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Asia-Pacific shares remain pressured amid firmer inflation data, downbeat growth forecasts and central bank inaction. Japan, Australia print strong inflation numbers, IMF cuts Asia growth outlook. BOJ defends status quo despite upwardly revising inflation forecasts. Asian shares hold lower ground while tracking global cues as fears surrounding inflation and growth prevail during early Friday. While portraying the mood, the MSCI’s index of Asia-Pacific shares outside Japan drops nearly 1.0% as bears attack the lowest levels since March 2020 whereas Japan’s Nikkei 225 loses 0.73% intraday heading into the European session. It’s worth noting, however, that the downbeat yields have earlier favored the equity buyers but the hawkish ECB and strong US Gross Domestic Product (GDP) drowned the stocks afterward. A 33-year high Tokyo inflation data joined strong Australia Producer Price Index (PPI) to keep bears hopeful as the International Monetary Fund (IMF) cut Asia's economic forecasts. “The IMF cut Asia's economic forecasts on Friday as global monetary tightening, rising inflation blamed on the war in Ukraine, and China's sharp slowdown dampened the region's recovery prospects,” said Reuters. The news also adds that the IMF cut Asia's growth forecast to 4.0% this year and 4.3% next year, down 0.9% point and 0.8 points from April, respectively. The slowdown follows a 6.5% expansion in 2021. Further details suggest that the Washington-based institute expects China's growth to slow to 3.2% this year, a 1.2-point downgrade from its April projection, after an 8.1% rise in 2021. The world's second-largest economy is seen growing 4.4% next year and 4.5% in 2024, the IMF said as per Reuters. On a broader front, Thursday’s US data weighed on the Fed wagers even as the headline US Gross Domestic Product (GDP) rose 2.6% on an annualized basis, more than expected, in the third quarter (Q3). The reason could be linked to a fifth consecutive fall in private consumption that challenged the Fed hawks as it showed the policymakers are gradually nearing the target of slowing down private domestic demand, which in turn might favor the easy rate hike talks for December in the next week’s Federal Open Market Committee (FOMC) meeting. That said, the sluggish US Treasury yields and the risk-off mood could also be held responsible for the Asia-Pacific market’s sour conditions. That said, the US Dollar Index (DXY) retreats to 110.50, following Thursday’s recovery from the five-week-low, whereas commodities are slightly red amid the market’s indecision. Moving on, the US Core PCE Price Index for September, expected to rise to 5.2% versus 4.9% prior, will be crucial for traders to watch for clear directions. A firmer print of the Fed’s preferred inflation gauge could add strength to the yields and hawkish Fed bets, which in turn will be favorable for the risk-safe assets ahead of the next week’s FOMC.

USD/JPY is in positive territory today. In the European session, the yen is trading at 146.94, up 0.47%. BoJ maintains policy All eyes were on the Bank of Japan, which wrapped up a crucial 2-day policy meeting on Friday. The meeting came just days after Japan’s Ministry of Finance (MOF) intervened in the currency markets after the yen had fallen close to the 152 line, a new 32-year low. Finance Minister Shunichi Suzuki would not confirm that the MOF had intervened for the second time in two months, but issued a blunt warning, declaring that the government was “facing off with speculators via markets.” This set the stage for today’s BOJ meeting. In the end, it was business as usual, as the Bank maintained ultra-low interest rates and kept its dovish guidance. The BoJ remains an outlier with its loose policy, as most other major central banks are tightening in order to curb inflation. What was noteworthy was that the central bank revised upwards its inflation forecast for fiscal 2023. Headline inflation was raised to 1.6%, up from 1.4% in July, and core inflation to 2.9%, up from 2.3% in July, with the BoJ warning that risks were skewed to the upside. The Bank also lowered its growth forecast for fiscal 2022 and 2023. Inflation has pushed above the BoJ’s target of 2%, but BOJ Governor Kuroda has insisted that he will not consider tightening policy until it is clear that inflation is sustainable. There was a hint from the Bank that this may not be so far off, as today’s BOJ quarterly report, noted that rising inflation is expected to “lead to sustained price rises accompanied by wage gains”. The yen has paid the price for the BoJ’s ultra-loose policy, tumbling some 20% against the dollar this year. With the BoJ making it clear that it won’t be throwing any lifelines to the yen, the currency will be under pressure from the widening US/Japan rate differential, unless the MoF continues to intervene in the currency markets. . USD/JPY Technical USD/JPY faces resistance at 147.50 and 148.59 There is support at 145.23 and 143.14 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.

Today, the Bank of Japan has once again confirmed its status as an outsider among global central banks. Despite the global tightening trend, the BOJ has decided to maintain ultra-low interest rates. No changes on the Japanese front At the end of the week, traders on the USD/JPY pair are focused on the BOJ meeting. At the start of Friday, the central bank issued its verdict on the further monetary exchange rate. As expected, the BOJ did not present a hawkish surprise. The central bank has maintained its policy guidelines: it left interest rates at -0.1% and promised to keep the yield of 10-year bonds at around 0%. The BOJ continues to follow the dovish route, even despite the next jump in consumer prices. The report published today showed that in October, annual inflation in the country increased at the highest rate since 1989. This month, the core CPI jumped to 3.4%, which is significantly higher than the BOJ target, which is at 2%. Nevertheless, the BOJ still considers the acceleration of inflation unsustainable. The central bank expects consumer price growth to slow down to 1.6% over the next 12 months, although it has raised its inflation forecast for the current fiscal year. According to BOJ estimates, the CPI will remain around 2.9% until March 2023, which is significantly higher than the previous estimate of 2.3%. Another argument in favor of maintaining a soft monetary policy of the BOJ is the slow recovery of the economy after the COVID-19 pandemic. Now the central bank is concerned that a total increase in interest rates in the world could trigger a global recession, which would negatively affect the state of the already fragile Japanese economy. Given this risk, the BOJ sharply lowered its economic growth forecast for the current fiscal year. Now the central bank expects GDP to rise not by 2.4%, as before, but by only 2%, followed by a slowdown to 1.9%. Such gloomy prospects are the BOJ's main obstacle on the way to normalizing its monetary policy. It forces the BOJ to take a marginal dovish position, which condemns the yen to further depreciation. What is happening with JPY now? This year, the yen is experiencing the worst drawdown in almost all directions in history, but most of all against the dollar. Since January, due to the strong monetary divergence of Japan and the United States, the JPY rate has fallen against the USD by more than 20%. Unlike the BOJ, the Federal Reserve has embarked on a hawkish track this year and has significantly outpaced other central banks in terms of rate hikes. In order to curb record high inflation in the country, American politicians have already raised interest rates five times during the year and are preparing to hold another round of hikes next week. Now the markets expect that in November the Fed will again increase the indicator by 75 bps, which is an excellent driver for the dollar, especially when paired with the yen. However, at the same time, most traders believe that by December, the US central bank may slow down the rate of tightening to 50 bps, as the American economy begins to show signs of slowing down. The emergence of speculation about the Fed's less hawkish policy caused the greenback to sharply weaken on all fronts this seven-day period, including against the yen. Recall that last week the dollar reached a new 32-year high relative to the yen, approaching the 152 mark. Since then, the USD/JPY pair has fallen by almost 4%. In part, the greenback's position was undermined by two cycles of interventions, which Japan is supposed to have conducted in support of the yen. But the main pressure on the dollar was still exerted by increased expectations of a slowdown in the pace of rate hikes in America. Now that the USD/JPY pair has received another powerful boost from the BOJ, analysts expect it to return to growth. At the time of preparation of the material, the yen really moved into the red zone and fell against the dollar by 0.35%. According to experts, in the short term, the yen's decline may accelerate significantly. Memories of last month are still vivid in the minds of many, when the dovish comments of BOJ Chairman Haruhiko Kuroda caused a sharp weakening of the yen. And just half an hour after Kuroda finished his speech, the Japanese Ministry of Finance conducted the first currency intervention in 24 years. Some analysts do not rule out that in the near future the market may catch deja vu. If the dollar bulls break loose again, the Japanese government will most likely not hesitate for a long time and press the red button.   Relevance up to 08:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/325622

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

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/

USD/JPY gains traction for the second successive day amid sustained USD buying. The Fed-BoJ policy divergence continues to undermine the JPY and offers support. The uptick lacks bullish conviction as the focus remains on the key FOMC meeting. The USD/JPY pair edges higher for the second straight day on Monday and looks to build on its recovery from the 145.00 psychological mark, or a nearly three-week low touched last Thursday. The pair stick to its modest gains through the first half of the European session and is currently placed near a multi-day high, just below mid-148.00s. The Japanese yen continues to be undermined by the fact that the Bank of Japan held interest rates at record lows on Friday and reiterated that it will continue to guide the 10-year bond yield at 0%. The central bank reaffirmed the need for accommodative policy amid economic headwinds stemming from the resurgence of COVID-19 cases in China and global recession fears. This, along with some follow-through US dollar buying interest continues to lend support to the USD/JPY pair. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, extends last week's bounce from over a one-month low amid rising US Treasury bond yields. The prospects for another supersized 75 bps Fed rate hike move in November turn out to be a key factor pushing the US bond yields higher and lending some support to the greenback. The USD bulls, however, seem reluctant to place aggressive bets ahead of this week's key central bank event risk. The Fed is scheduled to announce its monetary policy decision on Wednesday and investors will look for fresh clues about the future rate-hike path. Hence, the focus will remain on the accompanying policy statement and the post-meeting press conference. This will influence the USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair. In the meantime, elevated US bond yields should act as a tailwind for the USD amid absent relevant economic data.

The level of uncertainty in the market is off the scale ahead of tomorrow's Federal Reserve meeting, which affects the current dynamics of the dollar-yen pair. What helps USD? The US currency regained its wings at the beginning of the week. Yesterday, the DXY index soared by almost 0.8% and hovered around a weekly high at 112. The fuel for the greenback was the strengthening of hawkish market expectations ahead of the Fed's monetary policy meeting. The event at which American officials are to announce their decision on interest rates will be held on Wednesday � November 2. Now most traders expect that the Fed will raise the indicator by 75 bps for the fourth time in a row. The probability of such a scenario is estimated at 89.2%. The market's confidence in the hawkish determination of the Fed has a positive effect on the yield of 10-year US government bonds. Yesterday, the indicator rose to 4.06%, which put strong downward pressure on the JPY rate. The yen, which is extremely sensitive to the difference in the yield of US bonds and their Japanese counterparts, fell by more than 0.8% against the dollar on Monday and approached a 30-year low at 149. The sharp drop in the JPY was also facilitated by the dovish decision of the Bank of Japan, which was adopted at the end of last week. Despite the acceleration of inflation in the country, the BOJ has maintained an ultra-soft monetary rate, which implies negative interest rates. The fact that Japan left the indicator unchanged, while America is preparing for the next round of rate hikes, further intensified the divergence in monetary policy of these two countries. Most experts believe that until the monetary divergence begins to shrink, the yen will remain in a downtrend. However, judging by the forecasts regarding the Fed's future course, this will not last that long. What prevents the dollar? Now the main obstacle to the strengthening of the US currency is the growth of speculation about a possible slowdown in the pace of interest rate hikes. We are not talking about the November Fed meeting, but about more distant prospects. Weak US economic statistics, which were published last week, significantly increased market concerns about the impending recession in America. Most analysts believe that signs of weakening economic growth may force the Fed to reduce the degree of aggressiveness towards interest rates. Goldman Sachs analysts predict that in December the US central bank will raise the indicator not by 75 bps, but by 50 bps. More slowdown is expected in February and March next year. According to experts, rates will be raised by only 25 bps during this period. A less hawkish long-term scenario severely limits the dollar's growth, even though the USD may receive another boost from the Fed tomorrow. This morning, the greenback sharply moved to decline in all directions, also against the yen. At the time of preparation of the material, the USD/JPY major plunged by more than 0.5% and fell below the 148 mark. Pessimistic expectations of key US economic data contributed to the rapid decline of the asset. Today traders will focus on the ISM index of business activity in the manufacturing sector for October. According to preliminary estimates, the indicator will decrease to 50.0 against the previous value of 50.9. Investors fear that, if this forecast is implemented, the Fed may indeed change its anti-inflationary plans to less hawkish ones. In this case, the differential in US and Japanese interest rates will begin to shrink, which will help the yen strengthen against the dollar.   Relevance up to 08:00 2022-11-06 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/325894

Summary:  The Powell Fed was probably hoping that it could fly under the radar at today’s FOMC meeting, giving itself the luxury of two more data cycles as inputs before providing fresh guidance and forecasts at the mid-December FOMC meeting. But no such luck, given the recent significant easing of financial conditions and yesterday’s very hot September jobs opening survey. FX Trading focus: Powell in the hot seat at tonight’s FOMC, needing to surprise hawkish The US September JOLTS jobs openings release yesterday was a shocker, as August data was revised up 250k and the September release was nearly a million more than expected at 10.72M. This jolted US yields and the US dollar back higher, keeping the greenback largely in the tactical neutral zone ahead of tonight’s FOMC meeting. It is the latest data point to suggest that the Fed will have a hard time pre-committing to any slowdown in the pace of its policy tightening after the 75-basis-point hike that is fully priced in for tonight. The December 14 FOMC meeting odds have not shifted much over the last couple of weeks, as investors still favor the idea of a downshift to a 50-basis-point hike at that meeting, followed by another 50 basis points of tightening early next year over the space of a couple of meetings. (An interesting psychological block for this market appears to be the 5.00% level for the Fed Funds rate – markets have been unwilling to project the Fed to hike above this level – which is about where we are now for the March-May FOMC meetings) As I outlined in yesterday’s update, if the Fed merely keeps quiet and endorses current expectations and punts on further guidance until December, we might see an extension of the melt-up in risk sentiment and see another wave of USD weakness. But yesterday’s JOLTS data point raises the odds that the Fed will want to push back against that outcome or at least against complacency on its potential policy path in general. To surprise hawkish today, Powell and company will have to make it very clear that the Fed is willing to continue tightening beyond current expectations. At the same time, that task will be difficult if they are reluctant to pre-commit to another large hike in December. One possible tactic to keep maximum forward potential for hawkishness would be for the Fed to indicate very high reactivity to further incoming data and openness to continuing with large hikes as long as necessary if the data supports doing so. It's hard to tell how the market would treat such a stance at tonight’s meeting if that is what the FOMC delivers, but in coming days and until the December 14 FOMC meeting, it would certainly mean extreme volatility on the next bits of Incoming data, starting with the ISM Services tomorrow and then especially the October jobs report this Friday. Then we’ll have the October JOLTS survey, the November jobs report, and the October and November CPI releases before that meeting. Chart: EURUSDEURUSD is perched between the important parity level to the upside and perhaps 0.9875-0.9850 support to the downside, an important level on the way up, awaiting today’s FOMC meeting. Downside risk for a test of the cycle lows below 0.9600 if the Fed manages to surprise hawkish and lift rate expectations, while we’ll have to close north of parity and see a continued improvement in risk sentiment and perhaps some weak US data through Friday to sustain a new upside leg. Bank of Japan minutes surprise. It’s been a while since we got a surprise from the BoJ, and normally we don’t look for them in the minutes, which are not released until after the following meeting. But last night’s minutes from the September BoJ meeting generated a few waves and JPY strength as they showed considerable signs of member discomfort with rising price pressures and even brought up the subject of an eventual policy shift, even if not suggesting one is imminent: one member said that “when the appropriate time comes, it’s important to communicate to markets an exit strategy”. This won’t sustain a JPY rally if US treasuries run back higher after the FOMC today and/or in the wake of the key US data through Friday. NZD strength getting stretched after the strong jobs report overnight extended the NZD rally against the Aussie and even keeping the currency near the top of the recent range versus the US dollar. Not sure how much more the little kiwi can get out of this run of strength here – a turn in broad sentiment could suddenly see vulnerability. The RBNZ is concerned about the impact on the policy tightening on the country’s financial system in its financial stability report released yesterday. I don’t see any meaningful ability for policy to diverge from here from Australia’s for example. Bloomberg put out an interesting article on the globally weather-stressed dairy industry. New Zealand is the world’s largest dairy exporter and combined, milk, beef, butter and cheese make up some 30% of New Zealand’s exports in physical goods. The article mentions climate-linked legislation possibly limiting future output – worth watching. Table: FX Board of G10 and CNH trend evolution and strength.CNH weakness still prominent, sterling’s relative strength fading, kiwi strength looking overdone and USD at maximum indecision here. Table: FX Board Trend Scoreboard for individual pairs.EURCHF making a bid at a reversal of the uptrend that was established more than four weeks ago if it drops through the 0.9850-0.9800 zone in coming days. Look at AUDUSD ready to possibly tilt lower again if the USD can get a leg-up post-FOMC. EURUSD is also close to flipping lower again after its uptrend attempt didn’t extend very far from its launching point, which was near the current rate. Upcoming Economic Calendar Highlights 1215 – US Oct. ADP Employment Change 1800 – US FOMC Meeting 1830 – US Fed Chair Powell Press Conference 2000 – New Zealand RBNZ Governor Orr before Parliamentary Committee 0145 – China Oct. Caixin Services PMI   Source: https://www.home.saxo/content/articles/forex/fx-update-pressure-mounts-on-fed-to-surprise-hawkish-02112022

USD/JPY staged a rebound late Wednesday and ended up closing the day flat near 148. Economists at TD Securities believe that the risk of intervention is high above the 150 level. USD/JPY may begin the process of forming a top “The combination of BOJ/MOF activity on intervention and suggestions that tweaks to YCC are possible if inflation and wages improve is a notable shift in rhetoric and may help the pair to begin the process of forming a top.” “A higher Fed terminal is a problem but we think MOF/BOJ is now the canary in the coalmine; given FX intervention has a poor track record generally, why bother employing it if you did not expect to make some policy shifts of your own.”  “We think intervention risk is very high above 150 in USD/JPY.”

USDJPY is oscillating above 148.00 as investors are awaiting the US NFP release for making informed decisions. Rising interest rates and weaker economic projections have impacted employment opportunities. An intervention in FX by the BOJ is expected as USDJPY has rebounded in the past few trading sessions. The USD/JPY pair is displaying a topsy-turvy performance above the critical support of 148.00 in the Tokyo session as investors have shifted their focus towards the release of the US employment data. The risk impulse is still favoring safe-haven assets as anxiety ahead of the US Nonfarm Payrolls (NFP) data is accelerating. S&P500 futures have hardly moved in the Tokyo session as investors have shifted to the sidelines. The US dollar index (DXY) is continuously struggling to surpass the immediate hurdle of 113.00. Meanwhile, the 10-year US Treasury yields have escalated to 4.16% as a hangover of hawkish guidance on the interest rates by the Federal Reserve (Fed) is far from over. Investors are in the mix on whether the Fed will pause its policy tightening measures after reaching the terminal rate proposed at 4.75% or will continue tweaking monetary policy as short-term inflationary expectations are still de-anchored. For December monetary policy decision, Friday’s NFP data will be very crucial. Continuous increments in interest rates are responsible for the postponement of expansion plans from corporate, which has trimmed the requirement for more candidates. Also, weaker economic projections have resulted in a halt in the recruitment process by various firms. It is also noticed that job additions are increasing but at a significantly diminishing rate from the past three months and October, month report is no new under the sun. As per the consensus, the US economy has added 200k jobs in the labor market vs. the prior release of 263k. Also, the Unemployment Rate is seen higher at 3.6%. On the Tokyo front, , investors are worried over Japan-North Korea renewed tensions after North Korea fired an unidentified ballistic missile over Japan, as broadcasted by NHK. For safety measures, Japan administration warned residents to take shelter from missile threats. Apart from that, a firmer rebound in the USDJPY pair has triggered expectations for repeat intervention by the Bank of Japan (BOJ) to support the Japanese yen against sheer volatility.

GBPJPY fades two-day uptrend, remains sidelined of late. BOE witnessed a dim response of the first gilt sale, optimism surrounding UK’s fiscal policy fades. UK businesses fear gloomy Christmas amid inflation woes. Yields remain firmer as recession looms, China’s covid numbers escalate during a sluggish session. GBPJPY treads water around 168.80, pausing the two-day uptrend, heading into Tuesday’s London open. In doing so, the cross-currency pair portrays the market’s indecision amid mixed clues and a lack of major data/events. It should, however, be noted that a dim response to the Bank of England’s (BOE) first medium-term gilt selling operation seem to have teased the pair bears of late. On the same line was the recent survey for Barclays that suggest British businesses fear a gloomy Christmas ahead, as almost half of households plan to cut festive spending due to the soaring cost of living and sales are already falling sharply in inflation-adjusted terms. Furthermore, GBPJPY’s inaction could be linked to news suggesting that the UK Chancellor Jeremy Hunt is set to announce a new tax raid on inheritance, per the UK Telegraph. The news also mentioned that Chancellor Hunt and Prime Minister (PM) Rishi Sunak are understood to have agreed to freeze the threshold above which people must pay tax for another two years. Alternatively, chatters over likely positive outcomes from the next fiscal plan and UK Prime Minister (PM) Rishi Sunak’s efforts to justify his election keep the pair buyers hopeful. UK PM Sunak is poised to announce a major gas deal with America after the Cop27 climate change summit, The Telegraph can disclose. “Talks about the “energy security partnership” are in their final stages, with the US planning to sell billions of cubic meters of Liquefied Natural Gas (LNG) to Britain over the coming year,” the news adds. It’s worth mentioning that the Bank of Japan’s (BOJ) bond-buying operations and fears surrounding China’s higher covid counts since April, as well as a light calendar, restrict the GBPJPY pair’s moves. Moving on, a lack of major data/events could keep the quote sidelined but optimism surrounding the UK’s fiscal policies may allow the cross-currency pair to remain firmer ahead of the UK’s Gross Domestic Product (GDP) for the third quarter (Q3), up for publishing on Friday. Technical analysis GBPJPY bulls attack the 10-DMA hurdle surrounding 169.00 but the bearish MACD signals and steady RSI keeps sellers hopeful.

