflects only a minor chance for another 75bp hike next week. Measures of future inflation in the Eurozone are not quite back to the ECB's target Source: Refinitiv, ING Today's events and market view There is little data for markets to trade on today with only the US Initial jobless claims of note. Over in the eurozone some ECB official are scheduled to speak, including Lagarde, but given that we have already entered the pre-meeting quiet period we do not expect to hear much on monetary policy.   No government bond supply is scheduled for today. The lack of supply and event points to a continued drift lower in yields. So is the evident bias in market positoning since October. 10Y Treasury yields broke through the key 3.5% level to the downside yesterday although chance of profit-taking on short-term longs increases as next week's US CPI and policy meetings approach. 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
US Stocks Extend Rally Amid Optimism Over Fed's Monetary Policy

The Euro Benefited From The Weakening Of The US Dollar, A Potential Downside Risk For The Australian Dollar Over The Next Few Weeks

Kamila Szypuła Kamila Szypuła 08.12.2022 14:14
The euro stabilized against the US dollar on Thursday and the U.S. dollar clawed back some of the previous day's declines, as the market weighs in on the Fed's rate hike path. The euro benefited from the weakening of the US dollar The Australian dollar against the US currency fell sharply the 10-year Treasury note has fallen almost continuously EUR/USD was unable to overcome its late-June high EUR/USD hit a five-month high earlier this week but was unable to overcome its late-June high of 1.0615. The pair's mood remains bearish today. Compared to the previous day, the EUR/USD pair has fallen and is trading around 1.0469. The euro gained overnight after better-than-expected euro-wide GDP data showed an increase of 0.3% q/q in the third quarter instead of the expected 0.2%. This may indicate that the economic slowdown in Europe may not be as serious as previously feared. The European Central Bank will review its policy on 15 December. The broader weakness of the US dollar also helped strengthen the euro. GBP/USD The pound fell 0.3% against the dollar to $1.2175 and fell 0.35% against the euro. Sterling falls as falling UK house prices add to recession fears. The UK is facing a winter of strikes as rail workers, teachers and nurses demand better wages as the cost of living soared, exacerbated by rising energy costs after the Russian invasion of Ukraine. What's more, the prospects for next year are equally bleak. The UK economy could contract in the coming months. AUD/USD- commodity prices have a negative impact The Australian dollar against the US currency fell sharply this week. Currently, the pair is trading at mid-September levels. From The Australian Dollar (AUD) perspective, commodity prices have a negative impact on the currency coupled with yesterday's weaker GDP data. This morning started positively for the Australian dollar with a better-than-expected trade balance for October, but today the main focus will be on the US labor market data. If the reports turn out to be positive for the dollar, they will bring bears for the AUD/USD pair. Most recently, the Australian dollar got support from the easing of COVID restrictions in China, but that has since dissipated due to the rising number of COVID cases causing concern. The RBA's decision on interest rates also failed to support the Aussie. Overall, the current fundamental headwinds facing the AUD outweigh the US Dollar, which could suggest a potential downside risk for the Australian Dollar over the next few weeks. JPY is weaker The Japanese Yen is slightly weaker so far today despite GDP there narrowly beating forecasts. Annualised GDP was -.08% for the third quarter instead of -1.1% anticipated. The Japanese yen (JPY) which is highly sensitive to shifts in U.S. Treasury yields, fell 0.2% to 136.82. Instead the dollar-yen pair jumped. Currently, the pair is trading around 136.8130. The yield on the 10-year Treasury note has fallen almost continuously since hitting a 15-year high in late October. The Bank of Japan's ultra-loose monetary policy at a time when other central banks around the world are aggressively raising interest rates has made the yen the weakest major currency in the world in recent months. As a result, the USD/JPY exchange rate increased. However, according to some experts, the yen may rise against the US dollar next year. Source: finance.yahoo.com, dailyfx.com, investing.com
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

The Current Information Flow Is Not Able To Provoke A Stable Price Movement Of The EUR/USD Pair

InstaForex Analysis InstaForex Analysis 09.12.2022 08:22
Next week the US Federal Reserve and the European Central Bank will hold their last meetings of the year. These events will be the final chord of the year - at least for euro-dollar traders. The Fed will announce its verdict on December 14 and the ECB the next day. Also, the US core inflation data will be released on December 13, which will also trigger higher volatility amongst the dollar pairs. In other words, the currency market is going to experience a lot of turbulence next week which will be followed by a pre-Christmas, pre-New Year's (and then post-New Year's) calm. As a rule, the market's activity slows down for a few weeks after the December meetings of the key central banks. Although, given the general unstable situation in the world (geopolitical tensions, COVID in China), 2022 may be an exception in this regard. At the moment, the EUR/USD pair is drifting within the 5th figure, just continuing its current movement, reflexively reacting to the current information flow. Recently, bears have repeatedly tried to settle within the 4th figure, while bulls still try to conquer the 6th price level. But both sides are acting quite cautiously ahead of high-profile events in December, which is why the pair is actually winding circles around the 1.0500 mark. If we consider intraday trading, then, as they say, "day to day is not necessary." Bears dominated on Monday and Tuesday, pulling the price to the 1.0460 mark. Then bulls seized the initiative, regaining the lost positions. At the moment, the pair is just trading around 1.0550-1.0560. Looking ahead, the current information flow is not able to provoke a stable price movement of the pair – either down or up. Any trader, who opens short or long positions, will do so while thinking of next week's events. Therefore, at the first opportunity, the trader will lock in the profit and will not "play for a long time". Consequently, any price fluctuation is unreliable. Considering last week's dynamics, we can say that the pair is trading in the range of 1.0450-1.0570. But again, this is a temporary price tier. So far, the bullish/bearish momentum emerges and eventually ends within this range. It is obvious that traders will surpass this range by next week, the only question is in which direction. This will depend primarily on the outcome of the Fed and ECB meetings. And at the moment, traders are forced to make decisions under conditions where they don't have any "relevant" information. The Fed members observe the "blackout period" (a 10-day period prior to the meeting), so now traders are left "on their own" - one-on-one with an army of specialized experts and insiders. Information coming in is quite diverse and most importantly, contradictory, so they cannot decide on the vector of their movement. For example, on Thursday the analysts of Danske Bank published their forecast, which provoked increased volatility while the economic calendar is empty. According to currency strategists of this Danish bank, the Fed and the ECB will raise interest rates by 50 points in December. Experts revised their earlier forecast, according to which the Fed was to raise the rate at the December meeting by 75 points. Now they see the following actions of the US central bank: 50 basis points in December, then 50 points in February and 25 in March. That is the final point, according to Danske Bank, will be at the level of 5.25%, but it will be achieved at a slower pace. As for the ECB, Danske Bank analysts suggest a hawkish bias. According to their forecasts, the ECB will raise rates in December by 50 points and will continue to raise them during the first quarter of 2023 - at least to 2,75%, but with possible "prolongation" towards further hikes. In addition, according to Danske Bank, at the end of the December meeting, the ECB will present key principles of the end to reinvestments under the APP process, in which reinvestments will almost come to a full stop. The Danish bank's forecast was interpreted in favor of the euro, thanks to which the bulls could again get close to the middle of the 5th figure. As you know, ECB representatives are divided into two camps (or voice a neutral position) - some are in favor of continuing aggressive policy, while others are in favor of slowing down the pace of tightening of monetary policy. Therefore, there is still intrigue on this issue. ECB President Christine Lagarde, who made a speech on Thursday, did not add clarity, as her speech was ceremonial in nature. Opening the annual conference of the European Council on systemic risks, she voiced common phrases, saying that the unstable global environment "poses sizable risks for financial stability in Europe", while the deteriorating prospects of the global economy only increase these risks. Therefore, the EUR/USD pair, most likely, will drift further in a conditional price range of 1.0450-1.0570 with possible testing of 1.0600, if the only significant releases on Friday (the index of producer prices in the US and the consumer sentiment index from the University of Michigan) will come out in the red zone. But again - any price fluctuations this week should be treated with a certain amount of skepticism, because the decisive battle of bears and bulls is still ahead.     Relevance up to 01:00 2022-12-10 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/329358
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Rates Spark: The Focus In The Eurozone Is On The ECB's TLTROs

ING Economics ING Economics 09.12.2022 08:37
Whether it is the end of the rally or not, there are good reasons to take a breather. The Fed meeting next week is drawing closer, with a crucial CPI release just ahead of it. Resuming Treasury supply will add another technical headwind. But already today we see a consumer inflation survey that has swayed the Fed before. The ECB will announce the TLTRO repayment Source: Shutterstock Rates rally puts in a breather, but the Fed's patience is likely tested already Just as we were starting to wonder whether the rally was ever going to stop, Treasuries put in a breather yesterday. The extent of the move and its contrast to the messaging from the Fed would have been reason enough already earlier on. But now the actual FOMC meeting next week is within grasp, including another crucial inflation report just ahead with Treasury supply to top it off. Already today will see data that could give reason for pause Already today will see data that could give reason for pause. While the PPI data is seen to confirm easing pipeline inflation pressure,  the University of Michigan consumer survey could be a bit more of a wildcard. One is tempted not to place too much weight on the reading given the relatively small sample size, but we recall the FOMC having had an eye on that measure when they decided to hike 75bp in June, despite earlier guidance of a 50bp hike. Currently, market consensus looks for unchanged consumer inflation expectations. The June meeting set a recent precedent about the Fed swerving way from prior guidance. We do not know what it would take to tip the Fed towards placing another sounding with the press in order to steer market expectations ahead of a meeting. But the way current money market and yield curves are plotting for the path of key rates, at least beyond the upcoming meeting, is not aligned with the narrative that the Fed is trying to instil in markets.        10Y Treasury yields have dropped through 3.5% into the December FOMC Source: Refinitiv, ING A TLTRO piece to the ECB's balance sheet puzzle Today at 12.05 CET the ECB will announce the amount that banks will repay of their currently outstanding TLTROs ahead of year end. That amount will come on top of the €52bn TLTRO.III tranche that matures this month. We are looking for an early repayment of around €200bn, but admittedly it is not a high conviction call. Already ahead of November’s repayment, polling pointed to a wide range of forecasts from €200bn to €1.5 trillion for total repayments this year. The close to €296bn that materialised last month was clearly at the lower end of expectations, and likely also a disappointment for the ECB itself. The TLTRO repayments were seen as an important first step in the ECB balance sheet reduction process From the October ECB accounts we gathered that the TLTRO repayments were seen as an important first step in the balance sheet reduction process. The amounts repaid could also inform the decision on the reduction of the asset portfolios. According to the minutes the Council deemed the TLTRO recalibration “more efficient” than trying to achieve the same objective through an earlier start of (quantitative tightening) QT or more aggressive interest rate hikes. Taken at face value, that would imply another disappointing repayment could prompt a more hawkish reaction from the Council to achieve the desired pace of policy tightening – be it via rates or faster QT. However, one should also be aware that year-end considerations can influence repayment decisions and one should not move to rash conclusions. In any case it could spice up the Governing Council deliberations, where our economists have been seeing the risk of another 75bp rate hike on the rise again. Our main take remains that there is an overarching desire by the ECB to withdraw the exceptional accommodation provided via its balance sheet. And we have repeatedly said that we think the ones that have benefitted the most now also most at risk for an adverse market reaction. Yet, especially sovereign bond spreads of the eurozone periphery have proven remarkably resilient so far. While there was some widening in the 10Y Italian-German spread of around 5bp, it still remains at a relatively tight 186bp overall.        The ECB has incentivized early TLTRO repayments, with modest results so far Source: ECB, ING Today's events and market view The rates rally has finally put in a breather. A level of 10Y US Treasury yields below 3.5% still looks stretched and today's data could give first reason for pause. Less so the PPI data, where the consensus is looking for a clear decline in wholsale prices. Probably more eyes will fall on the preliminary readings on surveyed consumer inflation expecations by the University of Michigan. Consensus is not seeing any change here, making it a bit of a wildcard. But there is a precendent for the Fed putting some weight on this measure.  Away from the US the focus in the Eurozone is on the ECB's TLTROs and the annoucement of banks' early repayments for December.  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
China Restricts Gallium and Germanium Exports, Heightening Global Tech War

Major Currency Pairs Have Recently Shown A Slowdown In Their Growth (EUR/USD, GBP/USD, AUD/USD)

Kamila Szypuła Kamila Szypuła 09.12.2022 13:54
The dollar was broadly flat against major currencies on Friday as concerns about the health of the US economy resurfaced, as well as ahead of producer inflation data later in the day and the Federal Reserve's interest rate meeting next week Investors are expecting a series of interest rate decisions from central banks - including the Fed, the European Central Bank and the Bank of England - next week. Markets bet all three will limit pace of rate hikes, with hikes of 0.5bp The dollar index continued its decline yesterday keeping the Euro bulls on the front foot. The GBP/USD pair is rising for the third day in a row. The yen benefiting from growing expectations AUD/USD tried to regain ground today Read next: The FTC Is Trying To Block Microsoft's Merger With Activision| FXMAG.COM EUR/USD EUR/USD continues its grind higher in early European trade as key US data events lie ahead. The euro/dollar pair is trading in a better position than yesterday. This morning the euro rose 0.25% is $1.0581. The pair is currently trading at 1.0513. The dollar has a tendency for weakness in December. The dollar index continued its decline yesterday keeping the Euro bulls on the front foot. There has been comments this week from some ECB members discussing the possibility of further rate hikes. Later in the day attention turns to the US economic calendar as we await the US PPI as well as University of Michigan data. A positive data print could offer some support for the dollar while a weaker print could push EUR/USD lower. As for the US PPI, it is expected to maintain its previous level of -0.2%. A University of Michigan date specifically Michigan Consumer Sentiment is important, it is expected to increase by 0.1 to reach 56.9. GBP/USD GBP/USD Pair is on the buyers radar today. The GBP/USD pair is rising for the third day in a row and steadily climbing to the upper end of its weekly range. The pair points to a well-established short-term uptrend. A combination of factors is bringing the US dollar back to near the multi-month low reached earlier in the week. The Bank of England set to announce its monetary policy decision next week, with another interest rate increase of 50 basis points expected. It also can impact on the pound. Moreover, the gloomy outlook for the UK economy may keep investors from betting aggressively around the British pound and limit the GBP/USD pair, at least for now. Investors are now looking at Friday's US economic breakdown, which will release the Producer Price Index and flash Michigan Consumer Sentiment Index. This, along with US bond yields and broader risk sentiment, could influence USD price dynamics and provide some impulse for the cable market. AUD/USD AUD/USD tried to regain ground today China’s loosening Covid restrictions also lent optimism to the market, though renewed global recession fears and uncertainty around US Federal Reserve policy tightening kept sentiment in check. Meanwhile, latest data showed that Australia’s economy expanded less than expected in the third quarter as persistent inflation and rising interest rates dampened domestic consumption. The Reserve Bank of Australia raised its policy rate by 25 basis points to 3.1% at its December meeting. USD/JPY Currently, the pair is trading at 134.4750. On the daily chart, you can see that the dollar against the Japanese yen is falling. The recent weakness of the dollar affects the pair's advantage. The Japanese yen appreciated to around 136 per dollar, heading back to its highest levels. Also the yen benefiting from growing expectations that the Bank of Japan could end its ultra-easy monetary policy with inflation around 40-year highs. Source: investing.com, dailyfx.com, finance.yahoo.com
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