USDJPY climbs above 146.80 as the traction is returning in the risk-off profile. US yields are advancing after hawkish commentary from Fed policymaker Barkin. Japanese administration is set to approve more stimulus and hike taxes for ultra-wealthy individuals. The USDJPY pair has given an upside break of the sideways profile in the Tokyo session. Earlier, the asset resurfaced from 146.40 in the early Tokyo session. The risk profile is turning sour as investors are turning cautious ahead of the outcome of the US mid-term elections. The mighty US dollar index (DXY) has refreshed its day’s high at 110.40 as the risk aversion theme is gaining traction. Mild gains recorded in the S&P500 futures have been eased as the risk appetite is shrinking. The 10-year US Treasury yields have reached 4.23% after hawkish guidance from Richmond Federal Reserve (Fed) President Thomas Barkin. Fed policymaker has contrary views to the chatters over a slowdown in the pace of rate hikes. Current interest rates are near the proposed one at 4.80% and smaller rate hikes will be witnessed ahead. Fed Barkin believes that the ongoing pace of rate hiking will continue as inflationary pressures have not displayed signs of exhaustion yet. The outcome of the US mid-term elections seems to favor the Republicans. A note from ANZ Bank states that “We regard a Republican-controlled Congress as the most likely scenario (55%). Not far behind, at 41%, is a split Congress, with a Republican-led House and a Democrat Senate.” An occurrence of the same could bring political instability to the economy. On the Japanese yen front, Tokyo bulls are facing pressure as Japanese Prime Minister Fumio Kishida is set to approve USD198 billion in the additional budget for the economic stimulus plan, as reported by Bloomberg. The government also “may opt to hike taxes on ultra-wealthy individuals with annual incomes of more than JPY1 billion ($6.8 million).”

Recently, the king dollar has increasingly begun to show signs of weakness, even paired with the main loser of the year - the yen. Does this mean that USD has already exhausted its bullish potential? The dollar's wings were clipped For almost the entire past year, the US currency has been the star of the foreign exchange market. Thanks to the Federal Reserve's aggressive policy, the greenback was able to strengthen significantly in all directions, but most of all against the yen. Since the beginning of the year, the dollar has risen in price against the JPY by more than 20%. Such impressive dynamics was facilitated by a sharp increase in the differential of interest rates in the United States and Japan. In order to curb record high inflation in the country, US officials have already conducted several rounds of rate hikes over the past eight months. Meanwhile, their Japanese counterparts continue to maintain an ultra-soft exchange rate and keep rates in negative territory. Last week, the divergence in the monetary policy of the Fed and the Bank of Japan escalated even more. The reason for this was the hawkish statement of the head of the US central bank. Fed Chairman Jerome Powell made it clear that the central bank does not intend to slow down the pace of tightening yet and the final level of interest rates in America may be significantly higher than previous estimates. Now most analysts expect that the indicator will reach 5.00% next year. Such a scenario assumes several more cycles of aggressive rate hikes, which should ensure a steady growth of the dollar for at least several more months. However, why does the US currency ignore Powell's hawkish comments now and weaken in all directions, including against the yen? Sluggish economic data is to blame for everything. The report on employment in the non-agricultural sector of the United States published last week showed that the unemployment rate in the country rose to 3.7%. This further increased traders' fears about the recession and its possible side effects. If the US economy continues to show signs of slowing down, the Fed may well reduce the degree of its aggressiveness towards interest rates, even despite the populist promises of Powell. The likelihood that the US central bank will move to less hawkish actions is a strong negative factor for the dollar, which now overshadows any positive catalysts. What can bring the dollar back to growth? Yesterday, the dollar experienced another loud sell-off in all directions, including against the yen. The intraday low for the USD/JPY pair was the level of 146.08, which is 1.9% lower than last week's high. At the start of Tuesday, it found the strength to return to growth again. But its dynamics looks modest: at the time of release, the quote rose by 0.1%. The dollar is growing ahead of the midterm elections to the US Congress. It is also slightly supported by news from Japan. This morning it became known that Japanese Prime Minister Fumio Kishida is going to approve an additional stimulus budget of $198 billion. In addition, a summary of the BOJ's opinions was published on Tuesday. The report showed that during the October BOJ meeting, 8 out of 9 members of the central bank's board stressed the importance of maintaining an ultra-soft monetary policy, since price growth in the country is not sustainable. Only one official said that further acceleration of inflation could not be ruled out, and therefore the central bank should be ready to adjust its monetary rate. As we can see, hawkish sentiments are beginning to appear in the ranks of the BOJ. But one opinion is clearly not enough for the BOJ to radically change the strategy it has been following for almost ten years. Some analysts believe that the central bank may move to normalize its policy in the second quarter of 2023, when the term of office of the current head of the BOJ, Haruhiko Kuroda, ends. He is due to leave office in April. As long as Kuroda's dovish stance remains at the helm, the BOJ's position will remain unchanged. This could further weaken the yen, especially if rumors of a possible slowdown in the pace of tightening in the US are not confirmed. We can see the implementation of such a scenario in the near future – after this week's release of US inflation statistics for October. If the consumer price index drops slightly, the market will regard this as another signal of the continuation of an aggressive anti-inflationary campaign in America. In this scenario, the dollar can get a powerful boost for growth. Otherwise, if the inflation data turns out to be weaker than forecasts, we may witness a further decline in the green currency and a strengthening of the yen.       Relevance up to 09:00 2022-11-13 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/326502

The Japanese yen has steadied after posting strong gains on Tuesday. In the European session, USD/JPY is trading at 145.67, up 0.03%. Japan recorded stronger-than-expected gains in household spending and retail sales, but it’s questionable whether this positive trend will continue. Inflation hit 3% in September for the first time in over 30 years, raising concerns, but inflation is still at levels that other major central banks can only dream of.  The government is hoping that the finance package that was announced on Tuesday will reduce inflation and boost growth. Still, the outlook for the yen, which has been on a prolonged downturn against the dollar, remains grim. The Bank of Japan is unlikely to veer from its ultra-loose policy, despite the declining yen and rising inflation, unless inflation continues to rise. The Federal Reserve is expected to deliver additional oversize rate hikes, which will widen the US/Japan rate differential and likely push the dollar lower. At the BoJ’s meeting in late October, it was business as usual as policy makers maintained their dovish guidance. The BoJ remains an outlier amongst the major central banks, with a growing realization that any changes in policy will have to wait until Governor Kuroda’s term ends in April 2023. In the US, the dust from the mid-term election hasn’t yet settled. The Republicans are expected to retake the House, but with a very slim majority, while the makeup of the Senate is unlikely to be determined for several weeks. The election hasn’t had much impact on the movement of the US dollar, as investors are focussed on the US inflation report on Thursday.   USD/JPY Technical There is resistance at 147.07 and 148.45 145.28 and 144.20 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Summary:  When Sep CPI came lower than prior but higher than expected, S&P 500 index futures (ESZ2) had immediate reaction selling off ~3% and USDJPY - best carry trade among G10 yielding 5% - also rallied 100 pips so these two are expected to be most obvious ones to trade and show instant price action in terms of sensitivity to the data. First headline squawk highlighted in red that I saw this morning on my Bloomberg terminal was “BITCOIN DROPS BELOW $16,000…”. Last time Bitcoin (BTCUSD) dipped below $16,000 was 2 years ago and now it has fallen 77% from all time high $69,000 that was traded 1 year ago. Also to put this price action into perspective, Bitcoin/gold ratio has declined to just over 9 times compared to 35 times last year. When I checked on coinmarketcap.com, FTX - on the verge of potential bankruptcy - was the fourth biggest cryptocurrency spot exchange based on traffic, liquidity & volume, hence the risk-off sentiment has well and truly arrived as some of the notable crypto related stocks got hammered – COIN -10%, MSTR -20%, GLXY -16% while safehaven US dollar bid up broadly heading into October US CPI release tonight at 9:30pm. However we are yet to see significant systematic risk as VIX sitting at 26 with futures term structure of contango and high yield junk bond ETF (HYG) has not crashed trading 2.2% above recent low $70.40 as well as credit spread is also off 100bps below from the recent high 600bps. The current macro backdrop continues to focus and assess on the relative impact on inflation from rising real yield (10 year at 1.7%) or aggressiveness of interest rates hikes while Fed’s QT has been shrinking its balance sheet by about 3.2% from $8.9t to $8.6 in the last seven months. Even though last week’s unemployment rate looks to have bottomed from 3.5% to 3.7%, two of the mostly watched yield curves – 3m10y and 2y10y - still remain inverted at 9bps & 48bps respectively and we are not seeing substantial steepening happening yet therefore the futures implied terminal rate ~5% in 2Q next year may still have further rooms to move higher despite recent FOMC meeting’s down-shift signal and Powell’s cumulative tightening of 375bps, the most in one year since 1980.  The previous headline Sep CPI numbers 8.2% YoY showed major drivers were food, medical and shelter contributing nearly 1% each while energy and cars cooled. This time, energy may have gone up a bit and services would remain as a key area to watch as it has not stopped rising every month since Aug last year. The most recent PCE figures for Sep was 6.2% that is not only above Fed’s projection of central tendency 5.3%-5.7% but also far from its longer run target of 2%. After all, we have not seen sub 8% headline CPI since February number this year and actual result was less than estimate only once for July but given the estimate for tonight’s figures is anticipated at 7.9%, meeting this estimate may be sufficient for the equity market to find some relief rally. On 13 October, when Sep CPI came lower than prior but higher than expected, S&P 500 index futures (ESZ2) had immediate reaction selling off ~3% and USDJPY - best carry trade among G10 yielding 5% - also rallied 100 pips so these two are expected to be most obvious ones to trade and show instant price action in terms of sensitivity to the data. S&P 500 had a decent rebound last month digesting earnings as 456 companies have now reported with earnings surprise of 3% that is lowest in the last two years post Covid. S&P 500 forward earnings per share (EPS) estimated at 226 makes the PE ratio 16.6 times or 6% yield based on last night’s close 3,748 but again there-are-reasonable-alternatives (TARA) as 2 year treasury is at 4.6% and IG corporate bond ETF (LQD) giving nearly 6% with relatively lower implied volatility compared to SPY (13 vs 24). Lastly USDJPY is trading near a key level 145 that previously acted as resistance in September then turned into support level in the last two weeks. Correlation between USDJPY and US 2 year treasury yield remains high so the pair should be able to at least consolidate assuming 145 holds while long out-of-the-money call options could also work given 1 month implied volatility has fallen from 17 to 11 in recent weeks and 2 vol lower than realised volatility. Alternatively by taking more neutral to bullish view with possible Japan intervention, bull put spread (credit) could be considered using the same level 145 as the lower strike to long put and sell higher strike – say 148.50 that is half way between the recent high 152 and 145 – giving net premium of about 200 pips for one month expiry. Source: https://www.home.saxo/content/articles/forex/st-note---us-oct-cpi-preview-10112022

USDJPY comes under some selling pressure on Thursday amid a modest USD weakness. The Fed-BoJ policy divergence should act as a tailwind and help limit losses for the pair. Traders also seem reluctant and prefer to wait for the release of the crucial US CPI report. The USDJPY pair struggles to capitalize on the previous day's goodish rebound from the 145.15-145.10 support zone, or a nearly two-week low and meets with a fresh supply on Thursday. The pair remains on the defensive through the early European session and is currently placed near the daily low, just above the 146.00 round figure. A modest US Dollar downtick, amid some repositioning trade ahead of the key US macro data, turns out to be a key factor prompting some selling around the USDJPY pair. The downside, however, remains cushioned as traders seem reluctant to place aggressive bets ahead of the latest US consumer inflation figures, due later this Thursday. The crucial US CPI report will play an important role in determining the Fed's policy tightening path, which should influence the near-term USD price dynamics and provide a fresh directional impetus to the major. Nevertheless, the markets are still pricing in the possibility of at least a 50bps Fed rate hike move in December. In contrast, the Bank of Japan, so far, has shown no intentions to raise interest rates. Moreover, the BoJ remains committed to guiding the 10-year bond yield at 0%. In fact, BoJ Governor Haruhiko Kuroda reiterated on Thursday that the central bank must continue to underpin a fragile economic recovery with loose monetary policy. Kuroda added that economic uncertainty is extremely high and deeper negative rates are an option if needed. This marks a big divergence in comparison to a more hawkish Fed and supports prospects for the emergence of some buying around the USDJPY pair. Furthermore, the fact that the BoJ chief brushed aside hopes for any direct forex market intervention to safeguard the domestic currency adds credence to the positive bias. Hence, any subsequent slide might continue to attract some buyers and is more likely to remain limited, at least for the time being. That said, a convincing break below the 145.00 psychological mark will negate the constructive outlook.

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

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

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

Summary:  Equity and commodity markets seem to be on a risk-on frenzy for now, supported by the surprise weaker US CPI print, as well as China introducing 16 property stimulus measures at the weekend, following the easing of some Covid restrictions. However the market doesn’t have too far to look for the next catalysts that could continue the rally, stunt it, or see it take a haircut. Up next we watch US producer prices, and US retail sales, which may give the Fed further ammunition to slow down its pace of tightening if the numbers show the US economy is continuing to crack. UK’s outlook, Japan’s Q3 GDP growth rates, as well as China’s industrial production, retail sales, and fixed investment data are also key to watch. As well as corporate earnings from Nvidia and the Aussie dollar.   US eco data and news on tap; US producer prices, retail sales and big retail earnings Investors will be looking for further signs that point to a slowdown in inflationary pressures. In the October CPI release last week, we saw a fall in health insurance costs due to technical factors, which added to the slowing of the service component of core CPI. This is important to the calculation of core PCE, which the Fed watches most closely. As a result, this week investors will pay more attention to the October producer prices index (PPI) numbers on Tuesday, as they try to gauge if the service component of core inflation is slowing. Bloomberg consensus estimates PPI will rise 8.4% Y/Y and +0.3% M/M for core PPI or +7.2% Y/Y. If the numbers are weaker than this, it could provide further support to the equity market rally, as the Fed would garner more catalysts to slow its pace of hikes. Then on Wednesday, retail sales are on watch and are expected to have rebounded, rising 1% in October after stagnating the month earlier. On top of that, a bevy of large retailers, report earnings including Home Depot, Walmart, and Target, which will help investors gauge the health of the world's largest economy. Elsewhere in America, Canada will release inflation and housing starts data. Look for hints on the Fed’s hiking path in Fed speak this week Investors will get to gauge what the Fed’s latest thinking is, as we hear from a number of Fed officials this week, who will likely focus on the softer CPI print last week and if it’s changed their assessment of inflation and interest rate rates. Remarks from Fed Governor Christopher Waller will likely be a focus as Waller previously proposed not to pause, until core PCE falls below 3% on a monthly annualized basis. On top of that, speeches will be made from Neel Kashkari and Loretta Mester on Thursday G-20 meeting brings focus back on geopolitics and markets G-20 leaders will be meeting Bali, Indonesia this week on Tuesday and Wednesday, and the agenda is likely to be centered around geopolitical tensions and financial market risks. It is interesting to note that China has signaled the easing of its zero covid policy ahead of this event, despite the recent surge in cases. The meeting between Biden and Xi today will be key in the current cold war environment, especially with respect to the US tech controls and the stance on Taiwan. Other key areas of focus will be the Ukraine war, despite Putin’s lack of attendance at the event, as well as the global inflation concerns and what the global tightening wave means for financial markets. Lastly, climate change is likely to remain on the agenda, with progress stalling over the year as the focus shifted to meeting the world’s energy needs. Japan’s Q3 GDP and October CPI to see the drag from a weaker JPY Japan reports preliminary Q3 GDP on Tuesday, followed by the October CPI print on Friday. Growth is likely to weaken in the third quarter, with Bloomberg consensus looking at 1.1% QoQ print from 3.5% previously, mainly driven by a drag from net exports due to the surge in import prices. However, some support may be seen from private consumption with labor cash earnings and retail sales having stayed upbeat in the quarter. Meanwhile, business investment also likely improved, as suggested by large manufacturer’s Tankan report for the third quarter. The outlook also remains supported by the series of fiscal measures announced by the government, along with increased tourism. October CPI is likely to surge to fresh highs of 3.7% from 3.0% previously, with the core measure seen at 3.5% from 3.0% in September, but the outlook is likely improving as the Japanese yen recovers. UK’s medium-term fiscal outlook will be closely watched The UK updates markets on its fiscal plans in a week of reckoning following the collapse of Liz Truss’s administration. Chancellor of the Exchequer Jeremy Hunt on Thursday presents the medium-term outlook accompanied by updated economic forecasts. He’ll try to further restore investor confidence after his predecessor’s announcement of unfunded tax cuts created panic in markets, but spending cuts and tax rises remain on the horizon. While fiscal consolidation is still needed, excessive frontloading will mean more economic pain and backloading could impinge on government credibility. It’s a delicate balance, especially with double-digit inflation and recession concerns also on watch. China’s October activity data are expected to be weak October retail sales in China are expected to decelerate to +0.7% Y/Y according to the Bloomberg survey from +2.5% Y/Y in September as the surge in COVID cases and pandemic control restrictions took their toll on consumption. Industrial production is estimated to slow to +5.3% Y/Y in October from +6.3% Y/Y in September, amid Covid-related restrictions, slower auto production, and weak exports. Nvidia results in focus. Can its outlook and results continue to move its shares off its low? Nvidia (NVDA) is set to release third-quarter earnings on Wednesday, November 16 with analysts expecting revenue of $5.84bn down 18% y/y and EBITDA of $2.1bn down from $3.2bn a year ago and EPS of $0.71 down 30% from a year ago. Nvidia shares appear to be gaining traction of late, so its results will be watched closely, especially its outlook. If they are better than expected, you could see sentiment remain supported and it shares could continue to rebound. NVDA shares have risen about 40% in four weeks, but its shares are still down 52% from its high. Nvidia has been suffering amid restricted chip sales to China and declining PC demand. Pay close attention to if its results meet or exceed expectations, its outlook and what it sees as the potential full effects on the US/China chip restrictions. For detailed analyst, refer to Saxo’s Head of Equity Strategy, Peter Garnry’s note. AUDUSD is now up 9% from its low, gaining extra legs on China’ property rescue package  The Aussie dollar is gaining on the back of China's property sector rescue package. China introduced 16 property measures to address the developer liquidity crisis; from blanket debt extensions, to loosening down-payment requirements for homebuyers. On top of that that, China’s eased covid restrictions; shortening to five-day quarantines, which is aimed at reducing the economic impact of Covid Zero, rather than relaxing restrictions. While the market still awaits further easing developments, the market is buoyed on forward looking hopes that the AUD will continue to be bid on commodity demand picking up. As commodity hope-demand picks up, so have respective commodity prices; the iron ore (SCOA) price is back above US$90 after rising 6% last week, the copper price lifted about 5% last week, and the lithium price is also higher, with carbonate prices up 118% year-to-date. The next key event to watch for the Aussie dollar is the RBA meeting minutes; released Tuesday November 15, which should give more clues on the course of the central bank’s hikes after it made a lower-than-expected 25bps rate hike this months. Major China Internet companies are scheduled to report this week Meituan (03690:xhkg) kicks off the busy earnings calendar of  China Internet companies on Monday, followed by Tencent (00700:xhkg) on Wednesday, Alibaba (09988:xhkg) on Thursday, and JD.COM (09618:xhkg) on Friday. Analysts estimates for top line growth in Q3 are subdue on weak consumption recovery and macro environment. Slow gross merchandize value (GMV) growth during the Singles’ Day festival may point to sluggish Q4 outlook. Alibaba's GMV growth during the Singles' Day festival was flat. JD.COM has not yet announced its numbers except saying GMV had positive growth Y/Y during the period (from Oct 31 evening to Nov 11 end of day). According to estimates, eCommerce platform GMV grew about 14% Y/Y but the large traditional eCommerce platforms were estimated to see GMV growth at just around 3% Y/Y.   Key company earnings releases   Monday: Meituan, Sonova, Tyson Foods, Nu Holdings, Trip.com, DiDi Global Tuesday: Infineon Technologies, Vodafone, Alcon, Walmart, Home Depot, Sea Ltd, Commonwealth Bank Wednesday: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase Friday: JD.com   Key economic releases & central bank meetings this week Monday, Nov 14 US:  New York Fed Survey of Consumer Expectations (Oct) Eurozone: Industrial Production (Oct) Tuesday, Nov 15 US: PPI (Oct) US: Empire State Manufacturing Survey (Nov) Eurozone: GDP (Q3) Germany: ZEW survey (Nov) UK: Employment (Oct) Japan: GDP (Q3) China: Retail Sales (Oct) China: Industrial Production (Oct) Wednesday, Nov 16 US: Retail Sales (Oct) US: Industrial Production (Oct) UK: CPI, RPI & PPI (Oct) Thursday, Nov 17 US: Jobless claims (weekly) US: Housing Starts (Oct) Eurozone: HICP (Oct, final) Friday, Nov 18 US: Existing Home Sales (Oct) UK: Retail Sales (Oct) Japan: CPI (Oct) Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-14-nov-2022-14112022

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

“Financial market stability is the most important factor to consider when it comes to exit,” mentioned Bank of Japan’s (BOJ) executive director Shinichi Uchida early Thursday. The Senior BOJ Official also mentioned that a rate hike before balance sheet adjustment possible in an exit. Earlier in the day, BOJ Governor Haruhiko Kuroda also defended the Japanese central bank’s easy-money policy while stating, “(It is) Important to continue monetary easing to support economy.” Additionally, Deputy Governor Hiroshi Nakaso mentioned that the central banks must remove emergency support measures once financial crises are over to avoid causing moral hazard in the market. “Investors have come to assume that central banks will always come to the rescue when financial markets destabilise because of the massive monetary support deployed during the COVID-19 crisis,” stated BOJ’s Nakaso in a seminar hosted by the University of Tokyo and International Monetary Fund. USDJPY prints two-day uptrend Given the dovish comments from the BOJ officials, as well as the firmer US Treasury yields, USDJPY picks up bids to print mild gains around 139.60. Also read: USDJPY Price Analysis: Bears eye a breakout of the daily coil Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