A 50bp Hike By The Fed And The ECB Is Firmly Expected Next Week

ING Economics ING Economics 10.12.2022 08:58
A 50bp hike by the Fed is firmly expected. With concerns over the recent steep falls in treasury yields and the dollar, we are likely to end up at a higher ultimate interest rate than the bank indicated back in September. For the ECB, we think the risk of a 75bp hike has increased – still, we expect a 50bp hike, supported by hawkish communication as a compromise In this article US: A hawkish Fed message will likely fall on deaf ears UK: Hectic data week proceeds key Bank of England decision Eurozone: Another jumbo rate hike has become more likely in recent days   Shutterstock US: A hawkish Fed message will likely fall on deaf ears Markets are firmly expecting the Federal Reserve to opt for a 50bp hike at the 14 December Federal Open Market Committee (FOMC) meeting after already implementing 375bp of rate hikes, including consecutive 75bp moves at the previous four meetings. The central bank has been at pains to point out that despite smaller individual steps, we are likely to end up at a higher ultimate interest rate than the central bank indicated was likely back in September. Its forecasts are likely to show the Fed funds rate rising above 5% with potential slight upward revisions to near-term GDP and inflation and a lower unemployment rate to justify this. Officials have been suggesting they may not cut rates until 2024 and we suspect Fed Chair Jerome Powell will echo this sentiment. Nonetheless, this “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads, is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. In terms of our view, we continue to expect a final 50bp rate hike in February, but with recession risks mounting, which will dampen inflation pressures further, we look for rate cuts from the third quarter of next year. Ahead of that announcement, we will have consumer price inflation data. The surprisingly soft core CPI print was the catalyst for the recent moves lower in Treasury yields and the dollar, and a second consecutive low reading would reinforce the market conviction that rate cuts are going to be on the agenda for the second half of 2023. This means Powell will have to battle hard with his commentary in the post-FOMC press conference to prevent financial conditions from loosening too much before inflation is defeated. UK: Hectic data week proceeds key Bank of England decision There’s probably just about enough in the latest UK data and recent Autumn Statement for the Bank of England to pivot back to a 50bp rate hike at its meeting next Thursday. Inflation looks like it has peaked, although BoE hawks will be keeping a close eye on the data due a day prior to its announcement. Headline CPI is likely to dip, however core could be more sticky, and last month’s data saw core services inflation come in slightly higher than the bank had forecast in November. Jobs data has also hinted at persistent labour shortages, which will keep the pressure on wage growth. Still, Chancellor Jeremy Hunt probably did enough last month to lower concerns that the BoE and the Treasury are working at cross-purposes, even if the fiscal tightening announced won’t have a huge bearing on the economy, relative to the Bank’s forecasts released last month. We expect a 50bp hike next week, and another 50bp hike in February, which is likely to mark the peak of this tightening cycle. Read our full Bank of England preview here. Eurozone: Another jumbo rate hike has become more likely in recent days Macro data since the European Central Bank's October meeting has shown resilience in the eurozone economy in the third quarter but also confirmed a further cooling of the economy in the last few months of the year. The drop in headline inflation, as little as it says about the impact of the rate hikes so far, could at least take away some of the urgency to continue with jumbo rate hikes. At the same time, the ECB seems to be increasingly concerned that the fiscal stimulus and support measures announced could extend the inflationary pressure. ECB Executive Board Member Isabel Schnabel has been one of the more influential voices to watch, definitely since the summer with her Jackson Hole speech. Judging from her recent comments that “incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the 'neutral' rate", 75bp is clearly still on the table. We think that the risk of a 75bp rate hike at next week’s ECB meeting has clearly increased. Next to the rate hike, the ECB is likely to set out some general principles of how it plans to reduce its bond holdings. We expect the ECB to eventually reduce its reinvestments of bond purchases but to refrain from outright selling of bonds. Besides the ECB, industrial data for the eurozone are out on Wednesday. Don’t expect anything that will influence the governing council meeting too much. While a tick down in production is to be expected, the fact that industry has outperformed recent expectations is likely to uphold. The Friday data are just as interesting as the PMI will show how the economy is faring at the end of the fourth quarter. Expect it to continue to signal a contraction, but just how deep is the question relevant for markets and policymakers. Finally, trade-in goods data are also out on Friday and will provide a clue on how the trade deficit is faring, which is very important for euro fair value. Read the full ECB preview here. Key events in developed markets next week Refinitiv, ING Read the article on ING Economics TagsUS Federal Reseve ECB 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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Raising Policy Rate By The Fed, The ECB, The Bank Of England And The SNB Ahead, China Is Facing A Potential Surge In Cases As COVID Rules