The dollar-yen pair earlier this week updated a three-month price low, reaching 137.70. However, the USD/JPY bears failed to settle in the area of the 137th figure - dollar bulls stopped the downward momentum and turned the pair 180 degrees. In general, the trajectory of the pair's movement correlates with the trajectory of the US dollar index. Once again, we are convinced that the yen is not an independent player against the greenback. The Japanese currency certainly has its trump card, but it rather serves as a "stop tap". We are talking about a currency intervention, the risk of which increases along with the USD/JPY rate. In this context, we can say that the Japanese government controls the upper limit of the price range within which the pair is traded. According to most analysts, this limit is in the area of the 150.00 mark: exceeding this target is fraught with consequences. As for the lower limit of the conditional price range, everything depends on the "well-being" of the US currency. USD/JPY bears are forced to follow the greenback, which determines the end point of any downward surge. The yen has no arguments of its own to strengthen – primarily due to the divergence of the Federal Reserve and the Bank of Japan rates. The events of the last days serve as evidence of this. They eloquently illustrated the stated disposition, the essence of which boils down to an uncomplicated conclusion: the downtrend ends exactly where the dollar recovery begins. As you know, the US currency significantly sank throughout the market after the release of the latest data on the growth of inflation in the United States. The market started talking about the fact that the Fed will slow down the pace of monetary policy tightening at the next meeting, which will be held in December. A little later, these assumptions were confirmed by many representatives of the Fed: according to them, the central bank can afford to reduce the speed, while maintaining the final goal at the same level (that is, above the 5.0% mark). At first, traders mostly focused their attention directly on the fact of slowing down the pace of tightening of the monetary policy. But then they "listened" to the signals from the Fed representatives, who made it clear that no one was going to curtail the hawkish course – only the speed of achieving the goal slows down. In particular, Christopher Waller, a member of the Board of Governors, said that the markets should now pay attention to the "end point" of the rate hike, and not to the pace of its achievement. At the same time, he noted that the end point is probably "still very far away." Some of his colleagues also stated that, firstly, inflation in the United States is still at too high a level; secondly, it is impossible to make any long-term organizational conclusions based on only one report. Such messages eased the pressure on the dollar, and, accordingly, cooled the ardor of bears of the USD/JPY pair. Turning to the upside, the pair gradually began to gain momentum, rising by 250 points in two days. At the same time, traders ignore Japanese statistics, even when it comes to the inflation report. Key data on the growth of inflation in Japan was published during the Asian session on Friday. The report reflected a record growth of key indicators. For example, the overall consumer price index rose by 3.7% in October, which is the strongest growth rate of the indicator since 1982. The core CPI, which does not include fresh food, but includes energy prices (petroleum products), also updated the 40-year record. The consumer price index, excluding food and energy prices, jumped 2.5% year-on-year in October. All components of the above report came out in the green zone, significantly exceeding the forecast levels. It is worth noting that inflation has been exceeding the BOJ's 2% target for seven months, but at the same time BOJ Governor Haruhiko Kuroda continues to "hold the line", maintaining a soft monetary policy. This, in fact, explains such a phlegmatic reaction of USD/JPY traders to the report published today. Market participants reasonably doubt that Kuroda will toughen his rhetoric in response to the published figures. Thus, the fate of the USD/JPY downward trend depends solely on the behavior of the US currency, which is gradually beginning to "come to its senses". After all, even taking into account the slowdown in the rate hike, the Fed continues to act as an ally of the greenback, and even more so in tandem with another, which cannot count on the support of the BOJ. In my opinion, the rhetoric of the Fed representatives will only tighten ahead of the December meeting (at least in the context of determining the upper limit of the current cycle), while Kuroda will once again ignore the inflation report, declaring the preservation of the accommodative policy. All this suggests that the USD/JPY pair may demonstrate a more confident growth in the near future – at least to the Tenkan-sen line on the daily chart, which corresponds to the 142.40 mark. If we talk about the medium term, the main target here is 145.50: at this price point, the upper line of the Bollinger Bands indicator coincides with the upper limit of the Kumo cloud on the D1 timeframe. Relevance up to 02:00 2022-11-19 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/327451

GBPJPY struggles to preserve its modest gains to the weekly high and retreats below mid-166.00s. Stronger domestic inflation figures, the cautious mood underpin the safe-haven JPY and cap gains. A bleak outlook for the UK economy overshadows upbeat UK Retail Sales and acts as a headwind. The GBPJPY cross surrenders a major part of its intraday gains to the weekly high and retreats below mid-166.00s during the early European session on Friday. A combination of factors provides a modest lift to the Japanese Yen, which, in turn, acts as a headwind for the GBPJPY cross. Data released on Friday showed that Japan’s core consumer inflation (excluding volatile fresh food prices) accelerated to the highest level in 40 years and rose 3.6% YoY in October. This, along with the cautious mood, is seen driving some haven flows towards the JPY. That said, the Bank of Japan's dovish stance keeps a lid on any meaningful upside for the JPY and helps limit the downside for the GBPJPY cross. In fact, BoJ Governor Haruhiko Kuroda reiterated on Friday that the central bank will stick to its monetary easing to support the economy. In contrast, the Bank of England is expected to continue raising rates to combat stubbornly high inflation. The bets were reaffirmed by Wednesday's release of hotter-than-expected UK consumer inflation figures, which showed that the headline CPI accelerated to a 41-year high in October. Furthermore, BoE Governor Andrew Bailey said on Wednesday that Britain's very tight labour market was a key reason why further interest rate increases were likely. This, along with mostly upbeat UK monthly Retail Sales figures for October, offer support to the GBPJPY cross. That said, a bleak outlook for the UK economy is holding back bullish traders from placing aggressive bets around the GBPJPY cross. After processing Chancellor of the Exchequer Jeremy Hunt's new figures in the Autumn Statement, the UK Office for Budget Responsibility (OBR) has published new forecasts that predict UK GDP to shrink by 1.4% next year, as opposed to the 1.8% growth in its previous foercast, in March. The mixed fundamental backdrop warrants caution before positioning for an extension of the recent bounce from the 163.00 mark, or the monthly low touched last Friday. Traders now look to speeches by BoE's external MPC members - Catherine Mann and Jonathan Haskel - for some impetus. Nevertheless, the GBPJPY cross remains on track to register its first weekly gains in the previous three.

Inflation in Japan soared to the highest levels in more than 30 years, to 3.7% in October, up from 3% printed a month earlier. High inflation print sure revived the Bank of Japan (BoJ) hawks, and the calls for a policy rate hike, and kept the dollar-yen below the 140 level, but it’s unsure whether the BoJ will give up on its ultra-soft policy stance. Therefore, if the US dollar picks up momentum, which will certainly be the case, the USDJPY could easily rebound back above its 50-DMA, which stands near 145. US And the reason I think the US dollar will recover is because most Fed members remain relatively hawkish regarding the Fed’s policy tightening. Plus, option traders are building topside structure over the one-month tenor that covers the next US inflation report and the Fed’s next policy meeting in December. Stock market So, the ambiance in the stock markets is not as cheery as it was at the end of last week. UK In the UK, the autumn budget statement went happily eventless. Gilts rallied, pound saw limited sell-off, while energy companies’ reaction to windfall taxes remained muted. Watch the full episode to find out more! 0:00 Intro 0:30 Japan inflation soars, Mr. Kuroda! 1:34 Should you prepare for another USD rally? 3:32 Market mood turns… meh. 4:01 The retail roundup 6:11 The happily eventless UK budget 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.   #hawkish #Fed #USD #recovery #US #retail #sales #Walmart #Target #Macys #HomeDepot #Lowes #Alibaba #earnings #UK #Budget #GBP #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

Changes keep happening. Payments keep evolving. Inflation is also increasing, even in Japan. Layoffs at larger companies like Amazon are also on the rise. In this article: The 100 People list Transforming Business Business owners' Amazon Cross-border payments Japanese economy Goldman Sachs Chief Information Officer is in Top100 Goldman Sachs tweets about the 100 People list Transforming Business by Insider. .@BusinessInsider's 2022 list of Top 100 People Transforming Business recognizes our Chief Information Officer, Marco Argenti, among other game-changing leaders! Read more about how Marco is breaking new ground on Wall Street through technology: https://t.co/qDGLAooKCq — Goldman Sachs (@GoldmanSachs) November 17, 2022 Every year, Insider surfaces 100 leaders across 10 industries who are driving unprecedented change and innovation. The T100 does more than highlight career milestones. Goldman Sachs Chief Information Officer, Marco Argenti is on this list. Recognition of one of the directors in the field of finance is important for personal positioning and thus also for the company. Business owners' optimism UBS tweets about business owners' optimism. Despite recession fears, business owners continue to fill post-COVID labor gaps and are still optimistic about their businesses for the next year. #UBSInvestorSentiment #shareUBS — UBS (@UBS) November 17, 2022 There is no doubt that from 2020, companies, markets and entire economies are struggling. The pandemic has had a negative impact on employment, and the current inflation is also not encouraging. Despite the fear and all the difficulties, companies are getting ahead of it and are still hiring new employees. According to UBS bananas, business owners are very optimistic about the future. This is of particular importance for the labor market, as it affects not only the situation of households but also entire economies. Layoff in Amazon CNBC Now quotes the statement of Amazon CEO Andy Jassy. BREAKING: Amazon CEO Andy Jassy says layoffs will continue into next yearhttps://t.co/QEL5Diikjs — CNBC Now (@CNBCnow) November 17, 2022 The employment situation at Amazon is unstable. The company began informing workers this week that they were being let go. CEO Andy Jassy said this will continue next year. The cuts are being made as Amazon reckons with a worsening economy. Amazon isn't the only one struggling. Other giants also decided to reduce staffing. Cross-border payments IMF tweets about possible developments in cross-border payments. Cross-border payments are on track to be transformed by digital money. Learn how in F&D. https://t.co/uXmnOnQd8g pic.twitter.com/PwRn2wW1ki — IMF (@IMFNews) November 18, 2022 The development in this sector is very fast, but cross-border payments are still the Achilles' heel. We have all felt the frustration of sending money abroad. It takes time. It’s expensive. It turns out that there may be development in this payment sector. For people who love to travel or those who live in several countries, such a possibility may be very desirable. Japan CPI Reuters Business discusses the situation in Japan in its post. Japan's core consumer inflation accelerated to a 40-year high in October, driven by currency weakness and imported cost pressures that the central bank shrugs off as it sticks to a policy of ultra-low interest rates. Read more: https://t.co/AoJ6rkjSBw pic.twitter.com/DGaEal1df9 — Reuters Business (@ReutersBiz) November 18, 2022 Many economies around the world have been struggling with high inflation since the beginning of this year. Japanese inflation has been low for a long time. In October, it rose for the first time, reaching its highest level in 40 years. The activities of the Bank of Japan were dovish, which largely translates into the yen (JPY) exchange rate and the economic situation of the country. The Bank of Japan has made several interventions in the foreign exchange market, but economists do not expect the BOJ to join a global trend of raising interest rates. The more the question arises, will there be another intervention?

The Japanese yen has stabilized on Tuesday and is trading at 141.58, down 0.37%. USD/JPY rocketed higher on Monday, gaining 1.2%. BoJ Core CPI jumps to 2.7%  With inflation continuing to gain traction in Japan, there shouldn’t have been much surprise that BoJ Core CPI accelerated in October for a ninth successive month. Still, the 2.7% gain was much stronger than the prior reading of 2.0% and the consensus of 2.2%. The reading comes on the heels of National Core CPI, which rose to 3.6%, up from 3.0%. The Bank of Japan is unlikely to change its ultra-loose policy, even with inflation rising and a weak yen contributing to higher costs for households and businesses. The yen is well below the highs we saw in late October, when USD/JPY breached the 150 level and triggered a currency intervention. I am doubtful that such unilateral moves can have a lasting effect, but it is a tool that the government likes to resort to in order to dissuade speculators from pushing the yen lower. What may lead to a change in BoJ policy is the changing of the guard at the central bank. Governor Kuroda is scheduled to step down in April, after a 10-year stint as head of the bank. There have been calls to re-examine the bank’s policy, which has been in place for years. Sayuri Shirai, a former BOJ board member and candidate for a deputy BOJ governor, does not favor sharp rate hikes but has urged the bank to review its stimulus policy, show some flexibility and simplify its communication with the markets. This kind of thinking will be a breath of fresh air at the BoJ, whose policy meetings are usually drab affairs that are ignored by the markets, as the BoJ simply reiterates its policy and expresses concern about the decline in the yen. The most recent US inflation report was softer than expected, sending equity markets flying and the US dollar sliding lower. The Fed has responded with a steady stream of hawkish statements from Fed members, which has succeeded in dampening risk appetite and stabilizing the dollar. Fed member Mary Daly weighed in on Monday, stating that inflation remained unacceptably high and projecting that the fed funds rate will peak at 4.75%-5.00%   USD/JPY Technical USD/JPY is testing support at 141.55. Below, there is support at 140.77 There is resistance at 142.74 and 143.60 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.  

Although markets are sluggish ahead of the upcoming holiday and long weekend in the US, stock indices are rising, while Treasury yields and dollar are falling. This is mainly due to the slightly less hawkish comments from Fed speakers this week, which is in contrast with the statement of St. Louis Fed President James Bullard last week that stressed that interest rates should reach at least 5-5.25%. San Francisco Fed chief Mary Daly also pointed out the need to be mindful of delays in the transmission of policy changes, and Atlanta Fed President Raphael Bostic stated that an additional tightening of 75-100p would be justified. So far, the rate forecast is stable. There is a 75% chance of a 50p increase, another 50p in February, and a peak to 5.06% by June. This is the benchmark that is currently guiding the markets. Today is packed with important statistics from the US. The first one will be the report on orders for durable goods, which will reflect the state of the industrial sector and consumer demand. Next is the consumer confidence indices from the University of Michigan, followed by the Fed minutes, where players will be looking for signals of a dovish reversal by the Fed. There are no signs that the dollar will resume rising. USD/CAD The slowing Canadian economy has not yet led to any noticeable deflationary pressure. The labor market is strong, with employment and wage growth being higher than that of the US. Retail sales also rose 1.5% m/m in October, which means that the Bank of Canada has more room to maneuver than the Fed and so far can implement a policy of containing inflation without looking at the rate of economic growth. Bank of Canada Governor Tiff Macklem will be giving a speech today, where markets expect to see a similar position to that of the Fed. However, this is likely to rule out strong moves. Regarding the loonie, the latest CFTC report showed that cumulative short positions declined by 402 million to -973 million, which means that there is a slow shift in sentiment. But overall the loonie remains bearish, with the settlement price pointing downwards and below the long-term average. It has a chance to strengthen. The possible rise of USD/CAD will end in the resistance area of 1.3500/30, followed by an attempt to test the local low of 1.3224. Chances for a deeper decline have become higher, with the target being the technical support at 1.30. USD/JPY Core CPI rose 3.6% y/y in October, 0.6% higher than that of September's. The data has risen for the 14th consecutive month, and the rate of growth is already higher than in 2014, when the sales tax was introduced to break out of the deflationary squeeze. By all indications, the time for deciding whether to end the stimulus programs is approaching. Last November 10, Prime Minister Fumio Kishida met with Bank of Japan Governor Haruhiko Kuroda, which resulted in new signals. Kuroda expressed the BoJ's position that a unilateral sharp depreciation of the yen is not welcome. This means that raising the yield ceiling for 10-year bonds from the current 0.25% is rejected, as is the ending of QQE. The rising inflation and ruling out of the BOJ of rate cuts for the time being sends a clear signal to investors who are selling the yen. As a result, the net short positions continued to decline, falling by 548 million to -5.909 billion during the reporting period. The settlement price is also reversed downward. For now, there is less reason for USD/JPY to resume its record rise as trading is highly likely to be sideways. There is also little chance that it will move beyond the technical resistance at 143.12, unless there are clearer signals from the Bank of Japan.     Relevance up to 07:00 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/327882

Crypto Industry News: Despite Japan's uncertainty about whether to issue a central bank digital currency (CBDC), the Bank of Japan (BoJ) continues to experiment with the potential of a digital yen. Japan's central bank has partnered with three megabanks and regional banks to conduct a pilot CBDC issuance, local news agency Nikkei reported. The pilot program aims to provide demonstration experiments for the issuance of Japan's national digital currency, the digital yen, starting in spring 2023. As part of the process, the BoJ is expected to work with major private banks and other organizations to detect and resolve any issues with customer deposits and withdrawals in bank accounts. According to the report, the pilot program will test the offline functionality of a possible Japanese CBDC, focused on payments without the internet. Japan's central bank plans to continue its CBDC experiment for about two years and decide to issue a digital currency by 2026, the report notes. The news comes as countries around the world are increasingly launching CBDC research and development initiatives, with China leading the way. Technical Market Outlook: The BTC/USD pair has made a new yearly low at the level of $15,477 as the bearish pressure is still strong. There is no indication of the down trend on Bitcoin to terminate or reverse, so the next target for bears is seen at the level of $13,563 (2019 high). The bulls are trying to bounce and they broke above the local trend line already ( $16,201is the trend line resistance level), the next technical resistance is seen at $17,103. The momentum bounces from the extremely oversold market conditions as well and is currently positive, so the bounce might extend higher. Weekly Pivot Points: WR3 - $16,881 WR2 - $16,477 WR1 - $16,299 Weekly Pivot - $16,072 WS1 - $15,895 WS2 - $15,667 WS3 - $15,263 Trading Outlook: The down trend on the H4, Daily and Weekly time frames continues without any indication of a possible trend termination or reversal. So far every bounce and attempt to rally is being used to sell Bitcoin for a better price by the market participants, so the bearish pressure is still high. The key long term technical support at the psychological level of $20,000 had been violated, the new swing low was made at $15,555 and if this level is violated, then the next long-term target for bulls is seen at $13,712. On the other hand, the gamechanging level for bulls is located at $25,367 and it must be clearly violated for a valid breakout in the long term.   Relevance up to 09:00 2022-11-25 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/302347

Summary:  A quiet overnight session with the Thanksgiving holiday, and most assets remained in consolidation after the FOMC minutes-driven move the day before. China’s zero Covid still in focus as reports suggest that Beijing may go in a lockdown. The US dollar held on to its recent losses, and bets for the December Fed rate hike in favour of a 50bps move. Sweden’s Riksbank hiked 75bps and the pressure on Bank of Japan to tighten policy also remains with Tokyo CPI touching a new 40-year high. Crude oil still below key levels, while Gold and Silver are testing key resistances. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) Closed for the Thanksgiving holiday. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Closed for the Thanksgiving holiday. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index gained 0.8% on Thursday following China’s State Council’s call on the People’s Bank of China (PBOC) to cut the reserve requirement ratio (RRR). In addition, leading Chinese banks offered more than RMB 270 billion in credit facilities to support private enterprise developers. Chinese developers were top performers in the benchmark index, with Country Garden (02007:xhkg) jumping 20%, Longfor (00960:xhkg) up 12%, and Country Garden Services (06098) up 11%. Hang Seng TECH Index climbed 0.8%. Xiaomi was the laggard among tech peers, falling 3.6% after reporting Q3 results. Market sentiment was tempered by the rise of daily Covid cases to an all-time high of 31,444 in mainland China. CSI 300 edged down by 0.4%, driven by large state-owned enterprise names that consolidated recent strong gains. FX: Dollar held on to its losses in a thin trading day The dollar index traded steady below 106 on Thursday amid thin trading markets with US closed for Thanksgiving. The reaction to a dovish read of the FOMC minutes has been a significant slide in USD, which along with higher equities and lower bond yields, suggest financial conditions continue to ease since that softer CPI release. This is sending warning signals on inflation and Fed members may need to be more hawkish to prevent that. Lower US yields, and still-steady expectations of a BOJ pivot, have meant a stronger Japanese yen, with USDJPY now below 139. GBPUSD touched 1.2150, the highest levels since early August. Crude oil (CLZ2 & LCOF3)   Demand concerns, especially from China’s zero covid, continued to underpin the oil markets. A record high in the number of cases and reports that Beijing may go back in a lockdown show the difficulty of opening up the economy. US gasoline demand is also weakening as the travel season ends, and there are signals of overall demand weakness globally after massive tightening this year. This saw oil prices remain below key levels, with WTI still around $78/barrel and Brent around $85. Meanwhile, the proposed price caps on Russian oil continues to cause concern. EU diplomats are locked in negotiations over how strict the mechanism should be. Poland rejected USD65/bbl, while shipping giant Greece said it doesn’t want it below USD70/bbl. Gold (XAUUSD) and Silver (XAGUSD) testing key resistances A dovish FOMC read, along with softer US economic data from the flash PMIs, have returned the focus again on precious metals. Gold tested $1735 support again this week but is now back at over $1750-levels and testing the resistance at $1757. Break above will bring $1765 in focus, but lack of ETF buying still makes it hard to confirm the reversal of the short-term downtrend. Silver is also at key resistance level of $21.50.   What to consider? Sweden’s Riksbank hiked 75bps, more in the pipeline The Riksbank’s 75bps rate hike was larger than the 50bps signalled at the September meeting, and brings its policy rate to 2.5%, the highest since the GFC. Worsening inflation outlook, with October’s inflation at 9.3% and suggesting wage pressures as well, more rate hikes potentially remain in the pipeline. Peak rate is closer to 3% for now, but the bank showed an alternate scenario where persistent inflation above 3.5% could prompt the peak rate move higher from 2.84% to 4.65%. Japan’s Tokyo CPI above expectations again, more pressures to come Japan’s Tokyo inflation for November rose to its highest level in 40 years, suggesting that price pressures have not peaked yet. Tokyo CPI came in at 3.8% YoY from 3.5% previously, while the ex-food was at 3.6% YoY (prev 3.4%) and ex-food and energy was at 2.5% YoY (prev 2.2%). Meanwhile, Asia LNG prices are rising again, as colder temperatures in Europe heat up the competition to secure LNG cargoes again. This suggests price pressures will likely continue, and Bank of Japan could still likely consider tweaking its yield curve control policy. Anwar Ibrahim sworn in as Malaysia’s PM, political chaos to stay Malaysia’s new PM Anwar Ibrahim plans to test lawmakers' support for his leadership with a confidence vote on Dec 19, as he seeks to prove he commands a majority. His party, Pakatan Harapan, got the most but only 82 seats in the 220-seat parliament and lacks a majority. The political divide in the country is getting worse, suggesting policy paralysis that can likely drive foreign investors away. Local governments across China resorted to lockdowns as Covid cases surged to record highs As new Covid cases hit new highs day after day, local governments are torn between the urge to avoid full lockdowns and the instruction to adhere to the zero-Covid policy. Over 40 cities across China, including Guangzhou, Zhengzhou, Chongqing, Shanghai, and Beijing have to resort to some sort of movement restrictions or lockdown.   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/apac-market-insights-25-nov-2022-25112022

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

USD/JPY has reversed directions and posted gains on Friday, after three straight losing sessions. The yen is trading at 139.39, up 0.54% on the day. US markets are open for limited hours due to the Thanksgiving holiday, and there are no US releases on the schedule. Tokyo inflation hits 40-year high The caption above may sound dramatic, but inflation in Japan is far from the levels we’re seeing elsewhere, such as double-digits in the UK and the eurozone. Still, Japan finds itself dealing with rising inflation, after decades where deflation seemed a permanent part of the economic landscape. Tokyo Core CPI rose to 3.6% in November, nudging above the consensus of 3.5% and the consensus of 3.4%. This marked the highest reading since April 1982. There’s no arguing that core inflation isn’t accelerating – Tokyo Core CPI has strengthened for six straight months and BOJ Core CPI for ninth consecutive months. This extended uptrend belies BOJ Governor Kuroda’s insistence that cost-push inflations is only temporary and that an ultra-accommodative policy is needed to ensure that inflation becomes sustainable. The BOJ is not showing any inclination to change policy and the recent improvement in the yen means one less headache, as the need for a currency intervention has diminished. It’s likely to be business as usual for the BOJ until the spring of 2023, with two key developments on the calendar – wage negotiations and a new governor for the central bank. The Federal Reserve remains in a hawkish mode, sort of. The Fed’s stance, reiterated in this week’s minutes, remains somewhat mixed. On the one hand, the Fed has signalled that it will reduce the size of rate hikes “soon”, and the markets have priced in a ‘modest’ 50 bp hike in December after four consecutive 75-bp increases. At the same time, some Fed members are projecting that the terminal rate will be higher than previously expected. This mixed message has created uncertainty about what it means for the US dollar – will “lower for longer” raise risk sentiment and weigh on the dollar, or will investors view the Fed as remaining hawkish and stick with the US dollar? We’ll have to wait and see how the markets answer this question.   USD/JPY Technical USD/JPY faces resistance at 139.62 and 140.37 There is support at 138.43 and 137.19 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

US 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.  