Craig Erlam Craig Erlam 10.12.2022 11:47
US Two blockbuster events will have Wall Street on edge as the disinflation trade may have gotten ahead of itself. The last major piece of economic news before the Fed meets will be the November inflation report which is expected to show pricing pressures are decelerating.  The headline reading from a month ago is expected to rise 0.3%, a tick lower from the pace in October.  On a year-over-year basis, inflation is expected to decline from 7.7% to 7.3%. There is still a lot more work that needs to be done with bringing inflation down, but for now, it seems the trend is headed in the right direction.  The FOMC decision will be “Must See TV” as the Fed is expected to downshift to a half-point rate-hiking pace and yet still reiterate that they are not done raising rates.  The Fed will likely show that rates could rise anywhere from 4.75-5.25%, which will be very restrictive and should lead to a quicker cooling of the labor market.   EU  The ECB meeting next week promises to be a defining moment in the bloc’s fight against inflation. It was late to the party, very late in fact, but once it arrived it quickly started playing catch up culminating in a 75 basis point rate hike last week. The belief is that it won’t have to go as far as others in raising rates, with the terminal rate currently believed to be around 3%. That means the central bank is expected to already slow the pace of tightening on Thursday, with a 50 basis point hike, followed by another 100 over the first three meetings in the new year.  It’s not just the decision that investors will be focused on. The press conference and new macroeconomic projections will tell us everything we need to know about where the central bank sees itself in the tightening cycle and whether it is aligned with the markets. UK It’s all going on in the UK next week. The third week of the month brings a variety of major economic indicators including inflation, employment, retail sales, GDP and PMIs. This month has the added spice of the BoE meeting, the central bank that is arguably most stuck between a rock and a hard place among its peers. The economy is suffering and probably already in recession, inflation is 11.1% – although that is expected to drop slightly ahead of the meeting – and the cost-of-living crisis in squeezing those households least able to cope with it most. And yet the BoE is of the belief that the only policy response is to keep hiking rates. Markets expect another 50 basis points on Thursday and a further 100-125 in the first half of next year. The central bank has previously pushed back against market positioning and we may see language to the same effect in the statement, not to mention more dovish dissent.  Russia A week of no change is on the cards, it would appear. The CBR is expected to leave the Key Rate unchanged at 7.5% on Friday, the second consecutive hold after many months of hikes and then cuts following the invasion of Ukraine. On Wednesday, the third quarter GDP reading is also expected to be unchanged at -4% annualized.  South Africa The political environment appears to have cooled a little but President Ramaphosa isn’t necessarily safe yet. The focus will remain on this but there’s also inflation and retail sales data in the middle of the week that will be of interest. Turkey A few notable data releases next week although maybe not anything that will move the needle under the circumstances. Unemployment and industrial production stand out. Switzerland The SNB is expected to raise its policy rate by 50 basis points to 1% next week as it attempts to get a grip of inflation. It’s currently running at 3%, above its target of below 2% and the SNB has been clear in its determination to bring it down.  China China is facing a potential surge in cases as COVID rules are loosened. Following the protests over the zero-Covid policy in several Chinese cities last week, the Chinese government is pivoting its policy.  The elimination of key tenets of its virus elimination plan suggests they will try to learn to live with the virus. It will be a busy and not-so-good week of Chinese economic data. At some point this week we will see the release of aggregate financing, new yuan loans, and money supply data.  On Thursday, industrial production, retail sales, fixed assets, and the surveyed jobless rate will be released, with most expecting a softer print. The PBOC is also expected to hold its 1-year medium-term lending facility rate at 2.75% as volumes (CNY) could decline from 850 billion to 500 billion.     India All eyes will be on the November inflation report which could show a deceleration in pricing pressures coming closer to the upper boundaries of the RBI’s 2-6% target. Given the growth slowdown that is forming, inflation could continue its decline next quarter which should help finish the job of bringing it back to target.  India is also expected to see industrial production drop from 3.1% to -0.6%.   Australia & New Zealand Following the recent RBA rate decision, investors expect the bank to be nearing the end of its tightening cycle.  The focus for Australia now shifts to business conditions/confidence and the labor market.  The Australian economy is expected to add 15,000 jobs, a slower gain than the 32,000 seen in the prior month.   New Zealand’s GDP growth will quickly cool as the latest tourist boom eases. Third quarter GDP on a quarterly basis is expected to soften from 1.7% to 0.8%.   Japan Investors will have to be patient until the spring when the new leadership team has been created. The BOJ policy review could lead to the end of a decade-long ultra-loose monetary policy. The upcoming week is filled with economic data releases. The main highlights include the BOJ’s Tankan report which will show big manufacturers are struggling and non-manufacturing activity got a boost on easing covid rules. The November PPI report will show minimal pricing relief, while the trade deficit is expected to narrow.  The preliminary PMIs could show both manufacturing and service activity are weakening.     Singapore It could be mostly a quiet week for Singapore with the exception of the release of non-oil domestic exports.    Economic Calendar Saturday, Dec. 10 Economic Events The annual Bund Summit continues in Shanghai The International Coffee Organization conference takes place in Vietnam Sunday, Dec. 11 China FDI, Aggregate Financing, Money Supply, and New Yuan loans expected this week Monday, Dec. 12 Economic Data/Events India CPI, industrial production Japan PPI, machine tool orders Kenya GDP New Zealand net migration Mexico industrial production Turkey current account UK industrial production Brazil’s presidential election is expected to be certified Tuesday, Dec. 13 Economic Data/Events US November CPI M/M: 0.3%e v 0.4% prior; Y/Y: 7.3%e v 7.7% prior Australia consumer confidence, household spending Germany CPI, ZEW survey expectations Hong Kong industrial production, PPI Israel trade Italy industrial production Japan Bloomberg economic survey New Zealand home sales, food prices Philippines trade South Korea money supply Turkey industrial production UK jobless claims, unemployment The Bank of England releases its financial stability report US House Financial Services Committee holds an initial hearing on FTX’s collapse US President Joe Biden hosts the US-Africa Leaders Summit New Zealand’s government releases its half-year economic and fiscal update Wednesday, Dec. 14 Economic Data/Events FOMC Decision: Expected to raise the target range by 50bps to 4.25-4.50% Eurozone industrial production India trade, wholesale prices Japan machinery orders, industrial production Mexico international reserves New Zealand current account GDP ratio, BoP Russia GDP South Africa CPI, retail sales South Korea jobless rate Spain CPI UK CPI EIA crude oil inventory report The European Union and the Association of Southeast Asian Nations will celebrate the 45th anniversary of their partnership at a summit in Brussels US Senate Banking Committee holds a hearing on FTX’s collapse The US-Africa Leaders Summit continues with keynote remarks from Biden The Bank of Japan will announce the outright purchase amount of Japanese government securities RBA Gov Lowe delivers an address at the 2022 AusPayNet Annual Summit Thursday, Dec. 15 Economic Data/Events US Retail Sales, cross-border investment, business inventories, empire manufacturing, initial jobless claims, industrial production ECB Rate Decision: Expected to raise Main Refinancing rate by 50bps to 2.50% BOE Rate Decision: Expected to raise rates by 50bps to 3.50% Switzerland rate decision: Expected to raise rates by 50bps to 1.00% Norway rate decision: Expected to raise rates by 25bps to 2.75% Mexico rate decision: Expected to raise rates by 50bps to 10.50% Australia unemployment, consumer inflation expectation Canada existing home sales, housing starts China medium-term lending, property prices, retail sales, industrial production, surveyed jobless Eurozone new car registrations France CPI Japan tertiary index, trade New Zealand GDP Nigeria CPI Poland CPI Spain trade Friday, Dec. 16 Economic Data/Events US deadline for a new funding deal to avert a federal government shutdown US markets observe “Triple witching”, which is the quarterly event where the expiry of stock and index options occur with those of index futures US preliminary PMIs Australia preliminary PMI readings  European flash PMIs: Eurozone, Germany, UK, and France   Hong Kong jobless rate Italy CPI, trade Japan PMIs, department store sales New Zealand PMI Russia rate decision: Expected to keep rates steady at 7.50% Singapore trade Thailand foreign reserves, forward contracts, car sales Bank of Finland Governor Rehn speaks on the Nordic nation’s economy South Africa’s governing party begins its five-yearly elective conference in Johannesburg Sovereign Rating Updates Luxembourg (Moody’s) This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  
EUR/USD: Looking beyond the market’s trust issues with the Fed and ECB

The EUR/USD Pair Is Likely To Experience The Strongest Price Turbulence

InstaForex Analysis InstaForex Analysis 10.12.2022 15:43
Bulls and bears of the EUR/USD pair impulsively react to the current information flow. The initiative is to change hands, but in fact the price stalls above 1.0500 but below 1.0600. The fifth figure acts as a springboard for a large-scale attack, which will inevitably occur next week. The only question is in which direction, down or up. Obviously, the vector of the EUR/USD price movement will depend on the Federal Reserve and the European Central Bank: next week the central banks will sum up the year results and outline further prospects. In the meantime, traders have to act cautiously, so to speak, "according to the situation". The intraday market sentiment is changing fast, but all the downward and upward price bursts are short-lived. For instance, on Friday morning, EUR approached the limits of the 6th figure, marking 1.0589. Amid a nearly empty economic calendar, the forecast of currency strategists of Danske Bank had a certain influence on the pair. This forecast was interpreted by the market in favor of the single currency (and not in favor of the dollar). Danske Bank economists expect the ECB policy rate to peak at 2.75% in the first half of 2023, but the risks will be shifted towards a further increase. At the same time, they revised their hawkish forecast on the pace of monetary tightening by the Fed. According to them, the Fed will increase the rate twice more by 50 points (in December and February) and once more (in spring) - by 25 points. As a rule, such forecasts have a limited (and short-term) influence on the pair, but under current circumstances, apparently, traders especially pay more attention to this analytical report. But again - in anticipation of the high-profile events that will take place next week, any price spikes are temporary in nature. On Friday afternoon, the bears took the initiative, reacting to the inflation report. The US producer price index was published at the beginning of the US trading session on Friday, which did not disappoint the dollar bulls, contrary to pessimistic expectations. The overall PPI in annual terms came out at 7.4% (with the forecasted slowdown to 7.2%). On the one hand, it was expected to slow down, but, on the other hand, the rate of deceleration was not as fast as previously expected. The core index, excluding food and energy prices, reached the 6.2% target year-on-year, while most analysts predicted a decline to 5.9%. The situation here is similar: the index has been declining consistently for the past 8 months, but the rate of decline slowed in November. The pair then retreated from the daily highs, going down to the base of the 5th figure. The greenback received additional support from another report, which was released in the U.S. We are talking about the consumer sentiment index from the University of Michigan. This index showed positive dynamics contrary to the pessimistic forecasts. Thus, in December the index grew up to 59.1 points while experts expected further decline down to 55 points. However, the downward dynamic of the pair is likely to be of limited nature. It's just that the aforementioned reports turned out to be in favor of the dollar, and so the bulls locked in profit, not risking to leave short positions till Monday. The notorious "Friday factor" played its role here, which weighed on the pair. But taking into account the current fundamental background, we can say with confidence: both short and long positions on the pair are risky. Even within the fifth figure. Next week, the pair is likely to experience the strongest price turbulence, even before the announcement of the Fed verdict. The day before that event, i.e. on December 13, the key report of the Consumer Price Index growth will be published in America. If it reflects further slowing of inflation growth in the US, the market will play a conditionally dovish outcome of the Fed meeting in advance, i.e. the dollar will be under strong pressure. But if the report is contradictory, it is difficult to predict the reaction. So, taking into account the high degree of uncertainty, it is risky to open longs or shorts for the pair. It is better to take a wait-and-see position. Big events of the forthcoming week will completely redraw the current picture - both fundamental and technical. 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/329439
Czech National Bank Prepares for Possible Rate Cut in November