The covid situation in China remains in the spotlight. The topic of interest rates is addressed this time from the point of view of an ordinary citizen, not economies and central banks. In this article: The impact of Covid restrictions in China on farmers Japan Software/IT Service Sector What to do with money with rising rates New user signups to Twitter Destroy crops Ole S Hansen tweets about the impact of Covid restrictions in China on farmers China’s strict Covid controls are leaving farmers with no option other than to destroy crops they can no longer sell, triggering concerns about food shortages and stirring outrage on social media https://t.co/O7QzUewW4d via @markets — Ole S Hansen (@Ole_S_Hansen) November 28, 2022 The situation caused by the covid pandemic has significantly affected the codes of economies around the world. The recent spike in virus infections in China has prompted a strong response from the government, which has taken specific measures. From creating covid camps to strong restrictions. What is happening in the second world economy affects the situation on global markets and local markets. The author of the tweet emphasizes that this situation has a negative impact on farmers who are deprived of a market. Farmers, unable to sell and unable to store, decided to destroy the crops. Such actions will have an effect on food production, may increase imports and also directly increase costs for farmers themselves. Japan Software/IT Service Sector UBS tweets about Bank of Japan forecasts. What is the Bank of Japan’s outlook for the software sector? Find out the results of their short-term industry survey in our #UBSResearch report. #shareUBS. — UBS (@UBS) November 28, 2022 What is the Bank of Japan’s outlook for the software sector? The answer to that question is in this tweet. Investments do not have to take place in the financial markets. Investment is also an investment in development and science. We can expect Bank of Japan to plan investments in software. What to do with cash now? Morningstar Inc tweets about Christine Benz and Susan Dziubinski discussion about the best places to park your cash. A silver lining amid rising interest rates: Many savings vehicles now offer higher yields than they have in a long time.Watch as @christine_benz and Susan Dziubinski discuss the best places to park your cash while interest rates rise. https://t.co/Ul5qbLkRDu — Morningstar, Inc. (@MorningstarInc) November 27, 2022 Fighting inflation is hard. Rising interest rates have a negative impact on the average citizen. Everyone tries to protect themselves financially, but in such situations it is difficult. Therefore, everyone decides to save as much as possible. It's important not to go overboard with cash savings, mainly because it's dead money when adjusted for inflation. An online savings account is a good option for those who are looking for a profit but need regular access to this money. Whether this option is the best can be found out from this tweet. 66% Up Reuters Business in its tweet recalls Musk's words. WATCH: Elon Musk said new user signups to Twitter were at an 'all time high,' averaging over two million per day in the last seven days as of November 16, up 66% compared to the same week last year https://t.co/ta1vW74fgI pic.twitter.com/zYJaKjHzTB — Reuters Business (@ReutersBiz) November 28, 2022 Ever since Elon Musk took over Twitter, there's been a lot of talk about it in the media. This time, information about new user signups to Twitter appeared in the media. They turned out to be high, which is why the new CEO boasts about it.

After strong gains last week, the Japanese yen has extended its gains on Monday. USD/JPY is trading at 138.23 in the European session, down 0.67%. Yen jumps on China unrest China has applied its Covid-zero policy with a heavy hand, but Covid cases continue to rise nonetheless. The mass lockdowns have triggered widespread protests, which some injuries reported. The unrest is likely to exacerbate supply-chain disruptions and dampen domestic demand, which has hurt risk appetite. This has resulted in flows to haven assets, such as the Japanese yen. USD/JPY dropped as much as 1% earlier today, but the dollar has managed to recover some of these losses. The yen also received a boost after Bank of Japan Governor Kuroda said that the tightening labour market will push wages higher. Kuroda has long insisted that rising inflation has driven by import costs and the weak yen and is transient. Higher wages would indicate that inflation is sustained, which could result in the BoJ making some changes in its ultra-loose policy. After a short trading week in the US due to the Thanksgiving holiday, the markets will have plenty of US events to digest this week. CB Consumer Confidence will be released on Tuesday, with the November report expected to dip to 100.0, down from 102.5. The key release of the week is nonfarm payrolls on Friday, which could have a major impact on the Fed’s decision to raise rates by 50 or 75 basis points at the December 14th meeting. Currently, the likelihood of a 50-bp hike is about 75%, versus 25% for a larger 75-bp increase. Investors are viewing a 50-point move as a dovish pivot, which has been putting pressure on the US dollar. Still, even a 50-bp hike would set a record for yearly rate hikes of 4.25%.   USD/JPY Technical There is resistance at 139.82 and 141.58 There is support at 137.39 and 135.63 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.  

Labour market conditions tightened further last month, but we don't see any signs of wage growth yet. Meanwhile, goods consumption is weakening. Thus, the Bank of Japan will likely stick to its policy stance at its December meeting, despite expectations of higher inflation over the next few months   2.6 Jobless rate    Higher Labour market conditions remain solid, but there are still no imminent signs of wage growth The unemployment rate in Japan stayed at 2.6% in October for the second consecutive month, slightly above the market consensus of 2.5%, but the job-to-application ratio edged up to 1.35 as expected. We believe that the labour market will continue to recover over the next few months. Hospitality service jobs are likely to grow as the number of international and domestic tourists rise, while manufacturing employment will likely turn weak due to the weak manufacturing outlook suggested by muted PMI and export data. Wages in services tend to be lower than in manufacturing, so the unemployment rate is likely to fall, but we do not expect overall wage growth.  The jobless rate remained low in October CEIC Retail sales rose marginally Retail sales grew 0.2% month-on-month seasonally adjusted in October (vs a revised 1.5% in September) but fell short of the market consensus of 1.0%. Looking at the details, apparel sales rose the most (3.9%) and food/beverage sales also rose solidly (1.8%). However, durable goods, such as motor vehicles (-6.8%) and household machines (-0.4%), and fuel (-0.7%) declined, probably due to higher prices. Retail sales have been solid in recent months, mainly due to the easing of Covid restrictions and supply constraints on car production. However, we believe that goods consumption will likely turn weak over the next few months due to a rapid rise in prices, while services consumption boosted by tourism is likely to continue its recovery.  Retail sales growth slowed in October CEIC The Bank of Japan will stay pat at its December meeting In Japan, forward-looking price indicators suggest a further rise in inflation as we approach the end of the year, but the stabilised Japanese yen and global commodity prices will likely lighten the burden on inflation next year. The recent sharp rise in inflation is mainly driven by supply-side factors, so it won't change the policy stance of the Bank of Japan. TagsRetail sales Labour market Bank of Japan 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  

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

On Wednesday, two goposaraku may catch the attention of investors. The Bank of Canada will announce its monetary policy decisions and Japan will announce its GDP data. Bank Of Canada’s decision The Bank of Canada is expected to conclude a historic year marked by high inflation and aggressive monetary policy tightening with one more interest rate hike on Wednesday. In the wake of inflation soaring this year, the Bank of Canada has raised its key rate six times in a row since March in a race to curb inflation expectations before they are no longer anchored. After raising the main interest rate by a historical full percentage point in July, the Bank of Canada limited the scale of interest rate hikes. Forecasts call for the central bank to raise its key interest rate, which is currently 3.75 percent, by a quarter or a half of a percentage point. After raising its key rate by a historic full percentage point in July, the Bank of Canada has tapered the size of its rate hikes. In September, it announced a three-quarter percentage point rate hike, followed by half a percentage point in October. Now, the end of the rate hike cycle appears to be near. Canada’s economy grew more quickly than expected in the third quarter. Statistics Canada announced that Canada’s gross domestic product grew at an annualized rate of 2.9 per cent in the quarter. But preliminary October data released by Statistics Canada at the same time showed that the economy didn’t grow at all that month. That could give the Bank of Canada a reason to dial back its rate-raising campaign. That shows the Bank of Canada’s rate hikes are already having a significant impact on Canadian households ability to spend money. Japan GDP The world’s third biggest economy has struggled to motor on despite the recent lifting of Covid curbs, and has faced intensifying pressure from red-hot global inflation, sweeping interest rate increases worldwide and the Ukraine war. The unexpected decline reflects the impact of the Japanese currency on the economy and shows that the road to a sustainable post-pandemic recovery is long, with further risks clouding the outlook. Politicians will be hoping the government's latest economic stimulus package will help boost growth in the coming months. The reopening of Japan's borders also creates the prospect of a renewed increase in the spending of foreign tourists attracted by a country that has become much cheaper to travel around. The Bank of Japan maintains the view that the economy needs further support and that inflationary pressures require robust wage growth for price increases to be sustainable and beneficial to the economy. To ease the impact on households and businesses, Prime Minister Fumio Kishida last month proposed an economic stimulus package that includes help to cut energy costs and cash benefits for childcare. Japan's gross domestic product quarter-on-quarter in Q3 is expected to be the same as November's reading, i.e. it will stay at -0.3% Source: investing.com The economy fell in the third quarter for the first time in a year. GDP fell by 1.2% y/y. Typical suspects were the factors driving the decline in GDP - weak global growth and rising inflation, plus a weak yen. The GDP Y/Y result is now expected to reach a horizontal -1.1%. Source: investing.com, boc.com

Summary:  A hot US jobs report on Friday brought about a reversal in Fed rate path expectations, but a big part of the move was later reversed. Fed goes into a quiet period, but China reopening optimism is set to gather further momentum this week with easing measures being implemented in Shanghai. This would mean a further bump to metals and energy prices, especially with OPEC+ staying away from a production cut over the weekend and the next meeting only scheduled for February. Key levels on test this week with 3.50% in US 10-year Treasury yields, and USDJPY heading below the 200-day moving average at 134.50. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished the week higher despite a surge in wage inflation In spite of a strong non-farm payroll print and a surge in average hourly earnings on Friday which might cause some Fed officials to be wary about the unabated upward wage pressure when they meet on Dec 13 and 14, the major U.S. equity benchmark indices were largely flat and managed to retain the 1-2% gains following Fed Chair Powell’s dovish-leaning remarks on Wednesday. S&P500 and Nasdaq sold off more than 1% at the open but staged an impressive clawback of nearly all the losses when the closing bell rang on Friday. Materials and industrials were the top-performing sectors with the S&P 500 while energy stocks, followed by the information technology space were laggards. PayPal (PYPL:xnas) dropped 4.9%. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) clawed back all early losses and more with the 10-year yield down 2bps to 3.49% When the stronger-than-expected 263,000 growth in nonfarm payrolls and white-hot 5.1% Y/Y increase in November average hourly earnings (October revised up to 4.9% Y/Y from 4.7%) hit the wires, yields surged across the curve with the 2-year yield jumping 18bps to 4.41% and the 10-year yield rose 13bps to 3.63% in a matter of minutes. Bids emerged and yields spent the rest of the session grinding lower. By the time of market close, except for the 2-year yield which was 4bps cheaper at 4.27%, treasury yields were 1bp to 5bps richer, with the 30-year being the best performer. The 10-year yield slid 2bps to 3.49% and the 30-year yield dropped 5bps to 3.55%, hitting the lowest yield levels in nearly 3 months. The strong job and wage data made a further drift down to a 25bp hike in February 2023 less likely (only about 20% probability as money market rates suggest) and kept the 2-year yield from falling. The 2-10-year curve inversion widened 6bps to -78bps. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hang Seng Index and CSI300 Index consolidated and were modestly lower on Friday after the recent strong rally on signs of further easing of Covid restrictions in mainland China. Online health platform stocks surged. Alibaba Health (00241:xhkg) and JD Health (06618:xhkg) gained more than 9%, and Ping An Healthcare and Technology (01833:xhkg) jumped 15.4%. Profit-taking selling weighed on Chinese property developers, with leading names, such as Longfor (00960:xhkg) and Country Garden (02007:xhkg) dropping around 4%. More cities rolled out support policies to the property sector. In addition, after the market close, China reportedly told the country’s top state-owned banks to provide offshore financing to help property developers in repaying offshore debts. Overnight in New York hours, the Nasdaq Golden dragon China Index caught a bid, surging 5.4%, and Hang Seng Index Futures gained more than 2%. FX: Dollar continues its downtrend despite a strong jobs report The USD index got a bump higher after the stronger-than-expected jobs report on Friday which suggested that it might not be easy for the Fed to pause or pivot, but gains were reversed later and the index closed back at 104.50. NZDUSD was however a notch weaker this morning staying below 0.64 with AUDNZD testing 1.06 support ahead of RBA meeting tomorrow. USDJPY is testing a critical support level of 134.30 with lower US yields and some BOJ officials hinting at a policy review soon (read below). EURUSD looking stretched above 1.05. USDCNH fell below the 7 handle As cities in China relaxing Covid restrictions across the country and the spread between US treasury and Chinese government bond yields narrowing, the USDCNH dropped below 7.0, the first time since September, to 6.9852. Crude oil (CLZ2 & LCOF3) lower on unchanged OPEC+ output After strong gains in crude oil last week, some softness was seen at the end of the week after speculation of no production cut from OPEC mounted. WTI traded back to $80/barrel from $83 levels mid-week on China’s reopening optimism, while Brent retreated from $90 levels to sub-86. The Sunday OPEC meeting did come out with an unchanged output decision, as expected, while the EU’s price cap on Russian oil was also fixed at $60. This week will be key to watch further China reopening and any signs of a retaliation from Russia on the price cap. European gas prices also continue to pick up as falling weather boosts heating demand, and expectations are for a colder-than-expected winter. Gold (XAUUSD) and Silver (XAGUSD) poised for further upside The supportive factors for precious metals continue to line up – China’s reopening, lower US yields and a weaker dollar. This helped gold run higher to test a break above the key $1800 level for the first time since August. Meanwhile, Silver’s impressive November rally has extended into December with the price breaking above $22.25 – a 50% retracement of the March to September selloff – and on route to the next level of resistance at $23.35. Other metals such as Copper and Iron Ore also charged with China now reopening Shanghai, while the risk of a policy error by the Fed continues to run high. In Australia, home of some of the world’s biggest commodity commodities, BHP and Rio; it could be a positive week The benchmark index, the ASX200  is already trading at a seven-month high and could get a fresh kick this week as the iron ore (SCOA) price is back above $100 for the first time since August on optimism China could increase demand. The iron ore price has moved up 38% from its October low, so if we continue to see easing of restrictions in China, you might except this rally to continue and benefit forward earnings of BHP, Rio, Fortescue and Champion iron. What to consider? Hot US jobs report gives markets a re-think on Fed’s rate path The nonfarm payroll (NFP) data came out stronger-than-expected on Friday, with US employers added 263,000 jobs in November, less than October's upwardly revised 284,000 but well short of the turning point Fed officials seek in their battle against inflation. The unemployment rate was maintained at 3.7% while the wages were very hot: M/M rose 0.6% (exp. 0.3%) and Y/Y rose 5.1% (exp. 4.6%). After a few weeks where markets have been taking the slowdown in the pace of rate hikes by the Fed positively, this report was a reminder that rate hikes will still continue well into 2023. WSJ's Fed Whisperer Timiraos said the report keeps the Fed on track to raise interest rates by 50bps at its meeting in two weeks and underscores the risk that officials will raise rates above 5% in the first half of next year. November Caixin China PMI Services is expected be remain in the contractionary territory Caixin China PMI Services is scheduled to release on Monday. The consensus estimate from the Bloomberg survey is 48.0 for November, shrinking deeper into the contractionary territory from 48.4 in October. The lockdown and pandemic control restrictions during the best part of November when the survey took place weighed on economic activities, especially services. Investors will tend to look beyond this number and focus on the scope and pace of the easing of the pandemic restriction undergoing in China. Beijing, Shanghai, Hangzhou, Tianjin, Guangzhou and other large cities eased Covid policies Cities in China, one after one, announced to ease pandemic control restrictions including removing the requirement to show negative PCR test results when taking public transportation. Shanghai and Hangzhou joined the others on Sunday and announced that the cities no longer require negative PCR test results to enter public venues or taking public transportation. Economic reopening plays and commodities will be in focus this week with China easing some COVID restrictions On Monday, Shanghai and Hangzhou scrapped PCR testing to enter public venues including on public transport and to enter parks. Shanghai and Hangzhou joined other top-tier cities, Beijing, Shenzhen and Guangzhou in relaxing curbs after mass protests took place against China’s stringent policies last week. In equites, focus will be on markets being forwarding looking and hoping of a potential turnaround in consumption, especially cities with easing restrictions.   Another BOJ official fuels policy review speculation New BOJ board member Naoki Tamura urged a policy review, in his conversation with Bloomberg, saying that it would be appropriate for the central bank to conduct a review at the right time – soon or a little later depending on what happens to prices. The yen rose on speculation an assessment flagging policy change may come before Haruhiko Kuroda steps down in the spring. OPEC+ held production unchanged The OPEC+ group decided to keep the current production levels unchanged, as the crude oil prices started to show some tentative signs of a recovery after China’s continued commitment to ease its Zero covid policies. Still, a 2mb/d cut was announced in October, and the full effect of that is yet to be seen. Furthermore, there is volatility expected due to the EU sanctions and a G7 price cap on Russian crude which will go into effect this week, and further changes in China’s zero covid policy are also set to continue. The group’s next meeting is not scheduled until February. EU sets in a price cap for Russian oil, to kick in from today The EU nations have agreed to cap the price of Russian seaborne oil at $60/barrel, with a motive to diminish Russia’s revenues, paving the way for a wider deal with the G7 countries. This price cap is to go in effect on December 5, and represents a discount of ~$27 to the current price for Brent crude, but Urals has been trading at a discount of about $23 in recent days. However the risk of setting a price cap too low is that Russia could slash its output, which would roil markets. It will be important to watch for Russia’s reaction this week, after Putin has repeatedly said that they will not supply oil to countries that implement the price cap.   For a global look at markets – tune into our Podcast. Source: Market Insights Today: Hot US jobs report; No production cut from OPEC – 5 December 2022 | Saxo Group (home.saxo)

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

Summary:  "Japan’s real GDP drops by 8 percent." - John J. Hardy. Japan mobilised hundreds of billions of USD in its currency reserves in 2020 to defend the Bank of Japan’s (BoJ) unmoved monetary policy and the JPY itself as the BoJ refused to hike the policy rate from -0.1 percent or to lift the yield cap on 10-year Japanese government bonds at 0.25 percent. As 2022 rolls into 2023, the pressure on the JPY and the Japanese financial system mounts again on the global liquidity crisis set in motion by the vicious Fed policy tightening and higher US treasury yields.   Initially, the BoJ and Ministry of Finance deal with the situation by slowing and then halting currency intervention after recognising the existential threat to the country’s finances after burning through more than half of central bank reserves. But as USDJPY rises through 160 and 170 and the public outcry against soaring inflation reaches fever pitch, they know that the crisis requires bold new action. With USDJPY soaring beyond 180, the government and central bank swing into motion.   First, they declare a floor on the JPY at 200 in USDJPY, announcing that this will only be a temporary action of unknown duration to allow for a reset of the Japanese financial system. That reset includes the BoJ moving to explicitly monetise all  its debt holdings, erasing them from existence. QE with monetization is extended to further lower the burden of Japan’s public debt, but with a pre-set taper plan over the next 18 months. The move puts the public debt on course to fall to 100 percent of GDP at the end of the BoJ operations, less than half its starting point. The BoJ policy rate is then hiked to 1.00 percent and all yield-curve control is lifted, which allows the 10-year rate to jump to 2.00 percent.   Banks are recapitalised as needed to avoid insolvency and tax incentives for repatriating the enormous Japanese savings held abroad see trillions of yen returning to Japanese shores, also as Japanese exports continue to boom. Japan’s real GDP drops by 8 percent on reduced purchasing power even as nominal GDP rises 5 percent due to cost of living increases, but the reset puts Japan back on a stable path and establishes a tempting crisis-response model for a similar crisis inevitably set to hit Europe and even the US eventually.   Market impact: USDJPY trades to 200 but is well on its way lower by the end of the year.    Source: Japan pegs USDJPY at 200 - Saxo Outrageous Prediction | Saxo Group (home.saxo)

GBP/JPY picks up bids to challenge six-week-old resistance. Cautious optimism underpins recovery moves amid sluggish session. BOE hawks, indecision surrounding BOJ’s next move favor pair buyers. GBP/JPY prints 0.30% intraday gains as it pokes a multi-day-old resistance line surrounding $167.60 heading into Tuesday’s European session. In doing so, the cross-currency pair cheers the market’s risk-on mood, as well as sluggish US Treasury bond yields and the indecision over the Bank of Japan’s (BOJ) next moves. Reuters quotes Takeo Hoshi, an academic with close ties to incumbent central bank policymakers, to mention that the Bank of Japan (BoJ) could do away with its 10-year Japanese government bond (JGB) yield cap in 2023 on increasing odds that inflation and wages will exceed expectations. Earlier in the day, BOJ’s Kuroda mentioned that Japan has not achieved stable 2% inflation accompanied by wage rises. However, the policymaker also stated, “Once 2% inflation target is consistently met, will consider exiting ultra-loose policy.” Hence, the BOJ policymaker’s hesitance in accepting tighter monetary policies favors the GBP/JPY buyers. The same could be linked to the recently sluggish US Treasury yields and mildly bid S&P 500 Futures. It’s worth noting that the British Retail Consortium’s (BRC) Like-For-Like Retail Sales jumped 4.1% YoY in November versus 1.2% prior. Even so, Reuters said, “British consumer spending ticked up last month at a rate that greatly lagged behind inflation, according to surveys on Tuesday that underscored the pressure on household budgets ahead of the Christmas holidays.” On the contrary, the final readings of the UK’s November month S&P Global/CIPS Composite PMI eased to 48.2 versus 48.3 initial forecasts whereas the S&P Global/CIPS Services PMI confirmed the 48.8 flash estimates. Amid these plays, US stock futures print mild gains and the Treasury bond yields also reverse the early Asian session declines. Moving on, headlines surrounding the BOJ’s next move and the BOE’s optimism could entertain the GBP/JPY traders amid a light calendar. Technical analysis GBP/JPY justifies the last Friday’s rebound from the 100-DMA, around 164.40 by the press time, to lure the bulls. Even so, a downward-sloping resistance line from October 10, close to 167.60 at the latest, restricts the short-term upside of the pair. That said, steady RSI (14) and sluggish MACD signals, mostly in the red, keep the pair sellers hopeful. GBP/JPY: Daily chart Trend: Further weakness expected

Further comments crossing the wires from Bank of Japan (BoJ) Board Member Toyoaki  Nakamura, as he continues to speak about the inflation and monetary policy outlook.   Key to future policy will depend on whether inflation will rise sustainably. Not convinced yet whether consumer inflation will exceed 2% in fiscal 2023 onward. Rate of wage increase in next year's spring wage negotiations alone won't lead to policy tweak debate. Don't see need to change current monetary policy framework now.   Market reaction USD/JPY was last seen trading at 137.52, accelerating its advance on the dovish BoJ comments. The spot is up 0.35% on the day.

USD/JPY picks up bids to refresh intraday high around 137.60 during early Wednesday in Europe. In doing so, the Yen pair portrays the market’s risk-on mood amid a light calendar. However, the options market signals are in contrast with the USD/JPY price run-up. That said, the one-month risk reversal (RR) for the Yen pair, the ratio between call and put premiums, braces for the biggest weekly print in three by flashing -0.325 at the latest. In doing so, the weekly RR drops for the third consecutive week. Further, the daily RR snaps a two-day uptrend by printing the -0.435 figure at the latest. It’s worth noting that China’s announcement of the new Covid policy appeared to have triggered the latest risk-on mood. Also favoring the USD/JPY could be the comments from various policymakers at the Bank of Japan (BOJ). Recently, BOJ Board Member Toyoaki Nakamura said that it is ‘premature to tweak monetary policy now as service prices remain low. Also read: USD/JPY Price Analysis: Retreats from monthly resistance around 137.00  

The USD/JPY pair plummeted in November, which made many question its bullish potential. However, the dollar's recent growth convinces investors otherwise. So what to expect from the major? The dollar is winning so far The greenback rose 0.3% against its major peers on Wednesday night. The dollar was supported by rising concerns about the global recession. The day before, three leading U.S. banks - J.P. Morgan, Goldman Sachs and The Bank of America - said they expect a slowdown in global economic growth next year, as rising inflation is threatening consumer demand. The pessimistic outlook reinforced the anti-risk sentiment that prevailed for the third consecutive session. The MSCI All-Country World Index, which tracks stock market performance in 48 countries, fell 1.26%, down from a three-month high last week. The loss of appetite for equities and increased demand for the dollar was also triggered by strong US macrodata. Recall that earlier this week the Institute for Supply Management (ISM) said that economic activity in the services sector grew from 54.4 to 56.5 in November. The data followed Friday's report from the U.S. labor market, which also pleased dollar bulls. The nation's NonFarm Payroll employment rose more than forecast last month. The portion of optimistic data greatly strengthened the market's hawkish expectations for further monetary policy by the Federal Reserve. Currently, most traders expect the U.S. central bank to raise the rate by 50 bps next week. The probability of an increase by 75 bps is only 5%. However, talk of a higher peak in U.S. interest rates has returned to the market. Many investors believe the rate could reach 5.25% in 2023, whereas now it is in the 3.75-4% range. The hope that the Fed will continue to raise rates next year and keep them high for a long time acts as a very powerful trigger for the dollar at this point. This factor particularly helps the greenback against the yen. After USD/JPY plummeted to a 3-month low of 133.64 last week, it has now gained 3% and has managed to stay above 137. There aren't many new factors that can strongly influence the asset's dynamics now. In the coming days, investors will focus on two events: the US consumer price index for November and next week's Fed meeting. If investors see more robust inflation and hear hints of a higher peak in U.S. interest rates from U.S. officials, it will likely trigger a new wave of growth in the USD/JPY pair. What's in store for the USD/JPY next year? In November, the U.S. currency posted its worst monthly performance in 14 years against the yen. It fell by more than 7% due to fears that the US central bank is going to slow the pace of rate hikes. However, most currency strategists, recently surveyed by Reuters, believe that in the next few months, USD/JPY will be able to hold its annual growth, which amounted to 20%. The growing threat of recession in the U.S. and other countries should provide support to the dollar. In the backdrop of risk aversion, the greenback will once again feel a surge of strength, which will help it recover its recent losses on all fronts, even against the yen. "For now, the forces that have supported the USD this year remain valid, despite the recent correction lower. Other currencies do not look as attractive yet," said Athanasios Vamvakidis, head of G10 FX strategy at Bank of America. In the BofA baseline, the U.S. dollar will remain strong early next year and will only start a more sustained downward path after the Fed pauses. Despite the dollar's recent pullback, major currencies are not expected to recoup their 2022 losses against the USD until at least late 2023, the survey showed. Analysts estimate that the Japanese yen, down nearly 20% for the year and currently trading around 136.50 per dollar, was expected to change hands around 139.17, 136.17 and 132.67 per dollar over the next three, six and 12 months respectively.   Relevance up to 08:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/329168

By the end of the week, the dollar was under pressure from negative sentiment about the future prospects of the U.S. economy. This led to a sharp fall on many fronts. USD/JPY was no exception On Friday morning, USD/JPY plummeted by 0.6% and dropped below the 136 level. The reason for the sharp decline was the general weakness of the greenback. The DXY index fell more than 0.5% at the start of the day. The ground was knocked out from under the dollar's feet by increased fears of recession in the United States. Weaker-than-expected US economic data contributed to the growth of speculations on the subject. A report from the Labor Department released yesterday showed that initial claims for state unemployment benefits increased more than forecast to 230,000 over the week, while the number of people receiving benefits after an initial week of aid jumped to a 10-month high of 1.671 million. The fact that unemployment remained steady reinforced the market's view of the unenviable prospects for the world's largest economy. America could enter recession as soon as next year. Another harbinger of a negative scenario is the inversion of the U.S. Treasury bond yield curve. Now the gap between the yield of 2-year and 10-year bonds is -83.7 bps. Given all these factors, investors are concerned that the growing risk of a slowdown in economic growth may force the Federal Reserve to soften its monetary policy. Currently, traders estimate the probability that the Fed will raise rates by 50 bps in December at 93%. At the same time, most market participants believe that the rate will peak at just below 5% next May. Less hawkish market expectations significantly weigh on the U.S. currency. Against this backdrop, the dollar index has already lost more than 8% from its 20-year high reached in September. Recall that this year's peak for the greenback was 114.78. The USD is now trading just above 104. The dollar suffered the heaviest losses last month against the yen, which, on the contrary, showed the worst dynamics among the Group of 10 currencies throughout the year. The JPY gained more than 7% against the greenback in November. The key catalyst was an increase in speculations about a slowdown in U.S. rate hikes, which led to a sharp collapse in U.S. Treasury bond yields. The Japanese currency is extremely sensitive to changes in this indicator. Its significant dynamics always provokes equally strong movement of the yen. At the moment, the yield of 10-year US government bonds is keeping its growth above 3.48%, which creates an obstacle for further strengthening of the JPY. The US Consumer Price Index for November is expected to provide strong support to the yields. The report will be released next week, ahead of the Fed's interest rate decision. Economists estimate that overall inflation will remain unchanged at 7.7%. If the forecast comes true and we do see a more robust figure, it could change the mood of the market considerably. It is likely to bring back talk of a higher final level of interest rates in America and a continuation of an aggressive anti-inflation campaign. Analysts at Danske Bank see a further hike in interest rates by 50 basis points (bps) and a hawkish message from Federal Reserve chair Jerome Powell for CY2023. Also, the neutral rate is expected at 5.00-5.25%. Experts think that the steady rise in prices is the only chance for the dollar to hold out next week where in addition to the Fed meeting, the interest rate decisions of the ECB and Bank of England are also expected. As for USD/JPY, it is likely to remain in a consolidation phase until U.S. consumer inflation data is released. Most analysts predict that the pair will trade in a narrow price range of 136-137 in the short term. However, strong volatility in the asset is expected after the release of the key report. Depending on the data, dollar-yen might show either a strong upward bounce or a sharp retreat to the downside. The next potential trigger for the pair is the Fed's decision on the interest rate, which will be announced on Wednesday, December 14. Technical analysis of the USD/JPY pair The fall below the neckline, built from the December 6 low at 135.96, put a lot of pressure on the USD this morning. In addition, the USD/JPY asset failed to stay above the 200-period exponential moving average at 137.10, which also indicates the strength of the Japanese yen. Meanwhile, the RSI relative strength index has shifted into a bearish range of 20.00-40.00, indicating the start of downward momentum. In order to fall further, bears need to pull the pair below Friday's low of 135.77. This would take the pair to round support at 135.00, followed by the December 5 low of 134.13. On the other hand, a break above the 200-EMA near 137.00 would open a quick path to Wednesday's high at 137.86. A takeover there would send dollar bulls to the November 25 high of 139.60.   Relevance up to 08:00 2022-12-14 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/329392

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

Summary:  U.S. treasuries and stocks sold off after the hotter-than-expected PPI prints which suggest inflation not cooling enough and making the water murkier in the week of CPI and FOMC. The 10-year yield surged 10bps to 3.58%. Other key central bank meetings from the ECB to Bank of England also on watch this week. Hong Kong and Chinese stocks rallied on Friday on continuous optimism about reopening from Covid restrictions and supportive economic policy from the Chinese authorities. The Chinese Communist Party’s Central Economic Work Conference is expected to convene this week. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on hot PPI data U.S. equities edged down after the producer price Index (PPI), headline as well as core, came in stronger-than-expected and stirred up concerns about risks of pushing the Fed back towards a more hawkish leaning. Nasdaq 100 declined by 0.6% and S&P500 fell by 0.7%. 10 of the 11 S&P sectors declined, with energy, healthcare, and materials dropping the most. Lululemon (LULU:xnas) plunged 12.9% after a gross margin miss, inventory build-up, and below-expectation full sales guidance. Tesla (TSLA:xnas) bounced 3.2%. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) bounced on higher producer inflation prints U.S. treasuries sold off on the hotter-than-expected PPI headline as well as core prints. With heavy selling in the 10-year and 30-year segments, the yield curve became less inverted. Two-year yield rose 4bps to 4.34% and 10-year yield surged 10bps to 3.58%. The 2-year-10-year yield curve closed at 76bps on Friday, after hitting as low as 85bps during the week. The money market curve is predicting a 77% probability for a 50bp rate hike on Wednesday. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) rallied on growth optimism Hang Seng Index rallied 2.3% on Friday on continuous optimism on the prospect of a recovery in the growth of the Chinese economy in 2023 as the country reopens from Covid containment restrictions and more supportive government policies. Premier Li Keqiang said China will strive to achieve steady growth. Defaulted Chinese property developer Sunac (01918:xhkg) said it is in discussion with creditors to restructure USD9 billion of debts, including swapping USD3-4 billion of debts into ordinary shares or equity-linked instruments.  Reportedly another defaulted mainland developer Evergrande is meeting offshore creditors to discuss restructuring proposals. The Chinese authorities are considering allowing REITs to invest in long-term rental and commercial real estates. Leading mainland Chinese property developers listed in Hong Kong surged 5% to 18% with Longfor (00960:xhkg) soaring the most. A day after shortening the home isolation period for people infected with Covid-10 to five days from seven days, a Hong Kong health official said the city is considering to end its vaccine pass scheme. Hong Kong local property developers gained 2%-5%. In A shares, the CSI300 Index rallied 1%. The Chinese Communist Party is expected to convene its annual Central Economic Work Conference this week to formulate the macroeconomic policy blueprint for 2023. In Australia; this week the focus will be consumer confidence, employment data and China reopening talk vs pre lunar new year production halt There are a couple of economic readouts 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. On the equity side, with iron ore (SCOA) trades at four month highs $110.80 but is lower today. We mention on Friday the price of iron ore has been rallying as China on  easing restrictions and because of whispers that Chinese property developers will get more support, which would support demand for iron ore rising. However we mentioned 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 halt of Chinese steel plants ahead of the Lunar New year. Restocking typically occurs 5-8 weeks before the holiday, but plants could be closed earlier, due to poor profits and weak demand. So keep an eye on iron ore majors, Fortescue Metals, Champion Iron, BHP and Rio as they could see profit taking as well after rallying ~25-55% from October.  FX: A weaker start for NZD in Asia, Japan’s November PPI above expectations The US dollar started the week on a firmer footing with a big week ahead as the US CPI and FOMC meeting is eyed. A reversal of the short-term downtrend would however require US 10-year yields to get closer to 4% again. NZDUSD has been a strong performer since the softer October US CPI print and maybe the one to watch if the Fed fails to surprise hawkish this week, given that the RBNZ remains committed to its fight against inflation. Pair dropped below 0.64 in early Asian trading hours this morning as New Zealand Institute of Economic Research (NZIER) published slower GDP growth forecasts through 2025. A higher-than-expected Japan’s November PPI of 9.3% YoY/0.6% MoM, along with an upward revision to last month’s print, may create more talks of a possible policy review (read below) and USDJPY headed higher to 136.80. Crude oil (CLF3 & LCOF3) prices to watch Russia’s response to G7 price cap this week Crude oil prices saw a steadier start to the week after plunging sharply last week on demand concerns from a weakening macro backdrop as well as thin liquidity and control of short-term traders. The uncertainty surrounding European sanctions on Russian oil and the related price also kept volatility high, but was overshadowed by recession concerns. The impact of the potential pickup in demand from China as lockdowns continue to ease also started to fade. This week Russia will announce how it intends to counter the introduced price cap with the risk of a production cut potentially adding fresh support to the market ahead of what looks like a challenging 2023 where supply worries in our opinion will keep prices elevated, despite the risk of lower demand. WTI futures rose above $72 in the Asian morning, while Brent was seen above $77/barrel.   What to consider? Stronger-than-expected US PPI suggests inflation not cooling enough Headline PPI rose 7.4% in November Y/Y, above the expected 7.2% albeit down from the upwardly revised 8.1% for October. The core (ex-food and energy) Y/Y was also above expectations at 6.2% (exp. 5.9%), but cooler than the prior upwardly revised 6.8%. on a M/M basis, headline rose 0.3% while core was stronger at 0.4%, beating expectations. While the PPI data continued to show a peak in inflation in the Y/Y terms, but the downward surprise remains limited and may not be enough to support the Fed pivot expectations. Attention now turns to the US CPI data on Tuesday to see if a similar inflation story is seen for December ahead of the FOMC rate decision on Wednesday. Preliminary University of Michigan survey for December was also strong across the board, as the headline rose to 59.1 from 56.8, and above the expected 56.9. The headline was supported by current conditions and the forward-looking expectations both lifting to 60.2 (prev. 58.8, exp. 58.0) and 58.4 (prev. 55.6, exp. 56.0), respectively. Putin threatening to curb crude exports Vladimir Putin said Russia may lower crude output in response to the G-7 price-cap and added the country won't sell to price-cap participants. The price of Russian crude in Asia appears to be holding well above the $60 cap as it finds enough shipping and insurance capacity. While the crude oil prices last week have remained in the grip of technical traders and seen little impact from the price cap decision, there could be more volatility in store this week as Russia’s response is awaited which could range from production cuts to retaliatory measures. Bank of Japan board members continue to differ on timing for ending YCC All eyes are turning to who could be the possible replacement of Bank of Japan Governor Kuroda in April 2023. One of the contenders, Takehiko Nakao, said that subtle changes in policy framework should be considered as the leadership is changed next year. This comes after board member Naoki Tamura called for a policy review last week and hinted that it may come as early as next year (before Kuroda retires. However, another board member Toyoaki Nakamura said its too early to conduct a review now. Likewise, board member Hajime Takata also said it is too soon to start a policy review. While the timing may be uncertain, the open discussions about a possible BOJ policy review at some point is keeping expectations of an eventual BOJ pivot alive. China and Saudi Arabia upgrade relationships with top-level dialogue; Xi calls for using the renminbi to settle oil and gas trades During his visit to Saudi Arabia last week, China’s President Xi Jinping met with King Salman bin Abdulaziz Al Saul and Crown Prince Mohammed bin Salman. The two sides agreed to upgrade the relationship between the two countries with heads of state meeting every two years and moving established joint committees for trade, tech, security, and other areas from vice-premier to premier level. The two countries have signed a large number of agreements and MOUs from petrochemical, hydrogen energy, information technology, and infrastructure projects to cultural exchanges. Xi reiterates his call for using the renminbi more often to settle trades in crude oil and natural gas but it is not clear how well his call has been received by Saudi Arabia and the other oil-exporting countries at the China-Arab summit last week. China’s CPI softened to 1.6% Y/Y; PPI stayed at -1.3% Y/Y China’s CPI inflation decelerated to 1.6% Y/Y in November from 2.1% Y/Y in October, in line with expectations as food inflation slowed and consumer demand was weak during the lockdown. In the PPI, price increases in the raw materials sector decelerated while the price declines the in mining and processing sectors slowed in November.     Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT For a global look at markets – tune into our Podcast. Source: Market Insights Today: Hot US PPI brings focus to CPI/Fed meeting; HK/China stocks on watch – 12 December 2022 | Saxo Group (home.saxo)