Inflation Will Continue To Be One Of The Key Themes Of 2023

ING Economics ING Economics 11.12.2022 09:37
Rarely have predictions for an upcoming year been so difficult and wide-ranging. But we are sure of some things, and we are doing our best to help you navigate this unprecedented uncertainty  In this article Goodbye to all that Different shades of recession The widest range of possible outcomes and forecasts 3 calls for 2023: Recession, inflation and central banks Carsten Brzeski on what he's expecting in 2023 Goodbye to all that 'May he live in interesting times' is a Chinese proverb that many of us have heard, perhaps a little too often in recent times. The list of unprecedented crises gets longer by the year. 2022 was supposed to be the year of post-pandemic and post-lockdown reopenings. But it became the year of war, inflation, energy and commodity price crises, drought and floods. It was also a year which saw a paradigm shift at major central banks, trying to fight inflation at all costs. It's where we said goodbye to low interest rates for longer and that easing bias. Central banks got all of us used to jumbo-size rate hikes and, at least in the US, the policy rate is almost back at levels last seen prior to other financial crises. 2022 was also the year of what the Germans call 'Zeitenwende' or 'game changer', at least for Europe: a war in the EU’s backyard, which is still ongoing with no end in sight; an end to cheap energy, and an end to globalisation as we knew it. Combined with the well-known longer-term challenges of population ageing, a lack of international competitiveness, and the never-ending debate on further European integration, Europe's to-do list is long. The chances are very high that the continent will have a hard time returning to a pre-crisis growth trajectory any time soon.  Different shades of recession So what will 2023 bring? A natural reflex of many forecasters is to simply extrapolate recent trends and developments into the new year. And, indeed, many of this year's issues will also be prominent in the next: war, the energy crisis, inflation, trade tensions and even Covid are likely to affect the global economy significantly. This is not the moment to identify potential new black or grey swans... nor even pink ones. Our predictions and calls for 2023 reflect our base case: median forecasts backed by this year’s events and assumptions. We expect to see several different shades of recession in 2023. We should get a rather textbook-style recession in the US with the central bank hiking rates until the real estate and labour markets start to weaken, inflation comes down, and the Fed can actually cut policy rates again.  Expect a recession that feels but doesn’t read like a recession in China with Covid restrictions, a deflating real estate market and weakening global demand, bringing down economic activity to almost unprecedented low levels. And finally, look forward to an end to the typical cycle in the eurozone, where a mild recession will be followed by only very subdued growth, with a risk of a 'double dip', as the region has to shoulder many structural challenges and transitions. These transitions will first weigh on growth before, if successfully mastered, they can increase the bloc’s potential and actually add to growth again. The widest range of possible outcomes and forecasts Inflation will continue to be one of the key themes of 2023. We expect it to come down quickly in America, given the very special characteristics of the US inflation basket, allowing the Fed to stop rate hikes and eventually even cut before the end of the year. In the eurozone, inflation could turn out to be stickier than the European Central Bank would like and also perhaps afford. Still, with interest rates entering restrictive territory in early 2023, the looming loss of economic wealth and a large need for investment, the bank will be forced to stop earlier than it perhaps might like. Or, alternatively, it could commit a policy mistake if it hikes rates far beyond mildly restrictive levels. In any case, we are entering a year with the widest range of possible outcomes and forecasts in years. And this is not even taking into account potential blind spots such as the start of a pandemic or a war in Europe that markets simply did not have on their radar screens at the end of 2019 or 2021. It is both interesting and challenging, for the economy, for financial markets, for companies, for households but also for economists like us. 'May he live in interesting times'. A friend of mine just told me that this is actually not a Chinese proverb but more a curse. We shall see. In any case, Merry Christmas and a Happy New Year.   This article is part of ING’s Economic Outlook 2023: ‘May he live in interesting times’ 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   View 21 articles
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

Inflation Rates In Asia Look To Be Peaking Out, Picture Of The CEE Region For Next Year Is A Shallow Recession Driven Mainly By A Fall In Household Consumption