Summary:  Sentiment is off to a cautious start this week after US treasury yields rebounded on Friday, pressuring equity market sentiment and supporting the US dollar. This week should prove a volatile one, with the November US CPI data point up tomorrow, one that has triggered huge swings in markets nearly every month for the last several months, this time with an FOMC meeting to follow on Wednesday and ECB and other central bank meetings up on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equity markets rolled over again on Friday after US treasury yields jumped on a hotter-than-expected PPI release on Friday, taking the S&P 500 Index back toward the key support here, which comes in between 3900 and 3900 for the cash index, with the equivalent area around 11,430 in the Nasdaq 100 Index. Markets may be in for a fresh down-draft if US yields rise farther this week, whether due to the CPI release tomorrow, the FOMC meeting on Wednesday, or for any other reason. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Ahead of two key events, the FOMC meeting in the U.S. and the Central Economic Work Conference (CEWC) in China, investors in Hong Kong and mainland Chinese stocks took profits and saw the Hang Seng Index nearly 2% lower and the CSI300 sliding 0.8%. Meituan (03690:xhkg) declined nearly 7% and Country Garden Services (06098:xhk) plunged almost 17%. The CEWC will set out the blueprint for the macroeconomic policies in China for 2023 but will likely not release specific growth targets which be for the National People’s Conference in March. USD rebounds slightly as US treasury yields bounce back The US dollar rebounded on Friday and overnight as US treasury yields bounced back after the release of hotter than expected November PPI data on Friday. USDJPY was one of the bigger movers intraday, rebounding from sub-136.00 levels and trading above 137.00 this morning. EURUSD eased away from the recent cycle high of 1.0595 and was trading near 1.0515 this morning. Markets should be prepared for the risk of significant volatility on the CPI release tomorrow, with the market likely lease prepared for surprisingly firm core CPI readings – the surprisingly soft October CPI data released November 10, for example, triggered some 600 pips of USDJPY downside intraday. Crude oil (CLF3 & LCOG3) focus on Russia, China Covid cases and US pipeline closure Crude oil has started the week trading higher after plunging sharply last week on demand concerns from a weakening macro backdrop as well as thin liquidity leaving short sellers in control. No signs yet of calmer conditions ahead of year-end with multiple uncertainties still unresolved: The Keystone pipeline supplying Canadian oil to refiners on the US Gulf Coast remains shut with no date set for a restart. The market awaits news from Russia on whether it will make good on its threat to cut supply to price cap supporters. Meanwhile in China, surging virus case counts are raising concerns about a slowdown in demand. Focus on US CPI, FOMC and oil market reports from OPEC and IEA. Gold (XAUUSD) trades softer ... ahead of US CPI data on Tuesday and the FOMC rate decision on Wednesday. This after Friday’s stronger than expected US PPI, suggesting inflation is not cooling enough, helped trigger profit taking and another rejection at $1808, a key level of resistance. Ahead of the key data print, the current strength of the market would be tested on a break below $1765, a level where support was found on several occasions last week. US 10-year treasury benchmark rebounds above 3.50% (TLT:xnas, IEF:xnas, SHY:xnas) After teasing below the key 3.50% level for a couple of days last week, the 10-year treasury yield benchmark surged back higher to 3.59% Friday after higher-than-expected November PPI data (see more below) before easing a few basis points overnight. The US November CPI print tomorrow data will likely spark considerable volatility all across the curve, especially given the market’s strong expectation that inflation will fall back sharply already by late next year. What is going on? Stronger-than-expected US PPI suggests inflation not cooling enough Headline PPI rose 7.4% in November Y/Y, above the expected 7.2% albeit down from the upwardly revised 8.1% for October. The core (ex-food and energy) Y/Y was also above expectations at 6.2% (exp. 5.9%), but cooler than the prior upwardly revised 6.8%. on a M/M basis, headline rose 0.3% while core was stronger at 0.4%, beating expectations. While the PPI data continued to show a peak in inflation in the Y/Y terms, but the downward surprise remains limited and may not be enough to support the Fed pivot expectations. Attention now turns to the US CPI data on Tuesday to see if a similar inflation story is seen for December ahead of the FOMC rate decision on Wednesday. Preliminary University of Michigan survey for December was also strong across the board, as the headline rose to 59.1 from 56.8, and above the expected 56.9. The headline was supported by current conditions and the forward-looking expectations both lifting to 60.2 (prev. 58.8, exp. 58.0) and 58.4 (prev. 55.6, exp. 56.0), respectively. Bank of Japan board members continue to differ on timing for ending YCC All eyes are turning to who could be the possible replacement of Bank of Japan Governor Kuroda in April 2023. One of the contenders, Takehiko Nakao, said that subtle changes in policy framework should be considered as the leadership is changed next year. This comes after board member Naoki Tamura called for a policy review last week and hinted that it may come as early as next year (before Kuroda retires. However, another board member Toyoaki Nakamura said it’s too early to conduct a review now. Likewise, board member Hajime Takata also said it is too soon to start a policy review. While the timing may be uncertain, the open discussions about a possible BOJ policy review at some point is keeping expectations of an eventual BOJ pivot alive. UK power prices hit a new record on freezing temperatures The Monday price for UK power surged to a record on Sunday with the Met Office having issued snow and ice warnings throughout the country through to Thursday. The combination of low wind generation and surging demand for heating saw the day-ahead price for power double and reach a record £675/MWh (€785/MWh). The UK power grid operator has ordered two out of three coal-fired plants kept in reserve for emergencies to fire up in case they are needed on Monday.  German day-ahead power prices jumped 33% to €434/MWh, the highest since September 13 while the French contract rose 40% to €465/MWh on Epex Spot.  In the US meanwhile, natural gas prices jumped 12% on the opening today, thereby extending a four-day surge to $7/MMBtu, after a powerful Pacific storm knocked out power to thousands across California and is forecast to deliver heavy snow and blizzard conditions from Montana to Minnesota in coming days. What are we watching next? US November CPI data point tomorrow and FOMC meeting Wednesday The market is aggressively pricing for inflation to drop back sharply this year, with inflation swaps suggesting inflation will be below 2.5% by year-end, even more aggressive than the Fed’s inflation forecast of 2.8% headline and 3.1% core PCE inflation by year-end. This leaves the “surprise side”, as we saw with the Friday US November PPI release, any data that suggests hotter than anticipated inflation, particularly for the core month-on-month ex Food and Energy reading (expected at +0.3%). Meanwhile, due to the market’s anticipation of quickly retreating inflationary pressures and a softening economy, it is pricing the Fed to begin cutting rates as soon as Q4 of this year, something the FOMC forecasts will likely push back against, although the market will likely lean on incoming data more than Fed guidance, which now that the Fed is seen decelerating the pace of hikes to 50 basis points on Wednesday, is only given credence for the next few meetings. Some argue that this could be the Fed’s last rate hike of the cycle, with the “dot-plot” of Fed policy forecasts on Wednesday also likely to push back strongly against that notion with an end-2023 forecast rate of above 5.0% (which would require another 75 basis points of hiking beyond this week’s 50 basis point move, which will take the rate to 4.25-4.50%. Putin threatening to curb crude exports Vladimir Putin said Russia may lower crude output in response to the G-7 price-cap and added the country won't sell to price-cap participants. The price of Russian crude in Asia appears to be holding well above the $60 cap as it finds enough shipping and insurance capacity. While the crude oil prices last week have remained in the grip of technical traders and seen little impact from the price cap decision, there could be more volatility in store this week as Russia’s response is awaited which could range from production cuts to retaliatory measures. In Australia this week the focus will be consumer confidence and employment data There are a couple of economic read outs that could move the ASX200 (ASXSP200.1) needle 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, with payrolls growth of +17k jobs, down from the rise of 32.2k in October. So focus will be on the AUD and a potential pull back if the data is weaker than expected. Several central bank meetings this week The U.S. Federal Reserve (Wednesday), the Bank of England (Thursday) and the European Central Bank (Thursday) are expected to hike interest rates by 50 basis points each this week. Less than two weeks ago, Fed Chairman Jerome Powell said a December rate-hike slowdown is likely. But the hawkish tone should remain based on the latest Non Farm Payroll and Producer Prices reports which indicated that inflation remains high and broad-based. In the eurozone, this is a done-deal that the central bank will hike rates by 50 basis points. Pay attention to the updated economic forecasts (Is a recession the new baseline for 2023?) and to any indication regarding the expected quantitative tightening process. In the United Kingdom, the money market overwhelmingly believes (78%) that the Bank of England will hike its rate by 50 basis points to 3.5% this week. Only a minority (22%) foresees a larger increase, to 3.75%. Earnings to watch This is a quiet period in the earnings season, though a couple of interesting names are reporting this week, with former high-flyer Adobe up on Thursday. Adobe has something to prove as the US software company has seen a negative share price reaction on its past five earnings releases. Trip.com, China's leading online travel agency, reports on Wednesday and investors will judge the result on the company's outlook for Q4 and ideally 2023 as China's reopening is raising the expected travel demand in China for 2023. Read more here. Monday: Oracle Tuesday: DiDi Global Wednesday: Lennar, Trip.com, Nordson, Inditex Thursday: Adobe Friday: Accenture, Darden Restaurants Economic calendar highlights for today (times GMT) 0800 – Czech Nov. CPI 2330 – Australia Nov. Westpac Consumer Confidence Index 0030 – Australia Nov. NAB Business Conditions survey Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 12, 2022 | Saxo Group (home.saxo)

USD/JPY is aiming to shift its auction profile above 137.00 as the risk-off mood is strengthening further. Mixed views on the Federal Reserve policy outlook have escalated anxiety among the market participants. The Bank of Japan is aggressively working to achieve a 2% inflation rate. USD/JPY is expected to accelerate gains amid technical tailwinds. USD/JPY is hovering around the critical hurdle of 137.00 in the early European session. The asset is aiming to shift its business profile above the aforementioned critical hurdle as investors are getting anxious ahead of the announcement of the interest rate decision by the Federal Reserve (Fed). Volatility will stay a little longer this time as it is the last monetary policy of CY2022, which is expected to remain uncertain due to rising expectations of a slowdown in the pace of the interest rate hike. Also, Federal Reserve chair Jerome Powell is expected to provide interest rate guidance for the whole CY2023. S&P500 is displaying a subdued performance as investors await more development on Federal Reserve’s policy outlook through commentary from Federal Reserve policymakers. The 10-year US Treasury yields have surrendered gains and are auctioning below 3.57%, at the time of writing. The US Dollar Index (DXY) is displaying back-and-forth moves around the immediate resistance of 105.20. The US Dollar is facing hurdles in overstepping the 105.20 resistance despite a solid risk aversion theme in the global market. Mixed views on Federal Reserve policy outlook muddle investors’ sentiment After the release of the Federal Open Market Committee (FOMC) minutes for October’s monetary policy, it was clear that Federal Reserve policymakers are advocating a deceleration in the interest rate hike pace. Federal Reserve chair Jerome Powell and his teammates were in favor of reducing financial risks and assessing the impact of efforts made by the Federal Reserve in achieving price stability. Now, the release of upbeat payroll data for November and fresh demand in the United States service sector has triggered the option of a bigger rate hike continuation to safeguard the economy from a rebound in inflation. There is no denying the fact that higher employment generation and solid demand in service sector have the potential to spur the inflation rate again. Rabobank analysts said they expect the United States central bank to hike the policy rate by 50 basis points (bps) and see policymakers revising the terminal rate projection to the neighborhood of 5%. United States Inflation to set a stage for Federal Reserve’s policy Before the announcement of the last monetary policy of CY2022 by the Federal Reserve on Wednesday, investors are awaiting the release of Tuesday’s Consumer Price Index (CPI) data. As per the consensus, the headline inflation is expected to remain unchanged at 7.7% while core CPI that excludes oil and gas prices will inch higher to 6.4% from the former release of 6.3%. The United States Producer Price Index (PPI) data released on Friday is indicating the continuation of a slowdown in the inflation rate. The price Index for factory-gate rates was trimmed to 7.4% in line with expectations. A decline in prices for final products indicates a decline in demand, which forced producers to go easy on decision-making for end-products prices. However, investors should brace a surprise jump in inflation as the United States economy added 263K jobs in November more than the expectations of 200K. Tight labor demand is accompanied by premium earnings that could result in solid demand for durable goods by households. Bank of Japan to continue policy easing despite rising wages The risk of a decline in inflation has been triggered after a contraction in Japan’s Gross Domestic Product (GDP) numbers. A subdued demand never propels a hike in the price rise index. Bank of Japan (BOJ) Haruhiko Kuroda is of the view that even if wages rise by 3%, the BOJ will maintain its current easy policy until inflation reaches 2%. This would weigh more pressure on the Japanese yen. Meanwhile, Bank of Japan (BOJ) board member Hajime Takata said in an interview with the Nikkei newspaper published on Saturday that Japan's economy is not yet in a phase where the central bank can end yield curve control. He further added that there were some positive signs in corporate capital expenditure and wages, as reported by Reuters. USD/JPY technical outlook USP/JPY has accelerated to near the downward-sloping trendline plotted from November 22 high around 142.24. The asset is at a make or a break after a firmer rally. A bull cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at 136.5, indicates more upside. Meanwhile, the Relative Strength Index (RSI) (14) has moved into the bullish range of 60.00-80.00. Sustainability above the same will keep the reins in the asset solid.     search   g_translate    

USD/JPY remains sidelined after rising to an eight-day high. Treasury bond yields snap four-day uptrend, US Dollar stays depressed. Mixed concerns surrounding US CPI, challenges for BOJ’s pivot restrict immediate USD/JPY moves. USD/JPY traders witness a lack of direction as the quote grinds higher around 137.70 during the early Tuesday in Europe, after refreshing the multi-day top in the Asian session. The yen pair’s latest inaction could be linked to a lack of major data/events, as well as the cautious mood ahead of the US Consumer Price Index (CPI) for November. It should be noted that the mixed concerns surrounding the Bank of Japan’s (BOJ) next moves and sluggish US Treasury yields also restrict the immediate USD/JPY moves. Recently, Bloomberg released an analysis, relying on the data from the Japanese Bankers Association, which challenges the market’s hopes of the BOJ’s monetary policy tightening. “Japan’s financial regulator is examining how vulnerable lenders would be to a sudden slump in government bonds should the nation’s central bank pivot away from its ultra-loose monetary policy in future,” per Bloomberg. It should be noted that the recently firmer inflation and nearness to the end of BOJ Governor Haruhiko Kuroda’s term underpinned the talks of BOJ’s exit from the easy-money policies. Elsewhere, the US 10-year and two-year Treasury bond yields print the first daily loss in four around 3.59% and 4.36% in that order while the US Dollar Index (DXY) retreats to 104.95 at the latest. On Monday, the one-year inflation precursor from the New York Fed slumped the most on record but contrasted with the upbeat inflation expectations for the 5-year and 10-year reported by the St. Louis Federal Reserve (FRED) data. On the same line, the last week’s downbeat prints of the United States Producer Price Index (PPI) also hinted at softer US inflation but the University of Michigan’s (UoM) Consumer Sentiment Index, as well as the US ISM Services PMI and inflation expectations from the UoM Survey, suggested firmer prints of the US CPI. Amid these plays, the S&P 500 Futures print mild losses whereas stocks in the Asia-Pacific region trade mixed even as Wall Street benchmarks posted notable gains. Moving on, the mixed messages from the market, as well as from concerns surrounding Russia and China, could restrict USD/JPY moves ahead of the US inflation data. However, a firmer print of the US CPI, expected at 7.3% YoY versus 7.7% prior, won’t hesitate to recall the pair buyers amid recent hawkish Fed bets. Also read: US Consumer Sentiment Preview: Dollar set to decline on falling inflation expectations Technical analysis USD/JPY’s latest run-up could be linked to the week-start break of a descending resistance line from November 23, now support around 136.10. Also keeping the USD/JPY buyers hopeful are the bullish MACD signals and the firmer RSI (14), not overbought. However, a convergence of the 61.8% Fibonacci retracement level of the Yen pair’s run-up between August and October, as well as a seven-week-long downward-sloping trend line, challenges the USD/JPY bulls around 138.70.

The dollar-yen pair fell almost 300 points yesterday, reacting to the U.S. inflation report. The data came out in the red zone, disappointing the dollar bulls. The U.S. dollar index fell to a six-month low, to the bottom of the 103rd figure. USD/JPY, in turn, updated only a weekly low, denoting itself at 134.69. After that, the downward impulse faded, and during the Asian session on Wednesday, the pair even regained some of the lost positions, returning to the area of the 135th figure. Traders do not risk developing the downward direction in anticipation of today's events: the Federal Reserve will announce the results of its meeting at the end of the trading day. Notably, the main driver of the December USD/JPY decline was not the dollar, but the yen, which strengthened due to the unexpected hawkish statements of some representatives of the Bank of Japan. In comparison, yesterday's inflation report, which is crucial for all dollar pairs, triggered a 300-point drop. While signals from Japanese regulators let the bears of USD/JPY make a 600-point advance from 139.92 (Nov 30) to a 4-month low of 133.66 (Dec 2). Recall that at the beginning of this month, traders heard hawkish messages from the Bank of Japan for the first time in a long time. BOJ board member Asahi Noguchi stated that the central bank is ready to partially revise its soft monetary policy if inflation indicators turn out to be "too high." He called this step a "preventive measure" to curb inflationary growth. A little later, the head of the Japanese regulator Haruhiko Kuroda indirectly confirmed the existence of such intentions. He said that the central bank is really considering an exit from the ultra-soft monetary policy "as soon as the central bank reaches its inflation target of two percent on a sustainable basis." At the same time, he added that if the price target is reached, the bank's management will discuss the fate of assets in ETF's "as part of a strategy to exit the ultra-soft policy." Previously, Kuroda had only allowed easing the parameters of monetary policy if such a need arises. He repeated this mantra with such persistence and for so long that traders, for the most part, were no longer reacting to these dovish messages. Moreover, there is a strong opinion in the market that major changes of a hawkish nature are a priori possible only after the current governor of the Bank of Japan leaves his post (his second term in office expires in April 2023, re-election is impossible). That is why the USD/JPY traders reacted so strongly to the latest statements by Noguchi and Kuroda. Moreover, these official statements are overgrown with relevant rumors. In particular, according to Reuters, the Bank of Japan may abandon the yield cap on 10-year Japanese government bond (JGB) next year as Japan enters an era of high inflation. According to news agency sources, the Japanese regulator "begins to worry about the possibility of inflation accelerating more than expected." However, not all of Kuroda's colleagues agree that the Bank of Japan needs to adjust its policy. For example, board member Toyoaki Nakamura recently said that the country's economy is still recovering from the recession caused by the COVID pandemic, so the central bank should patiently continue easing monetary policy. At the same time, inflation dynamics are not worrying Nakamura. According to him, consumer inflation in Japan is accelerating, "but next year its growth rate is likely to slow down, as the stimulus from rising energy and food prices is already weakening." It is also worth noting that yesterday representatives of the Japan Bankers Association reported that the country's banks could suffer losses on their government bonds in the amount of more than $1 trillion if the Bank of Japan loosens its control over the yield of 10-year bonds. Commenting on this information, Bloomberg sources in the Japanese government said that the financial regulator is now studying how vulnerable creditors will be to a sudden fall in government bonds if the central bank still abandons the ultra-soft monetary policy. In other words, the discussion about leaving the ultra-soft monetary policy is still ongoing, but even the very fact of this discussion provides background support for the yen. Of course, in the short term, the USD/JPY pair will focus only on American events, reacting to the results of the December Fed meeting. But at the same time, it is worth recognizing that the Japanese currency now has "its own" fundamental arguments that can strengthen the bearish mood for the pair (earlier, the downward impulses of USD/JPY were mainly due to the weakening of the greenback). Therefore, if the Fed does not support the dollar today, the pair's downward trend may develop in the medium term. From a technical point of view, the USD/JPY pair on the daily chart is located between the middle and lower lines of the Bollinger Bands indicator, and is under all the lines of the Ichimoku indicator, signaling the priority of short positions. The main target of the downward movement is 133.90, which corresponds to the lower line of the Bollinger Bands on the D1 timeframe.       Relevance up to 01:00 2022-12-15 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/329747

Summary:  U.S. equities and bonds faded the initial hype after softer CPI prints and ended the volatile session with muted gains. USD sold off and USDJPY dipped below 135 at one point. Crude rallied for the second day in a row, rising 3% as supply issues remained. A 50bp hike at today’s FOMC is cemented and the market’s focus will be on the dot plot about the Fed’s rate projections for 2023 and Powell’s comment at the press conference. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) jumped at the open before paring most of the gains After a strong opening, soaring at much as 4% in the S&P 500 and 3.9% in Nasdaq 100, the U.S. market spent the rest of the day pulling back from the intraday highs. S&P500 finished the volatile session at 4019.65, up 0.7%, and Nasdaq 100 closed at 11834.21, 1.1% higher.  A large portion of the early surge was in ETFs. A huge USD3.9 trillion notional value of options expiring this Friday may tend to pin the benchmark S&P 500 as well. All sectors with the S&P 500, except consumer staples, advanced. The interest rate-sensitive real estate sector was the top gainer, rising 2%, which was followed by the energy sector which was boosted by a 3% rise in the crude oil price. Meta Platforms (META:xnas) gained 4.7% as Republican Senator Rubio is seeking a pass a bi-partisan bill to ban Tik Tok from operating in the U.S. Moderna (MRNA:xnas) soared 19.6% on news of positive trial data from an experimental skin cancer vaccine in collaboration with Merck (MRK:xnys). Merck climbed 1.8%. Airlines were notable laggards on Tuesday. A 3% drop made airfares one of the largest items contributing to the softness in the CPI report. In addition, Alsska Air (ALK:xnys) warned about slowing corporate travel and JetBlue (JBLU:xnas) which was more leisure travel-focused, mentioned weaker bookings in Q4. US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) bull steepened on soft CPI data Immediately after the release of the soft CPI data which increased the chance of further downshift to a 25bp hike instead of 50bps in February, the whole yield curve shifted down with the 2-year at one point shedding 24bps to 4.13% and the 10-year 20bps richer to as low as 3.41%. The money market curve now prices the terminal rate at around 4.82% in 2023, down from 4.98%. The long-end however did not manage to keep their gains after some large block selling in the 10-year contracts and a weak 30-year auction. The 10-year gave back nearly half of the gain to close the session 11bps richer at 3.50%. The 2-10-year curve steepened to 72bps. The yield on the 30-year long bonds finished the day only down 4bps at 3.53%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hang Seng Index advanced by 0.7% after Hong Kong lifted all travel restrictions on visitors arriving in the city and relaxed the QR code scanning requirements for residents.  Catering and retailer stocks outperformed. Cosmetic chain operator Sa Sa (00178:xhkg) jumped 14.2%. Local developers and commercial landlord stocks rose by 3% to 4%. Cathay Pacific climbed 3.2%. Macau casino operators gained between 1% and 4%. Shares of the semiconductor industry jumped on media reports suggesting that the Chinese Government is going to spend RMB 1 trillion to support the industry. SMIC (00981:xhkg) gained 9.7% and Hua Hong Semiconductor (01347:xhkg) soared 17.4%. In A-shares, the CSI300 index was little changed. Farming, textile, and transportation stocks outperformed. FX: USDJPY dipped below 135 before a recovery in Asian hours The US dollar sold off on Tuesday following the softer November CPI print in the US saw US yields plunge lower. AUDUSD was however seen paring some of the gains in early Asian trade and slid below 0.6840 amid concerns on China’s Covid cases ramping up further which also led to the postponement of the Central Economic Work Conference. USDJPY took a brief look below 135 after the CPI release but some of the move was erased later. EURUSD surged to 1.0673 and remains supported above 1.0620 ahead of Fed meeting today and ECB meeting tomorrow. Crude oil (CLF3 & LCOF3) pauses after two days of gains Crude oil prices gained further on Tuesday after a softer-than-expected US CPI print for November spurred hopes that the Fed will slow down its pace of rate hikes. Supply side issues were also supportive. TC Energy Corp has yet to submit a restart plan for the Keystone pipeline following a leak last week, and plans have been delayed by bad weather. Russia’s President Putin is planning to sign a decree banning the sale of Russian oil through any contract that specifies the recipient as a nation that joined the G7 price cap. OPEC urged caution as its members implement the recent 2mb/d production cut. It now expects to see a finely balanced market in Q1 2023, instead of the deficit implied by its forecasts a month ago. It sees demand increasing by 2.2mb/d next year to average 101.77mb/d. Demand concerns may pick up further in Asia today as Covid cases in China continue to rise and impede the reopening trade, but caution will prevail ahead of Fed meeting later today.   What to consider?   Another softer US CPI print is still not enough The November CPI report was cooler-than-expected across the board, highlighted by the headline cooling to 7.1% from 7.7% (exp. 7.3%), with a M/M gain of 0.1%, slowing from the prior 0.4% and beneath the expected 0.3%. Core metrics saw Y/Y print 6.0% vs 6.3% prior and beneath the 6.1% expectation, while the M/M saw a 0.2% gain, lower than the prior and expected 0.3%. The market pricing has shifted towards a 25bps rate hike for February after we potentially get a 50bps today, while the terminal rate forecast has drifted lower to 4.82%. If we dig into the details, the disinflation is clearly driven by goods and energy, while services prices continue to rise further. This means wage pressures will continue and provides room for the Fed to continue to beat the drum on rates being higher-for-longer.  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. 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’s Central Economic Work Conference is reportedly postponed According to Bloomberg, which cites unnamed sources, the Chinese Communist Party is postponing the Central Economic Work Conference that was previously scheduled for this week due to the spread of Covid-19 inflections in Beijing. No signs, however, show that the Chinese authorities are reversing the recent trend of relaxing pandemic restrictions. New Zealand forecasts a recession starting Q2 2023 New Zealand Treasury Department issued 2022 half-year economic and fiscal update, forecasting three quarters of negative GDP growth from Q2 2023. Overall, the forecast calls for 0.8% contraction in 2023. Still, comments from RBNZ this morning suggested inflation focus will continue to drive more rate hikes, even as spending slows and unemployment levels increase as more people join the workforce over the coming year, partially helped by improving migration levels. Bank of Japan’s Tankan shows weakening business sentiment Sentiment among Japan's large manufacturers deteriorated slightly in the three months to December amid concerns over the global economic slowdown. The main index for sentiment among large manufacturers was +7, compared with +8 in Q3, according to the Bank of Japan's quarterly Tankan survey. Non-manufacturers still took a more positive view as the economic reopening gathered momentum, and large non-manufacturer index rose to 19 in Q4 from 17 previously.     Detailed FOMC Preview – read here. Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT 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: Softer-than-expected US CPI puts the focus on FOMC dot plot and Powell’s comments – 14 December 2022 | Saxo Group (home.saxo)

Summary:  Risk sentiment rushed higher on the soft US November CPI data yesterday, although sentiment rapidly turned more cautious as traders recognize the risk that the Fed may be less willing to react as quickly to signs of easing inflation as the market in today’s FOMC meeting, which will refresh the Fed’s latest economic projections and the “dot plot” of projected Fed rates for coming years. Four G10 central bank meetings follow tomorrow, including the BoE and ECB.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The US November CPI report was exactly what the market was hoping for, sending S&P 500 futures on a rally to the 4,180 level before being sold off declining 3% from the high to the close. This rejection indicates that the market is doubting itself despite the lower US core inflation print. A weak session by Tesla suggests that while inflation fears might be disappearing growth fears will begin to take hold instead posing a new threat to the equity market. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and Chinese stocks edged up higher. The news about a delay in China’s central economic work conference due to a surge in Covid inflections in Beijing. Investors are encouraged by signs that the Chinese authorities are not reversing course despite outbreaks after the easing of restrictions. China will stop reporting infections without symptoms as mandatory testing has been dropped. Hang Seng Index climbed 0.7%, led by technology names. Chinese educational services providers were among the top gainers. In A-shares, CSI 300 gained 0.3%, with tourism, lodging, Chinese liquor, and semiconductor outperforming. FX: USD dumped after another soft CPI print The US dollar sold off on Tuesday on the softer November CPI print in the US taking US treasury yields sharply lower. AUDUSD pared some of the gains in early Asian trade and slid below 0.6840 amid concerns on China’s Covid cases ramping up further which also led to the postponement of the Central Economic Work Conference. USDJPY took a brief look below 135 after the CPI release but some of the move was erased later. EURUSD surged to 1.0673 and remains supported above 1.0620 ahead of the FOMC meeting today and ECB meeting tomorrow. Crude oil (CLF3 & LCOG3) pauses ahead of FOMC Crude oil trades softer ahead of FOMC after rallying 6% over the previous two sessions, driven by an improved risk appetite following Tuesday's CPI print and encouraging signs from China where easing restrictions eventually will boost demand. The rally however slowed after the API reported a 7.8 million barrel rise in crude inventories versus expectations for a +3 million barrel draw from EIA later, and OPEC urged caution as it cut its Q1 23 oil demand forecast. The IEA will publish its monthly report later today. Goldman cut its Q1 price forecast by $20 to $90/bbl siting weak demand while saying “The structural oil cycle has taken a pause this year”. Apart from IEA, also focus on a potential Russian response to the price cap and not least today’s FOMC result. Gold (XAUUSD), silver (XAGUSD) and copper (HGH3) all rallied strongly following the lower-than-expected US CPI print Gold closed at its highest level since July above $1808 while silver reached an 8-month high above $24. The recovery in silver has been impressive with the market only requiring 15 weeks to recover half of what it lost during an 82-week period from Feb 2021 to Sept this year. Copper meanwhile briefly traded above its 200-day moving at $3.913/lb before finding stiff resistance ahead of the $4/lb area. All metals finding support from a weaker dollar and lower bond yields on signs that the worst inflation has likely passes, suggesting the Fed could further slow the pace of rate hikes next year. US 10-year treasury benchmark rebounds further (TLT:xnas, IEF:xnas, SHY:xnas) Immediately after the release of the soft CPI data which increased the chance of further downshift to a 25bp hike instead of 50bps in February, the whole yield curve shifted down with the 2-year at one point shedding 24bps to 4.13% and the 10-year 20bps richer to as low as 3.41%. The money market curve now prices the terminal rate at around 4.82% in 2023, down from 4.98%. The long-end however did not manage to keep their gains after some large block selling in the 10-year contracts and a weak 30-year auction. The 10-year gave back nearly half of the gain to close the session 11bps richer at 3.50%. The 2-10-year curve steepened to 72bps. The yield on the 30-year long bonds finished the day only down 4bps at 3.53%. What is going on? Another softer US CPI print The November CPI report was cooler-than-expected across the board, highlighted by the headline cooling to 7.1% from 7.7% (exp. 7.3%), with a M/M gain of 0.1%, slowing from the prior 0.4% and beneath the expected 0.3%. Core metrics saw Y/Y print 6.0% vs 6.3% prior and beneath the 6.1% expectation, while the M/M saw a 0.2% gain, lower than the prior and expected 0.3%. The market pricing has shifted towards a 25-bp rate hike from the Fed for February after we are nearly certain to get a 50bp hike today, while the terminal rate forecast has drifted lower to 4.82%. If we dig into the details, the disinflation is clearly driven by goods and energy, while services prices continue to rise further. This means wage pressures will continue and provides room for the Fed to continue to beat the drum on rates being higher-for-longer. Tesla shares down another 4% Headwinds are mounting for Tesla as EV demand is coming down in China and VW CEO said yesterday that EV sales in Europe is slowing down due to high price points and elevated electricity prices. Tesla shares closed just above the $160 level, which is just below the 200-day moving average at $164, the lowest levels since November 2020. High battery materials prices are also weighing on the outlook for EV makers. Finally, CEO Elon Musk’s endeavour at Twitter is potentially pressuring Tesla shares as he might be forced to put up Tesla shares as collateral for refinanced Twitter debt. Inditex Q3 results in line with estimates The European fast fashion retailer has delivered nine-months results (ending in October) with revenue at €23.1bn and EBIT at €4.2bn in line with estimates. Apple to allow alternative App Stores on its devices This move is a response to new European Union requirements under the Digital Markets Act that are set to go in effect in 2024. The move will initially only apply to the European market unless regulators elsewhere make similar moves. This will allow app developers to avoid paying Apple up to 30% of revenues for payments made through Apple’s app store. Several large app makers’ shares, including those for streaming service Spotify and dating services app Match group jumped on the news. New Zealand forecasts a recession starting Q2 2023 New Zealand Treasury Department issued 2022 half-year economic and fiscal update, forecasting three quarters of negative GDP growth from Q2 2023. Overall, the forecast calls for 0.8% contraction in 2023. Still, comments from RBNZ this morning suggested inflation focus will continue to drive more rate hikes, even as spending slows and unemployment levels increase as more people join the workforce over the coming year, partially helped by improving migration levels. Bank of Japan’s Tankan survey shows weakening business sentiment Sentiment among Japan's large manufacturers deteriorated slightly in the three months to December amid concerns over the global economic slowdown. The main index for sentiment among large manufacturers was +7, compared with +8 in Q3, according to the Bank of Japan's quarterly Tankan survey. Non-manufacturers still took a more positive view as the economic reopening gathered momentum, and large non-manufacturer index rose to 19 in Q4 from 17 previously. US places 30 additional Chinese companies on Entity List, a trade blacklist The companies included Yangtze Memory Technologies, China’s top memory chip producer and others and will prevent them from purchasing selected American components. This expands the original Entity List of companies that were blacklisted back in October for their connection with China’s military. What are we watching next? 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, as will the latest “dot plot” projections of the Fed policy rate, which are expected to show a median terminal rate that is higher than the September projections (4.6%, with the market currently projecting 4.32%), as has been alluded to by Chair Powell at the November FOMC and in remarks made in December. Easing financial conditions and an anticipated China stimulus could see the Fed Chair Powell remaining in hawkish mode, so Powell’s press conference remains key to watch. There will have to be a lot of focus on pushing back against the market’s anticipation that the Fed will be trimming rates by Q4 of next year, emphasising that the Fed will not ease prematurely if Powell and committee want to avoid further easing of financial conditions. Four more central bank meetings tomorrow The Swiss National Bank, Norway’s Norges Bank, Bank of England and the European Central Bank will all meet tomorrow, with the Norges Bank expected to hike 25 basis points and the three others expected to hike 50 basis points.  Markets will look for the relative degree to which the central banks signal that they are ready to declare at least a pause in the hiking cycle soon. The Norges Bank has hinted that it sees its tightening cycle near an end and the BoE has said that the peak rate will likely prove lower than the market was forecasting around the time of its last meeting. With the late dollar weakness, a dovish shift is more likely. Earnings to watch Inditex has reported its Q3 results in early European hours (see review above) which extends today’s earnings focus to the US session where our focus will be on Lennar, a US homebuilder. Lennar is expected to show 20% revenue growth y/y in its FY22 Q4 period (ending November), which is expected to decline to 5% y/y in FY23 Q1 (ending February). Today: Lennar, Trip.com, Nordson, Inditex Thursday: Adobe Friday: Accenture, Darden Restaurants Economic calendar highlights for today (times GMT) 0900 – IEA's Monthly Oil Market Report 1000 – Euro Zone Oct. Industrial Production 1330 – Canada Oct. Manufacturing Sales 1530 – EIA's Weekly Crude and Fuel Stock Report 1900 – US FOMC Meeting 1930 – US Fed Chair Powell Press Conference 2145 – New Zealand Q3 GDP 0030 – Australia Nov. Employment Change / Unemployment Rate 0120 – China Rate Decision 0200 – China Nov. Retail Sales 0200 – China Nov. Industrial Production Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 14, 2022 | Saxo Group (home.saxo)

Today's data supports our view that Japan's recovery will be driven mostly by non-manufacturing activity, while sluggish manufacturing could partially hamper the recovery  5.4% Core machine orders %MoM sa Higher than expected Core machinery orders rebounded in October Core machinery orders, a forward-looking indicator for investment, rebounded 5.4% month-on-month (seasonally adjusted) in October after dropping for two consecutive months. The gain came mainly from non-manufacturing (14.0%) with a stong rise in construction, transportation and information services while manufacturing orders continued to drop. The weakness in manufacturing investment is more pronounced due to sluggish industrial production. October industrial production was revised down -3.2% MoM (sa) from -2.6% in the new estimate and the weakness in manufacturing production broadened.     Core machinery orders rebounded in October, only partially offsetting the losses from the previous two months Source: CEIC Tankan survey showed gloomier outlook, more so for manufacturing sector The Tankan survey showed that large companies still foresee positive growth in the coming quarter but the momentum is weakening. The outlook for manufacturing slid to 6 in 4Q from 9 in 3Q while that for non-manufacturing was unchanged at 11, but missed the market consensus of 15. The recent government subsidies on tourism and fuel were expected to boost service activities and business sentiment but companies appear to be more cautious about cost-push inflation. For manufacturing, growing recession fears in the US, EU and China probably hurt the near-term outlook.  Less optimistic outlook for large companies Source: CEIC November trade preview Japan's trade deficit is expected to narrow in November to -1.5 trillion yen (vs -2.2 trillion yen in October). The early November trade data showed that import growth decelerated significantly to 21.0% YoY during the first 20 days of November (vs 49.7% in Oct for the same period), while the slowdown in exports (19.2%) was slightly milder than imports. The decline in global oil prices and the recent appreciation in the yen should have worked in favour of lowering import growth, and this trend is likely to continue in the near future.  The unexpected contraction in 3QGDP was mainly due to a surge in service imports. We believe that improvements in net trade contributions will support a rebound in growth in 4Q. The trade deficit is expected to decrease further due to weaker global commodity prices and the strong JPY, and the service balance is expected to improve with the return of foreign tourists.   Bank of Japan watch The Bank of Japan will meet next Tuesday but it will be another uneventful meeting with no policy changes. Considering the weak October IP and Tankan survey, the growth outlook for coming quarters is weakening, supporting the BoJ's easing policy.  Moreover, the Bank of Japan will likely maintain its current easing policy stance for a considerable time. Some argue that when the current Governor Haruhiko Kuroda ends his second term in April, a policy shift could materialise soon after. But in our view, the BoJ's view on inflation and policy is unlikely to change under the new governorship in 2023.  The JPY is at 135.4 and is expected to appreciate further next year as the US dollar loses strength. The narrowing of the yield gap will likely benefit the currency for the time being. This means that the negative impact of a weak currency on growth and inflation will be reduced over the next few quarters. Thus, discussions on yen weakness and the BoJ's policy response will no longer be the focus of the market next year. The real issue will be whether strong wage growth is agreed upon in the salary negotiation season next spring. Prime Minister Kishida has proposed a 3% increase in wages and incentives for businesses in return for higher wages, but the 3% wage hike is too much for some companies. However, if that happens and fiscal policy also shows hints of normalisation, it is possible for the BoJ to adjust its forward guidance and widen the 10-year yield band by the end of 2023, though it is still highly unlikely to raise its policy rate.  Read this article on THINK TagsTrade balance JPY Industrial Production Business confidence Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  The widely expected 50bps rate hike by the Fed came along with hawkish revision of the dot plot in which the terminal rate projection was increased to 5.1% from September’s 4.6%. Equities and bonds fell but the reaction faded later at Chair Powell’s presser where he hinted that policy is close to “sufficiently restrictive”. Dollar ended the day lower. Meanwhile, China’s plan to go ahead with the Central Economic Work Conference despite the surge in cases boosted sentiment. Crude oil prices were firmer on IEA expecting higher prices next year. A plethora of G10 central banks, including the BoE, ECB, SNB, & Norges Bank, meet today. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) erase part of the post-FOMC announcement declines Equity markets were in a whipsaw falling sharply after the announcement of a 50bps rate hike which was accompanied by a hawkish shift in the dot plot which brought the terminal rate projections to 5.1% for end-2023 from 4.6% at the September meeting. Some of the decline was however reversed later as Chair Powell press conference went underway. Fed Chair Powell started the press conference with a hawkish tone in which he noted there is still some ways to go and the Fed needs to see substantially more evidence to have confidence inflation is on a sustained downward path back to target, although there was some reprieve after Powell stated during the Q&A that he thinks policy is getting to a pretty good place and close to sufficiently restrictive. S&P 500 ended the session down 0.6% and Nasdaq 100 was down close to 0.8%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) edged higher in a lackluster session Hong Kong and Chinese stocks edged up higher. The Bloomberg story speculating about a delay in China’s annual Central Economic Work Conference due to a surge in Covid inflections in Beijing did not worry investors much. Investors were encouraged by signs that the Chinese authorities were not reversing course despite outbreaks after the easing of restrictions. China will stop reporting infections without symptoms as mandatory testing has been dropped. Hang Seng Index climbed 0.4%. CSPC Pharmaceutical (01093:xhkg), rising 6.5%, was the best performer in the benchmark index. Hengan (01044:xhkg), Sunny Optical (02382:xhkg), Techtronic Industries (00669:xhkg), Li Ning (02331:xhkg), and Baidu (09888:xhkg) were other outperformers, gaining between 3% and 6%. Previously battered Chinese educational services providers soared while online healthcare names pulled back from recent strength on profit-taking. Alibaba Health (00241) slid 7%. In A-shares, CSI 300 gained 0.3%, with semiconductor, tourism, lodging, and Chinese liquor stocks advancing. FX: Hawkish Fed unable to provide a lasting bid to the dollar The USD eventually settled lower on Wednesday following the FOMC rate decision and the press conference by Chair Powell. Initial positive reaction following the upside adjustment in the dot plot was erased as Chair Powell said he thinks policy is getting to a pretty good place and policy is getting close to sufficiently restrictive. GBPUSD tested the critical 1.2450 with UK CPI also coming in softer than expected at 10.7% and cooled from the prior 11.1%. EURUSD got in close sight of 1.0700 while USDJPY fluctuated between 135-136. Crude oil (CLF3 & LCOG3) extended the rally on IEA outlook Crude oil prices surged higher again on Wednesday with the IEA warning that prices may rise next year as sanctions squeeze Russian exports. It expects its output will fall by 14% by the end of the first quarter. It also increased estimates for global demand by 300kb/d, in a nod to China’s reopening. Overall crude consumption is expected to rise 1.7mb/d next year to average 101.6mb/d. A weaker US dollar despite the Fed’s hawkish shift in the dot plot also underpinned, while the unexpectedly large increase in US inventories was shrugged off. WTI futures rose above $77/barrel while Brent touched $83.  Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM What to consider? FOMC sets the terminal rate forecast at 5.1%, above market expectations The Fed voted unanimously to lift the Federal Funds Rate target by 50bps to 4.25-4.50%, as expected, downshifting the pace of rate hikes. While the statement was broadly unchanged, the updated economic projections showed Fed Funds at 5.125% by December 2023 and core PCE still at 3.5% by that time. That implies 75bps of more tightening in this cycle, which will be seen in 2023, but the markets are still pricing in a peak rate of 4.87%. After that point, the dot plot is far more distributed, but the median projects the Federal Funds Rate target at 4.1% by the end of 2024, suggesting 100bps of rate cuts. Equities did see a negative reaction to the upside surprise in terminal rate projections, but this may remain short-lived as markets remain focused on incoming data. Bond markets had little reaction to the Fed’s updated dot plot. Dollar fell. Australia employment report better-than-expected Australia’s November employment rose 64k, higher than the +19k estimate and more than the revised +43k gains for October. Jobless rate was steady at 3.4% and participation rate came out higher to return to the record highs of 66.8% (vs. estimate 66.6%). The strength in the labor market will continue to provide room to the Reserve Bank of Australia to continue with its modest rate hikes, after it has already downshifted to a smaller rate hike trajectory. 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 edge0 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. The U.S. is adding China’s top memory chips maker to the trade blacklist The U.S Department of Commerce is reportedly moving Yangtze Memory Technologies, a leading memory chip maker in China, together with 30+ other Chinese companies, from the Unverified List to the Entity List, after the expiry of a 60-day period for the company to answer requests for information about its business and customers. The Entity List is the official export control blacklist that restricts companies from access to American technologies. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM New Zealand Q3 GDP comes in above expectations A big positive surprise in NZ Q3 GDP which came in at 2.0% Q/Q sa vs expectations of 0.9% and higher than last quarter’s revised 1.9%. With the possibility of a recession in 2023 highlighted yesterday, this print suggests that there is a substantial amount of work left to be done by the Reserve Bank of New Zealand to dampen demand in order to curb inflation. Bank of Japan policy review speculation gathers further pace Some reports suggested that the BOJ could review policy next year, after pay growth and any slowdown in the global economy are closely examined. The results of spring wage negotiations come in mid-March, after Governor Haruhiko Kuroda's final policy meeting, so an assessment would probably be done after he departs. The review could reaffirm the existing ultra-loose framework, but possibility of some tweaks to the yield curve control policy remains as inflationary pressures remain a concern.   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: FOMC’s hawkish dot plot; more G10 central bank meetings ahead – 15 December 2022 | Saxo Group (home.saxo)