ING Economics ING Economics 11.12.2022 09:48
The global economy at a glance In this article US: Markets doubt the Fed’s intent Eurozone: Lower energy prices have temporarily stopped the downturn UK: Calmer markets and delayed fiscal pain not enough to stop recession China: Still dire from rising number of Covid cases Rest of Asia: No recession, but certainly slowdown CEE: Geopolitical misfortune  Rates: To reverse higher first, and then collapse lower as a theme for 2023 FX: Everyone is asking whether the dollar has topped   Shutterstock The World Reimagined globes in London, UK - 20 Nov 2022   1US: Markets doubt the Fed’s intent The economy is experiencing a strong second half of 2022. Jobs are being created in significant number, wages continue to rise and household keep spending as the Fed signals a step down to 50bp incremental rate hikes, but with a higher ultimate rate than they indicated was likely back in September. Officials suggest they may not cut rates until 2024 given their concern about stickiness in key service sector components of inflation, but their forward guidance needs to be taken with huge handfuls of salt given their recent track record. The “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. Nonetheless, the softer core inflation prints seen in October, combined with bad housing market data and weaker business confidence has led the market to anticipate rate cuts from second half of 2023 – in line with our long-held view. 2Eurozone: Lower energy prices have temporarily stopped the downturn With lower natural gas prices on the back of the unusual warm autumn weather the downturn in sentiment has been temporarily halted, though most indicators are still weak. With retail sales falling sharply in October a recession over the winter quarters still looks very likely, albeit perhaps not as deep as we previously pencilled in. Thereafter, growth will be subdued at best, as higher interest rates will start to bite, energy prices are likely to remain at elevated levels, while budgetary stimulus is bound to peter out in the course of 2023. Headline inflation fell back in November to a still high 10%, while underlying inflation remains stuck at 5%. The ECB is therefore likely to lift the deposit rate to 2% in December, considered by some members of the Governing Council as the neutral rate. The first quarter might see another 50 bp further tightening, as well as the start of gradual reduction of the balance sheet, though at a very slow pace in the beginning. 3UK: Calmer markets and delayed fiscal pain not enough to stop recession Calmer financial markets and some fresh tax rises allowed the Chancellor to put off some of the painful spending cuts until after the next election in 2024/25 in his Autumn Statement. Nevertheless, energy support will become considerably less generous for most households from April, and the housing market is showing very early signs of faltering. Despite the sharp fall in swap rates since September’s mini-budget crisis, mortgage rates have fallen much more gradually. A recession now looks virtually inevitable, though it might not be until the first quarter until we see more material signs of slowing. The Bank of England has begun to talk down market rate hike pricing, and investors have taken the hint, but are still probably overestimating what is to come. We expect the BoE to pivot back to a 50bp hike in December, and expect one further 50bp move in February, which is likely to mark the top of this tightening cycle. 4China: Still dire from rising number of Covid cases Even the government offers property developers to increase funding channels, uncompleted home projects are yet to be finished. Most of those projects are left in the hands of local governments to find a private company to finish the construction work. This takes time to finish. The housing market is therefore quiet as home price continues to fall. On Covid, more local governments have subtly changed to slightly softer practices to implement Covid measures. But the higher number of Covid cases means that there is limitation on how fine-tuning can benefit the economy. Sporadic lockdowns would continue and still affect retail sales and production adversely. We have already seen retail sales fell into yearly contraction in October, and PMIs showed that could easily repeat for the rest of 4Q22. More, exports should continue to show weaknesses due to high inflation in US and Europe. The only support to the economy is now fiscal spending, which has been in the area of advanced technology and new energy. 5Rest of Asia: No recession, but certainly slowdown On the positive side, inflation rates in Asia look to be peaking out, and at levels well below comparable rates in Europe and the US. And this has also meant that although central banks across the region have been raising policy rates, they have not gone up alarmingly, and it feels as if in many cases, we are nearing a peak after the next one or two hikes. On the negative side, Asia is highly geared to global growth through global trade, and so with Europe contracting, China in as weak a state as we have seen it, and the US slowing, it is not surprising to see Asia export figures swinging sharply negative, with Korea and Taiwan the bellwethers for the North Asia, and Singapore’s Non-oil domestic export declines performing the same barometer role for SE Asia. Not entirely independently, the global semiconductor downturn is heaping further downward pressure on the region, which is the key production centre for most global technology hardware, weighing on industrial production and exacerbating the export downturn. 6CEE: Geopolitical misfortune  In addition to the global story of high energy prices and headline inflation, the CEE region is suffering from its own problems. The common denominator is the region's unfortunate geographic location in the current geopolitical landscape and historically strong labour market. The result is significantly higher inflation than in Western Europe, but also high and persistent core inflation, underpinned by a still massively tight labour market that shows no signs of easing despite the coming recession. Moreover, in response to the energy and migration crises at the same time, governments across the region have come up with another wave of household support spending, resulting in massive twin deficits. However, this has been countered by central banks tightening monetary conditions through interest rate hikes, well above global peers, but also often through the FX channel. The resulting picture of this wild mix for next year is thus a shallow recession driven mainly by a fall in household consumption, only gradually slowing inflation with a possible upside surprise, and cautious central bank foot-dragging around the timing of the start of monetary policy normalisation.  7Rates: To reverse higher first, and then collapse lower as a theme for 2023 2022 is shaping up to be the biggest bear market for bonds in modern times. This might help explain why market rates have reversed lower in recent weeks. But it’s also to do with position squaring, as a decent rump of investors square up on bear market positions taken in 2022. That requires the buying of both duration and risk. However, this stores up problems for the turn of the year. Arguably, financial conditions (especially in the US) are prone to loosening too much, driven there by falls in market rates. But the Fed is still hiking and needs tighter financial conditions. That should force market rates back up first. But the biggest narrative for 2023 will be one of big falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. 8FX: Everyone is asking whether the dollar has topped At top of everyone’s minds in the FX market is the question as to whether the dollar has topped. Softer US inflation data and some hints of softer Covid policy in China have combined to knock the dollar some 8% off its late September highs. Those arguing for a continued dollar decline are wholly focused on the Fed story and the extension of a Fed pivot into a full-blown easing cycle. We certainly agree that a dovish turn at the Fed – a turn that finally sees short-dated US yields start to fall – is a necessary condition for a drop in the dollar. But a sufficient condition requires investment destinations in Europe and Asia being attractive enough to pull funds out of dollar deposits yielding 4%+. It remains questionable whether either of these necessary or sufficient conditions are met in 2023 and we remain sceptical that EUR/USD will be able to sustain gains above the 1.05 level. Elsewhere, sterling has recovered after November’s fiscal U-turn – a sign that policy credibility has a big role to play in FX markets. And finally, Japanese policy makers will be looking at back at some incredibly effective FX intervention to sell USD/JPY in September and October. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

The Second Half Of 2023 Will Be About Rate Cuts By The Fed, But Do Not Expect The People’s Bank Of China To Cut The RRR Or Interest Rates

ING Economics ING Economics 11.12.2022 10:19
Global central banks are facing unprecedented challenges. Here's our focus on the main ones In this article Federal Reserve European Central Bank Bank of England People's Bank of China Shutterstock   Developed markets: Our calls at a glance ING Central and Eastern Europe/EMEA: Our calls at a glance ING Asia (ex Japan): Our calls at a glance ING Central banks: Our forecasts Macrobond, ING Federal Reserve After 375bp of rate hikes since March, including four consecutive 75bp moves, the Federal Reserve has concluded that it is now time to move in smaller increments. Nonetheless, the market doubts the Fed’s intent and the recent falls in Treasury yields and the dollar are undermining the central bank's efforts to defeat inflation. Officials have been trying to convince the market that the ultimate/terminal interest rate will be above where they had signalled in September, but this is falling on deaf ears. The market is focused on soft inflation readings, coupled with a sense that recession is around the corner. While we agree that the second half of 2023 will be about rate cuts, we think there is the risk of a more aggressive response to inflation in the near term, with upside potential to our call for 50bp rate hikes in December and February. We could even see the Fed consider a faster run down of its balance sheet in an effort to re-steepen the Treasury yield curve at a higher level. European Central Bank Eurozone inflation is close to its peak, unless energy prices surge again next year, but the road towards the ECB’s 2% target will be long and bumpy. The pass-through of wholesale gas prices, as well as still high selling price expectations, suggest that there is still inflationary pressure in the pipeline. It could take until 2024 before inflation has returned to 2%. For the ECB, this means that its job is not done, yet. At the same time, the looming recession, the risk of a subdued recovery and increasing government debt bring the ECB closer to the point at which rate hikes become overly restrictive. As a consequence, we expect the ECB to bring the deposit rate to a maximum of 2.5% in the first quarter of 2023. The reduction of the balance sheet, a.k.a reducing the ECB’s bond portfolio, could become the ECB’s main policy instrument to fight inflation. Bank of England The Bank of England may have hiked by 75bp in November but it made it abundantly clear that this was likely to be a one-off, and that investors were overestimating future tightening. Admittedly, recent data has been slightly hawkish, and the committee is alive to the risk that services/wage inflation may only fall gradually despite the forthcoming recession. But the Chancellor’s Autumn Budget probably did just about enough to assuage the BoE's concerns about fiscal and monetary policy working at cross purposes. While much of the fiscal pain was delayed to future years, the government still scaled back energy support for households next year. We expect 50bp rate hikes in both December and February, marking a peak Bank Rate of 4%. With labour shortages unlikely to disappear next year, and wage growth therefore likely to stay more elevated than in past recessions, we suspect the BoE’s first rate cut may not come until 2024, and after the Federal Reserve.  People's Bank of China The PBoC cut the reserve requirement ratio (RRR) by 0.25 percentage points, effective in December, following a cut in April. There were also two 10bp cuts in the 7D reverse repo policy rate and 1Y Medium Lending Facility (MLF) rate back in January and August this year. The loosening of monetary policy has been mild relative to the slow rate of growth, which averaged 3.0% over the first three quarters of 2022. We believe that Covid measures are more likely to ease in 2023. But external demand could be weaker compared to 2022. Overall, growth in the domestic market should outpace the potential contraction of exports. Still, inflation should be absent in China. As such, the PBoC may choose to stay on hold next year as the central bank has hesitated to lower the 7D interest rate to near the 1% level to avoid falling into a liquidity trap. We do not expect the PBoC to cut the RRR or interest rates in 2023. That said, the re-lending programme for specific targets, e.g. SMEs and unfinished home projects, should continue at least in the first half of 2023.  TagsPBoC Federal Reseve ECB Central banks Bank of England 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
RBA Minutes Signal Close Decision, US Retail Sales Expected to Rise

FX: Movement Of Major Currency Pairs This Week

Kamila Szypuła Kamila Szypuła 10.12.2022 20:01
Next week we will have another powerful breakthrough in this respect: besides the release of important reports, 4 major world central banks (USA, Switzerland, UK and eurozone) will announce their decisions on monetary policies. The dollar may strengthen again. A strong US economy and aggressive interest rate hikes are strong assets for the US dollar, but not the only ones. The USD index rose as a result of strong demand for safe assets at a time when fear dominated the markets. A deep recession would increase the demand for the US dollar as a safe-haven asset. Read next:The Fed And Slowing Down The Pace Of Rate Hikes On Last Meeting This Year?| FXMAG.COM EUR/USD This week the pair started at 1.0545. This level was followed by a weekly high of 1.0585. On Wednesday, the pair met the expectations of ING economists and moved around 1.0400, thus reaching the lowest levels of the week at 1.0452. The mood was gloomy and the bulls had challenges ahead. The pair gradually recovered from losses and returned to trading above 1.0500. Currently, the pair is trading at 1.0572 There were no economic events during the week that could significantly affect the currency pair. On Wednesday, the euro received support from the eurozone as the domestic gross production reading was higher than expected. Moreover, the weak us dollar during the week added strength to EUR/USD. EUR/USD price movement will depend on the Federal Reserve and the European Central Bank. Next week the central banks will sum up the year results and outline further prospects. EUR/USD Weekly Chart GBP/USD The cable market started the week well at 1.2295. On the same day, GBP/USD hit its highest level of the week, trading at 1.2336. Tuesday and Wednesday were the weakest days for the couple. Just like EUR/USD, the pound/dollar also hit a low on Wednesday, dropping to 1.2107. After that, the pair rose and recorded a correction. Currently, the price of the pair is at 1.2239. This week has been empty in terms of reports. The movement of the pair was influenced mainly by the situation of the dollar. Next week brings a lot of emotions among traders. British reports will open in the coming week with data on industrial production and GDP for October. This report presents aggregated economic data and will have a major impact on the Bank of England's monetary policy decision (Thursday). GBP/USD Weekly Chart AUD/USD The pair of Australian dollar (AUD/USD) started the week at 0.6799. Like the British pound, the Aussie hit a weekly high on Monday. The highest price level was 0.6848. Then the pair began to wane. Following the trend of currencies from the old continent, Wednesday was the lowest level of the pair, 0.6672. And just like the pairs above, AUD/USD tried to recover. The pair closed the week at 0.6772. China's announcement of easing covid restrictions added support to the Australian dollar. On Tuesday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, but the bank's decision did not add strong support to the AUD price. AUS/USD Weekly Chart USD/JPY USD/JPY started the week at a low of 134.4900, on the same day it recorded a weekly low of 134.1300. The upward trend continued until Wednesday. On that day, the Japanese yen pair peaked at 137.8010. There were declines after that. The week ended with USD/JPY at 135.0740 Undoubtedly, the weakness of the dollar and the statement of the representative of the Bank of Japan added support to the Yen. USD/JPY Weekly Chart Source: investing.com, finance.yahoo.com
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

A Slowdown In The Pace Of Rate Increases By The ECB May Be Coming

Kamila Szypuła Kamila Szypuła 11.12.2022 18:52
The European Central Bank meets next Thursday and looks set to slow the pace of aggressive interest rate hikes as inflationary pressures finally show signs of abating. Read naxt: FX: Movement Of Major Currency Pairs This Week| FXMAG.COM Forecast The ECB has already raised its main lending rate by 2% since July in three separate increases. The ECB is due to meet again on December 15 amid expectations that rate will be increased again. Comments from ECB officials this week saying inflation was probably close to its peak have bolstered expectations that the central bank is likely to slow its pace of interest-rate increases to half a point from 75 basis points previously, on December 15. Markets anticipate a 50 basis point, or half point, rate hike after two straight increases of 75 basis points each, slowing the pace of tightening. Recent comments from ECB officials wouldn’t lead one to believe that a pace decrease is in sight but market participants are still leaning towards a smaller rise, with 55bps priced in, after 75bps hikes in September and October. The dovish emphasis came from the October meeting minutes which highlighted the progress that had been made from removing the accommodative policies. In its October decision, the ECB said "substantial progress" had been made in withdrawing policy accommodation and the lags involved in the transmission of the earlier tightening measures. But the ECB is likely to stay hawkish and investors will also look for clues on where the deposit rate is going. Deutsche Bank economists see the terminal rate at 3%, with risks skewed to the upside. The ECB meeting coming after the Fed, so some may question whether the Fed’s decision will have an impact at all. Data A sharp slowdown in inflation in the US in October and the eurozone in November has encouraged investors to believe the worst may be over in terms of price pressures, causing global yields to drop sharply in recent weeks. Germany's 10-year bond yield, seen as the benchmark for the eurozone, rose one basis point to 1.8%, while the Irish and French 10-year yields traded at around 2.3%. Many investors say the sharp drop in eurozone yields has gone too far, given that annual inflation is still running at 10% and that the ECB is set to raise rates to at least 2% next week. Eurostat said area inflation rose 10% in the year to November, which is a decline on October's 10.6% and lower than the consensus expectation amongst economists for a reading of 10.4%. Excluding food, fuel, alcohol and tobacco, inflation is at 5% and pipeline pressures remain abundant. Closely-watched business activity data points to a mild recession and latest forecasts should show how the ECB views the coming slowdown. In September, it forecast 0.9% eurozone growth in 2023, a significant downgrade from its June prediction. Recent reports have shown that employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. A positive GDP reading may influence the ECB's decision. Retail sales in Europe continue to fall. It came down to -2.7% in October, which is far worse than the expected. EUR/USD Euro exchange rates would be set to benefit if the European Central Bank (ECB) defies expectations next week by hiking 75 basis points, an outcome some economists say is likely. A 50bp move would therefore be a neutral outcome for the Euro to Dollar exchange rate. Source: investing.com, ecb.europe.eu
The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

China’s New Aggregate Financing May Bounce | Monetary Policy Decisions Ahead

Saxo Bank Saxo Bank 12.12.2022 09:07
    Softer US CPI to offer mixed signals and considerable volatility Last month’s softer US CPI report was a turning point in the markets and inflation expectations have turned markedly lower since then. Consensus is looking for another softer report in November, with headline rate expected at 7.3% YoY, 0.3% MoM (from 7.7% YoY, 0.4% MoM) while the core is expected to be steadier at 6.1% YoY, 0.3% MoM (from 6.3% YoY, 0.3% MoM). While the case for further disinflationary pressures can be built given lower energy prices, easing supply constraints and holiday discounts to clear excess inventory levels, but PPI report on Friday indicated that goods inflation could return in the months to come and wage inflation also continues to remain strong. Easing financial conditions and China’s reopening can be the other key factors to watch, which could potentially bring another leg higher in inflation especially if there is premature easing from the Fed. Shelter inflation will once again be key to watch, which means clear signs of inflation peaking out will continue to remain elusive. Why volatility in equites could pick up this week and what we learnt from prior inflationary out outs Will the inflation read show CPI fell to 7.3% in November as the market expects, down from 7.7% YoY? The risk is that inflation doesn’t fall as forecast, and that may likely push up bond yields and pressure equites lower. We saw this set up play out on Friday. November’s producer price index showed wholesale prices rose more than expected, which spooked markets that this week’s CPI could be bleak. As such bonds were sold off on Friday, pushing yields up; with the 10-year bond yield rising 10bps to 3.58%, while equities were pressure lower. Consider over the past six months, the S&P 500 has seen an average move of about 3% in either direction on the day US CPI has been released, according to Bloomberg. We haven’t seen these moves since 2009. Also consider, the S&P 500 has fallen on seven of the 11 CPI reporting days this year. December FOMC and dot plot may have little new to offer, so focus remains on Powell’s press conference The Fed is expected to lift its Federal Funds Rate target by 50bps to 4.25-4.50%, according to the consensus as well as the general commentary from Fed officials signalling a downshift in the pace of rate hikes. The updated economic projections will also be released, and are expected to show a higher terminal rate than the September projections (4.6%), as has been alluded to by Chair Powell at the November FOMC and in remarks made in December. But that means little room for market surprise as the Fed funds futures are pricing in a terminal rate of 4.96% in May 2023. Easing financial conditions and expected China stimulus could mean Fed continues to chase the inflation train from the back into the next year as well, so Powell’s press conference remains key to watch. There will have to be a lot of focus on pushing out the rate cuts of ~50bps that are priced in for next year, and emphasise that the Fed will not ease prematurely if Powell and committee want to avoid further easing of financial conditions. China is expected to convene the Central Economic Work Conference this week The Chinese Communist Party is expected to have its annual Central Economic Work Conference this week to formulate the macroeconomic policy framework for 2023. Investors are expecting supportive initiatives including measures to ease the stress in the ailing property sector. The conference will set out directions and blueprints but short of releasing key policy targets which will be for the National People’s Conference to be held next March. A weak set of Chinese activity data is expected Economists surveyed by Bloomberg are forecasting that China’s retail sales shrank sharply by 3.9% Y/Y in November. The potential weakness is likely attributed to poor performance of auto sales, dining-in activities, and sales during the “double-11” online shopping festival in the midst of Covid-19 lockdowns during the best part of November. November auto sales in China fell by 9.2 %Y/Y and by 10.5% M/M. Courier parcels processed on Nov 11 fell 20.7% Y/Y. The growth in industrial production is expected to fall to 3.7% Y/Y in November from 5% to 3.7%, following a weak November NBS manufacturing PMI and soft high-frequency data of steel production. Year-to-date fixed asset investment is expected to edge down to 5.6% from 5.8%, dragged by stringent pandemic control practices. ECB also likely to downshift to a smaller rate hike The European Central Bank (ECB) is also expected to slow down its pace of rate hikes to a 50bps increase this week. Headline inflation eased slightly in November, coming in at 10.0% YoY (exp. 10.4%), but was overshadowed by an unexpected rise in core inflation 6.6% YoY (exp. 6.3%, prev. 6.4%). While there is likely to remain some split in ECB members at this week’s meeting, the central bank’s Chief Economist Lane remains inclined to take into account the scale of tightening done so far. There is also uncertainty on the announcement of quantitative tightening. Bank of England may remain more divided than the other major central banks The Bank of England is also expected to follow the Fed and the ECB and downshift to a smaller rate hike this week, but the decision will likely see a split vote. A host of key data, including GDP, employment and inflation will be due this week in the run up to the BOE decision, and significant positive surprises could tilt the market pricing more in favour of a larger move which also creates a bigger risk of disappointment from the central bank. Headline annualised inflation advanced to 11.1% Y/Y in October, while the core rate remained at an elevated level of 6.5%. Consensus expects inflation to cool slightly to 10.9% Y/Y in November, but the core to remain unchanged at 6.5% Y/Y. Wage pressures are also likely to be sustained, and the cooling in the labor market will remain gradual. In Australia, this week the focus will be on consumer confidence and employment data There are a couple of economic read outs that could move the market needle, the ASX200 (ASXSP200.1) this week. Weakening confidence is expected; starting with Consumer Confidence for December (released on Tuesday), followed by Business Confidence for November. Employment reports are due on Thursday for November, and likely to show employment fell; 17,000 jobs are expected to be added, down from the 32,200 that were added in October. So focus will be on the AUD and a potential pull back if the data is weaker than expected. Iron ore equites to see volatility China reopening talk vs shut downs pre lunar new year The iron ore (SCOA) trading at four month highs $110.80 rallying as China has been easing restrictions, plus there are whispers Chinese property developers could get more support, which would support demand for iron ore rising. However we mentioned on Friday, why iron ore could pull back, as buying volume appears slowing. So be mindful of potential pull back in iron ore pricing and mining equities. Secondly, consider seasonable halts of Chinese steel plants ahead of the Lunar New year holiday. Restocking typically occurs 5-8 weeks before the holiday, but plants could be closed earlier, due to poor profits and weaker demand. This could cause volatility in iron ore and iron ore equities. So, keep an eye on iron ore majors, Vale, Fortescue Metals, Champion Iron, BHP and Rio as they could see profit taking after rallying ~25-55% from October.   China’s new aggregate financing and RMB loans are expected to have bounced in November Market economists, as surveyed by Bloomberg, are expecting China’s new aggregate financing to bounce to RMB 2,100 billion in November from RMB 907.9 billion in October and new RMB loans to rise to RMB 1,400 billion in November from RMB 615.2 billion as People’s Bank of China urged banks to extend credits to support private enterprises including property developers. Less bond issuance by local governments and corporate and weak loan demand however might have weighed on the pace of credit expansion in November. Key earnings to watch: Adobe (ADBE:xnas), Trip.com (TCOM:xnas) In his note for key earnings this week, Peter Garnry highlights Adobe and Trip.com. The past five earnings releases have all led to a negative price reaction in Adobe shares as growth has come down while the cost of capital has gone up. Can Adobe buck the trend next when the company reports earnings? Another question investors will be asking is an update on the company’s $20bn acquisition of the industry challenger Figma, which was delayed due to a US Department of Justice investigation of the deal. Adobe reports FY22 Q4 (ending 30 November) earnings on Thursday with revenue growth expected at 10% y/y and EPS of $3.50 up 36% y/y as cost-cutting exercises are expected to improve profitability. Adobe is expected to end the fiscal year with revenue of $17.6bn and strong free cash flow generation of $7.3bn which translates into 5% free cash flow yield. Recently the Chinese government has chosen to move ahead with reopening the economy taking on the associated Covid risks and this could be good for the outlook for travel activity and thus Trip.com. The Chinese online travel agency platform is expected to report earnings on Wednesday with analysts expecting revenue growth of 22% y/y. Analysts expect revenue to increase 50% y/y in 2023 to CNY 29.6bn. •          Monday: Oracle•         Tuesday: DiDi Global•          Wednesday: Lennar, Trip.com, Nordson, Inditex•          Thursday: Adobe•          Friday: Accenture, Darden Restaurants   Key economic releases & central bank meetings this week Monday 12 December United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Oct)United Kingdom Goods Trade Balance (Oct)India CPI and Industrial Output (Nov)China (Mainland) M2, New Yuan Loans, Loan Growth (Nov) Tuesday 13 December Germany CPI (Nov, final)United Kingdom Labour Market Report (Oct)Hong Kong Industrial Production, PPI (Q3)Germany ZEW Economic Sentiment (Dec)United States CPI (Nov) Wednesday 14 December Japan Tankan Survey (Q4)United Kingdom Inflation (Nov)Eurozone Industrial Production (Oct)United States Fed Funds Target Rate (14 Dec) Thursday 15 December New Zealand GDP (Q3)Japan Trade Balance (Nov)South Korea Export and Import Growth (Nov)Australia Employment (Nov)China (Mainland) Industrial Output, Retail Sales, Urban Investment (Nov)Philippines Policy Interest Rate (15 Dec)Switzerland SNB Policy Rate (Q4)Norway Key Policy Rate (15 Dec)United Kingdom BOE Bank Rate (Dec)Eurozone ECB Deposit and Refinancing Rate (Dec)United States Initial Jobless ClaimsUnited States Retail Sales and Industrial Production (Nov)Taiwan Discount Rate (Q4) Friday 16 December Australia Judo Bank Flash PMI, Manufacturing & ServicesJapan au Jibun Bank Flash Manufacturing PMIUK S&P Global/CIPS Flash PMI, Manufacturing & ServicesGermany S&P Global Flash PMI, Manufacturing & ServicesFrance S&P Global Flash PMI, Manufacturing & ServicesEurozone S&P Global Flash PMI, Manufacturing & ServicesUS S&P Global Flash PMI, Manufacturing & ServicesUnited Kingdom GfK Consumer Confidence (Dec)Singapore Non-Oil Exports (Nov)United Kingdom Retail Sales (Nov)Eurozone Total Trade Balance (Oct)Eurozone HICP (Nov, final)   Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT Source:Saxo Spotlight: What’s on the radar for investors & traders for the week of 12-16 Dec? A flurry of central bank meetings from Fed to BOE to ECB, US/UK C