Summary:  The FOMC meeting and accompanying economic and Fed Funds projections saw the Fed attempting to bolster its inflation fighting credibility with forecasts of a weaker economy and higher inflation and policy projections than in September. But after some back-and-forth churning, the market decided it was largely a non-event, with very minor shifts in the USD and US yields. Today, we have four more G10 central banks on the menu.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The market initially took the hawkish FOMC rate and inflation projections at face value last night, plunging sharply, if briefly, before rebounding slightly into the close. The trading ranges for the main indices are generally sandwiched in a narrow zone between important support and resistance. In the case of the S&P 500, the upside range high is clearly marked at just above 4,100, while the downside support level comes in the 3,900-20 area. FX: The USD merely churned around with little conviction on latest hawkish Fed blast The new FOMC monetary policy statement and economic and policy projections (more below) were hawkish as the Fed raised the median policy forecast for the end of next year to above 5%, but after a volatile reaction, traders decided they were unimpressed and the US dollar largely fell back to where it was trading ahead of the meeting as only the shortest part of the yield curve was marked slightly higher in recognition of the Fed’s hawkishness and risk sentiment stabilized. If the market is willing to ignore Fed guidance, what should we expect from the market’s treatment of today’s central bank meetings? Watching USDJPY cycle lows and the 200-day moving average where the pair is sticky (currently near 135.65) and the cycle top in EURUSD just ahead of 1.0700 after yesterday’s stab at posting new highs. Crude oil (CLF3 & LCOG3) Crude oil trades softer ahead of the reopening of a key pipeline in the US and following a strong session on Wednesday where prices found support after the IEA warned that prices may rise next year as sanctions squeeze Russian exports. It expects its output will fall by 14% by the end of the first quarter. It also increased estimates for global demand by 300kb/d, in a nod to China’s reopening and more gas-to-oil switching. Overall crude consumption is expected to rise 1.7mb/d next year to average 101.6mb/d. China’s reopening and a weaker US dollar despite the Fed’s hawkish shift in the dot plot also underpinned prices, while the unexpectedly large 10mb increase in US inventories and signs of slowing demand for gasoline and diesel were shrugged off. Both Brent and WTI are now facing resistance at the 21-day average, at $83.25/b and $77.80/b respectively. Gold (XAUUSD) was little changed after the FOMC raised its terminal rate forecast ... and Fed Chair Powell said the central bank isn’t close to ending its battle against inflation. Supported by ten-year US yields holding steady around 3.5%, the most inverted yield curve in four decades on recession angst and the dollar trading near a six-month low. However, following a 180-dollar rally during the past five weeks and after struggling to break resistance around $1808 this week, the metal increasingly looks ripe for a period of consolidation which may see it drift lower towards $1745, the 38.2% retracement of the run up since early November. A correction of this magnitude may setup an eventual and potential healthier and robust attempt to break higher. US treasury yields underwhelmed by FOMC meeting (TLT:xnas, IEF:xnas, SHY:xnas) The FOMC accompanying projection materials saw the Fed projecting significantly higher inflation for 2023 than expected, and a higher median Fed Funds rate projection just north of 5%. This sparked a sharp reaction in Treasury yields, with the 2-year rising more than 10 basis points briefly before sawing that move in half, while the 10-year yield only rose about 5 bps before wilting back just below 3.50%. Incoming data will set to the tone from here as the market was largely unmoved by the Fed’s rather bold rate projections of its policy rate and inflation for 2023 in last night’s FOMC meeting. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM What is going on? FOMC sets the terminal rate forecast at 5.1%, above market expectations The Fed voted unanimously to lift the Federal Funds Rate target by 50bps to 4.25-4.50%, as expected, downshifting the pace of rate hikes. While the statement was broadly unchanged, the updated economic projections showed Fed Funds at 5.125% by December 2023 and core PCE still at 3.5% by that time. That implies 75bps of more tightening in this cycle, which will be seen in 2023, but the markets are still pricing in a peak rate of 4.87%. After that point, the dot plot is far more distributed, but the median projects the Federal Funds Rate target at 4.1% by the end of 2024, suggesting 100bps of rate cuts. Equities did see a negative reaction to the upside surprise in terminal rate projections, but this may remain short-lived as markets remain focused on incoming data. Bond markets had little reaction to the Fed’s updated dot plot. The dollar fell. Australia employment report better-than-expected Australia’s November employment rose 64k, higher than the +19k estimate and more than the revised +43k gains for October. The jobless rate was steady at 3.4% and participation rate came out higher to return to the record highs of 66.8% (vs. estimate 66.6%). The strength in the labor market will continue to provide room to the Reserve Bank of Australia to continue with its modest rate hikes, after it has already downshifted to a smaller rate hike trajectory. New Zealand Q3 GDP comes in above expectations A big positive surprise in NZ Q3 GDP which came in at 2.0% Q/Q sa vs expectations of 0.9% and higher than last quarter’s revised 1.9%. With the possibility of a recession in 2023 highlighted yesterday, this print suggests that there is a substantial amount of work left to be done by the Reserve Bank of New Zealand to dampen demand in order to curb inflation. What are we watching next? The 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. ECB is 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 of 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 Japan policy review speculation gathers further pace Some reports suggested that the BOJ could review policy next year, after pay growth and any slowdown in the global economy are closely examined. The results of spring wage negotiations come in mid-March, after Governor Haruhiko Kuroda's final policy meeting, so an assessment would probably be done after he departs. The review could reaffirm the existing ultra-loose framework, but possibility of some tweaks to the yield curve control policy remains as inflationary pressures remain a concern. Norges Bank and Swiss National Bank also up this morning The Swiss National Bank is expected to hike another 50 basis points, taking its policy rate to 1.00%, with little anticipation of pointed guidance coming into this meeting as Swiss inflation has peaked at 3.50% for the cycle and was 3.0% for the most recent print. The Norges Bank, meanwhile, seems more interested in signaling that policy tightening is set to cease and may indicate that today’s expected 25 basis point hike to 2.75% could be the last for now as it is concerned about weakness in the “mainland” (non-oil & gas) economy after the worst Regions Survey outlook since the global financial crisis. Earnings to watch The big name reporting today is Adobe Inc., the former high-flyer that trade north of 700 before rolling over to below 300 on the rise in interest rates and as its steady pace of top-line growth decelerated in recent quarters. The stock closed yesterday at 339. Many highly-valued growth stocks have been extremely sensitive to both execution for the current quarter and revenue expectations for the coming quarter, so traders should brace for this earnings report after market hours today. Today: Adobe Friday: Accenture, Darden Restaurants Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Economic calendar highlights for today (times GMT) 0830 – Switzerland SNB Policy Rate Announcement 0900 – Switzerland SNB press conference 0900 – Norway Norges Bank Deposit Rate announcement 1200 – UK Bank of England Rate Announcement 1315 – Eurozone ECB Rate Announcement 1315 – Canada Nov. Housing Starts 1330 – US Dec. Empire Manufacturing 1330 – US Nov. Retail Sales 1330 – US Weekly Initial Jobless Claims 1330 – US Dec. Philadelphia Fed Business Outlook 1345 – Eurozone ECB Press Conference 1415 – US Nov. Industrial Production 1530 – EIA's Natural Gas Storage Change 1900 – Mexico Rate Announcement 0001 – UK Dec. GfK Consumer Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source:Financial Markets Today: Quick Take – December 15, 2022 | Saxo Group (home.saxo)

Economies today face a litany of challenges they have not faced in the last decade: Putin's war in Ukraine, record-breaking inflationary pressures, looming global recession and the struggle to stay ahead of the ongoing climate crisis. The banks are doing what they can to slow down inflation, but not the Bank of Japan. His decision may remain unchanged. Meanwhile, geopolitical uncertainty, the threat of further disruption to the global supply chain and higher interest rates remain key risks to Canada's economic growth. Bank of Japan Japan's benchmark interest rates have been among the lowest in the world for decades. Part of the yen's recent strength stems in part from talk that the BoJ may change its yield-curve control policy now that consumer price inflation has surged to 3.7% - an eight-year high. However, such a move seems unlikely. Japan's central bank has pledged to pursue an "over-inflation" policy and appears to have no intention of curbing its extremely loose monetary policy. Inflation in Japan is low compared to rates in other developed economies, which allows the country's central bank to keep interest rates very low. Although the Bank of Japan has raised its inflation forecast for 2022 to 2.9%, down from its previous forecast of 2.3%, it is expected to keep its key short-term interest rate at -0.1% and maintain the 0% cap for its 10-year bond yield at this month's meeting. During his decade in office, Kuroda, seeking to push inflation to 2%, introduced massive asset purchase and YCC, an elaborate program that combined a negative short-term target rate and a 0% cap on 10-year bond yields. In addition to the global supply pressure caused by the war in Ukraine and the pandemic, the collapse of the yen triggered a sharp increase in the cost of imported raw materials and ultimately household goods, making Kuroda and its currency-deprecating low interest rates the target of public outcry As Japan's massive pile of debt makes an abrupt interest rate hike too costly, the BoJ will tread carefully and explain the shift as a gradual move towards normalizing emergency stimulus - rather than full monetary tightening, they said. But policymakers also know they are running out of time to deal with the huge costs of the Bank of Japan's relentless defense of its 0% yield cap, such as declining bond market liquidity, crushed bank margins and a devastating yen sell-off. BOJ officials are now preparing the theoretical basis for future policy change, releasing research into whether firms and households will finally shake off their deep-seated reluctance to raise prices. Any apparent shift in BoJ thinking, even if it does not lead to an immediate change in monetary policy, could trigger a massive sell-off in Japanese bonds, with significant implications for global markets. Canada GDP The Canadian economy is moving closer to a recession in 2023. Early signs of easing inflationary pressures raise the odds that the slowdown will be "mild" by historical standards. Unemployment fell to a record low in the summer (at least since 1976) and only slightly increased since then. The US economy is also expected to plunge into recession in 2023, which will take a toll on Canadian exports. Price growth is still well above the central bank's targets, but increases have been smaller and less widespread in recent months. The crisis in the global supply chain, which largely contributed to the initial rise in inflation, is weakening. Commodity prices remain high but have fallen after a sharp rise earlier this year when Russia invaded Ukraine. Withholding interest rate hikes will not prevent a recession in Canada in the coming year. A mild deterioration of the economic situation is probably already certain in the light of the current restrictive level of interest rates. GDP is expected to stay at 0.1%, but neither rising nor falling suggests stagnation, which could lead to a mild recession. Source: investing.com

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

Summary:  Markets stumbled into the close last week, shaken in Europe by a resolute, and possibly unrealistic ECB stance at last Thursday’s ECB meeting, while a heavy calendar of event risks combined with trillions in options expiries roiled US markets last week. The two final weeks of a remarkable 2022 await. Are traders willing to put any risk to work here after an exhausting year or hanging up their spikes until 2023?   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Following a close at the 50-day moving average on Friday, S&P 500 futures are attempting to rebound this morning trading around the 3,885 level driven by fresh sentiment change over China’s alleged move to enact pro-business policies and stimulus in 2023. There are no meaningful earnings or macro releases expected today so we expect a calm trading session with Friday’s low in S&P 500 at the 3,855 level being the key level on the downside and the 100-day moving average at the 3,935 level being the key upside level to watch. Euro STOXX 50 (EU50.I) European equities are still digesting their decline last week, biggest decline in many months, as the ECB delivered a more hawkish message than expected. STOXX 50 futures are trading around the 3,818 level getting a little bit of tailwind electricity prices coming down from excessive levels. The IFO December survey out at 0900 GMT is today’s main macro release that could jolt market sentiment. Analysts expect an improvement in the IFO survey for December. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and Chinese stocks pared all the early gains and turned lower as investors turned cautious during a surge in media reports of rises in Covid inflections and death tolls. The lack of commitment to more large-scale economic stimulus measures from the Central Economic Work Conference was considered underwhelming. Nonetheless, a shift to a more conciliatory stance towards the private sector from the meeting may be a positive that will contribute to growth and reduce risk premium in the medium-term. More details about the Central Economic Work Conference can be found here. Hang Seng Index dropped 0.9% and the CSI300 Index tumbled 1.8%. FX: Dollar off to a weak start to the week as JPY gains on 2023 policy review speculation EURUSD has rebounded slightly from the Friday close as the market must decide whether the ECB can maintain the hawkish bluster on display at last Thursday’s meeting, which initially supported the euro, but subsequently saw doubts emerging as peripheral EU spreads widened sharply. USDJPY had a volatile week as a drop below 135 was not maintained despite US yields remaining capped, but a fresh bout of JPY strength arrived overnight on reports that Japan PM Kishida is considering a tweak in BOJ’s 2% inflation goal next year (read below). Crude oil (CLF3 & LCOG3) prices advance on China’s growth push and US refilling SPR Oil prices started the week on a firmer footing, with WTI rising towards the $75/barrel mark and Brent heading back towards $80. While there are unconfirmed reports of massive number of cases and fatalities in China from the spread of Covid, the government’s official message continues to stress upon the need to expand consumption as the key economic priority for 2023. This helps paint a better demand outlook for oil, as global demand slowdown concerns continue to mount in the US and Europe and Russian flows show no signs of slowing. Moreover, it was reported that the US is starting to replenish the Strategic Petroleum Reserve (SPR), starting with a 3-million barrel, fixed-price purchase. In week to Dec 13 funds cut bullish Brent and WTI bets to lowest since April 2020. Gold (XAUUSD) trades near $1800 as it continues to find support Since the current run up in gold started in early November, the price has not dipped below its 21-day moving average, today at $1775. Speculators increased bullish gold and silver bets by 50% in the week to December 13 when prices briefly spiked in response to a softer dollar and CPI print. The subsequent setback following Wednesday’s hawkish FOMC, however, was not big enough to rattle recent established longs. For that to happen the price in our opinion as a minimum need to break below $1765. The risk of a recession and the FOMC hiking into economic weakness – potentially without succeeding getting inflation under control - continues to strengthen the upside risk for investment metals in 2023.  US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) steepens as market refuses to price Fed rate projections Soft US preliminary PMIs on Friday and weak risk sentiment kept treasuries supported and the 2-year benchmark yield remains near recent lows as the market refuses to price in the projected Fed Funds rate projections from last week’s FOMC meeting, as the market persists in pricing in high odds of Fed rate cuts late next year. At the longer end of the curve the 10-year yield remains pinned near the 3.50% level and the 2-10 slope steepened to –67 basis points this morning, near the highest reading in a month. What is going on? New Zealand Q4 Westpac Consumer Confidence plunges to lowest ever measured The survey reading was 75.6, a huge drop from 87.6 in Q3 and the lowest reading in the 34-year history of the survey and below the 78.7 former record low from Q2 of this year and the 81.7 trough during the global financial crisis. NZD gapped lower after another strong week on the recent relative hawkishness of the RBNZ, a stance that may soften in coming weeks. AUDNZD hit lows since late 2021 over the last couple of weeks after trading at the highest in years as recently as last September. EU considering cutting the proposed natural gas price The EU nations are likely to discuss cutting the gas price cap by almost a third today after the EUR275 per megawatt-hour was proposed last month. As the energy crisis continues to threaten a fresh surge in inflation and growth slowdown in the region, it is also stretching government budgets to maintain popularity. But this will eventually be inflationary again, as price caps hardly work effectively. US flash PMIs send warning signals. Flash December PMIs for the US slumped to fresh lows, sending more warning signals about the economic momentum going into 2023. Manufacturing PMI came in at 46.2, below last month’s 47.7 and the expected 47.8, while the services PMI receded to 44.4 from 46.2 previously – that survey has shown little correlation with the ISM Services survey, which continues to suggest an expanding US services sector. Japan PM Kishida hinting at altering inflation goal for central bank Reports suggested that Japan PM Kishida plans to revise a ten-year-old accord with the BOJ and will consider adding flexibility to the agreement's 2% price goal. Kishida will discuss the matter with the next central bank governor, who'll take office in April. Furthermore, some more comments from officials this morning continued to signal that the authorities may be considering a policy review in 2023, and more hints are awaited at the BOJ meeting tomorrow. Ex-BOJ Deputy Governor Yamaguchi said that the BOJ must stand ready to tweak YCC next year if Japan's economy can withstand overseas economic risks, while also warning that once inflation expectations become entrenched, it is very hard to control them. Speculators bought investment metals and sold dollars ahead of FOMC The latest Commitment of Traders report covering the week to December 13, when the market responded to a softer dollar and CPI print, showed speculators increase their dollar short against nine IMM currency futures to a 17-month high. The selling of CAD being more than offset by short covering in AUD, GBP, and not least the JPY. Since the turn of the dollar in early November, the speculative short in JPY has almost halved. In commodities, the net longs in gold, silver and platinum all increased strongly. Crude oil was mixed with the Brent long being cut to a 26-month low, the natural gas short was cut in half. Across the agriculture sector, the soymeal long hit a 4-½ year high, the cocoa position flipped back to long while buyers returned to coffee. What are we watching next? The calendar roll after a volatile 2022 Many long only equity funds have suffered their worst year since 2008, and “balanced” stock-bond funds have put in their worst year in modern memory on the surge in bond yields this year that has seen the 2022 calendar year providing nowhere for the passive investor to run and hide. On the flip side, some hedge funds and volatility traders enjoyed the market environment of the last 12 months. As we wind down 2022, note that new themes can quickly develop in 2023, as many have closed their books on taking risk as liquidity thins out for the holiday time frame and may be set to put on significant risk on the rollover into the New Year. Earnings to watch This week’s earnings focus is Nike, FedEx, and Carnival which we previewed in the earnings watch note on Friday. The bar is set high for Nike earnings as sell-side analysts have recently hiked their price target on the stock and increased their expectations for 2023 on margins. Today’s earnings focus is HEICO which sells aerospace products to the airline industry and defense contractors. Analysts expect FY22 Q4 (ending 31 October) revenue growth of 18% y/y and EPS of $0.70 up 12% y/y. Today: HEICO Tuesday: Nike, FedEx, General Mills, FactSet Research Systems Wednesday: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 0900 – Germany Dec. IFO Survey 1330 – Canada Nov. Teranet/National Bank Home Price Index 1500 – US Dec. NAHB Housing Market Index Bank of Japan meeting (Asian hours Tuesday)   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 19, 2022 | Saxo Group (home.saxo)

The US dollar fell on Monday as improved market sentiment pushed stocks and riskier currencies up. The US Dollar Index (DXY) - which tracks the dollar against a basket of six major currencies - fell 0.2% to 104.580 The euro gained 0.4% to $1.06260 , while sterling strengthened 0.7% to $1.22195. However, both remained lower than their levels before last week's central bank moves. EUR/USD The EUR/USD pair started trading above $1.06 this week. The technical outlook for the euro remains positive and reasonably well supported. The single currency appreciated against the US dollar The latest publication of the German Ifo shows that the sentiment in Europe's largest economy "improved significantly" at the end of the year. The business climate rose to 88.6 from 86.4 in November, breaking the index's six consecutive declines, while the expectations reading hit 83.2, up from 80.2 the previous month. GBP/USD And EUR/GBP GBP/USD generally trades in the range of 1.2170 - 1.2200 during the day. The intraday high was above 1.2240. Currently, the cable pair is trading in the range of 1.2170- 1.2180 The British pound crept back toward the previous week's six-month high against the US dollar on Monday, days after the Bank of England (BoE) raised its benchmark interest rate to its highest level since 2008. The Bank of England made its ninth consecutive interest rate hike on Thursday, raising interest rates by 50 basis points (bps) to 3.5% as the central bank battled double-digit inflation. Read next: Russian Drones Attacked Kyiv Again | Most respondents do not want Musk| FXMAG.COM The euro fell 0.1% against the pound to 86.94 pence. The single currency hit a month-high against the pound sterling on Thursday after decisions by the BoE and the European Central Bank (ECB). ING analysts believe the pound sterling could be vulnerable against the euro, and their target is to move to 89p in the first quarter of 2023. USD/JPY The Japanese yen galloped higher amid illiquid trading conditions on Monday morning on news of a possible change in the Bank of Japan's (BoJ) monetary policy targets. The Bank of Japan currently has a prime interest rate of -0.10% and maintains yield curve control (YCC), setting a range of +/- 0.25% around zero for Japanese government bonds (JGB) for up to 10 years. The BoJ and the People's Bank of China are the only two major central banks with loose monetary policies. Much of the rest of the world is tightening financial conditions to deal with uncomfortably high and volatile inflationary pressures. The BoJ meeting will take place tomorrow, but at this stage the market does not expect any changes. USD/JPY has been in a downtrend since it peaked at 151.95 on the day of the BoJ intervention. At the end of last week, the price moved towards the upper band of the channel but was unable to sustain the move above it. The downtrend may continue to resist, currently at 137.45. Looking at the chart of the pair, you can see the strengthening of the yen against the us dollar. The pair returned to trading around $135 but is now trading above $136, meaning the yen's strength was short. AUD/USD The uplifting Australian dollar is trading slightly higher against the US dollar this Monday. This comes after China announced its intention to stimulate the economy with loose monetary policy and fiscal support. Looking at the chart, it is clear that the beginning of the week for Aussie is strong. Comparing to the close, the can pray increased significantly and is now trading above $0.67. Source: investing.com, dailyfx.com, finance.yahoo.com

Summary:  The Bank of Japan surprised global markets overnight with a tweak to their yield curve control policy that came as a large shock to currency traders and even shook risk sentiment more broadly. Not only did the JPY surge broadly, especially against non-USD major currencies, but global yields jumped on the news as yields on Japanese government bonds rose in step-wise fashion on the shift higher in the yield cap on 10-year JGB’s from 0.25% to 0.50%.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) After a weak session yesterday that saw the major indices losing about a percent, futures traded lower still overnight after the Bank of Japan decision to tweak its policy (more below) took US long yields sharply higher overnight. The next technical focus lower could be the 61.8% retracement of the rally from the October low – which is at a rather lower level for the cash index at 3,724 because the wild spike higher in US equity futures on the CPI release last week was not traded in the cash market. Equity traders will keep at least one eye on treasury yields after the surge overnight. Euro STOXX 50 (EU50.I) STOXX 50 futures are some 1.5% lower this morning from yesterday’s close after the surprise BoJ policy shift overnight cratered sentiment and have tumbled over 5% since the ECB’s hawkish meeting last week. The next technical focus lower could be the 200-day moving average, which for the cash index comes in near 3,675. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Overnight U.S. stock market weaknesses, concerns about spreading of Covid-19, and the upward adjustment of yield cap by the Bank of Japan contributed to the risk-off sentiment in the Hong Kong and mainland Chinese stock markets.  Both the Hang Seng Index and CSI300 Index plunged around 2%. Technology stocks underperformed. Hang Seng TECH Index tumbled 4%, with Alibaba (09988:xhkg) and Tencent (00700:xhkg) dropping by more than 4% and Bilibili (09626:xhkg) tumbling more than 8%. Placement of shares at discount from two Hong Kong listed Chinese developers weighed on the property sector. Chinese banks fixed their 1-year and 5-year loan prime rates unchanged. FX: BoJ move sees massive JPY surge, particularly in the crosses The market was surprised to see a shift in BoJ policy overnight, as Governor Kuroda and company shifted the cap on the 10-year JGB to 0.50% from 0.25%, even as they left the base policy rate of -0.10% alone. The move took the JPY sharply higher, with USDJPY trading some 3% lower to new cycle lows below 133.00, while non-USD JPY crosses surged somewhat more as the BoJ’s move triggered a global surge in bond yields and took risk appetite down a few notches, helping support the US dollar elsewhere. Crude oil (CLF3 & LCOG3) prices modestly higher Crude oil prices continue to find it challenging to balance the varied narrative around the demand outlook. China demand faces short-term headwinds as the Covid wave spreads but is likely poised for a rebound in the medium term as authorities remain committed to driving up consumption recovery. Meanwhile, global demand outlook faces headwinds amid the massive tightening seen by global central banks this year. Supply side volatilities also persist with US refilling its SPR and sanctions on Russian oil with a government response close to being completed. In week to Dec 13 funds cut bullish Brent and WTI bets to lowest since April 2020 and it highlights the risk of large price swings as the short-term outlook remains very clouded. Crude oil prices were slightly higher, with WTI futures above $75/barrel and Brent futures getting close to $80. Gold (XAUUSD) maintains a bid near $1800 ... after Bank of Japan’s surprise tweak of its yield cap sent mixed signals for bullion as the dollar dropped and bond yields rose. Overall, however, the prospect of higher yields in Japan following years of artificially low rates could potentially be seen as gold negative given that the BOJ’s steadfast commitment to defending its 10-year yield cap has served as an anchor indirectly helping keep borrowing costs low around the world. Since the current run up in gold started in early November, the price has not dipped below its 21-day moving average, today at $1777. With momentum showing signs of slowing a break below may signal a period of consolidation ahead of yearend while a close above $1815 is needed for that risk to fade. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) drop on BOE and BOJ actions The surge in yield across the pond in the U.K. and Eurozone as well as the surprise announcement from the BOJ that it will lift the yield cap on 10-year JGB’s from 25 bps to 50 bps has driven U.S. Treasury yields higher, with the yield on 2-year notes rising to 4.27% and that on 10-year notes to 3.68%. In futures, large selling was seen on the 10-year (ZNH3) and the ultra-10-year (TNH3) contracts. The 2-10-year curve steepened to -60bps from the recent peak at -84bps. The move was supported on Monday by a 17bp jump in the yield on the U.K. 10-year Gilts after the Bank of England announced the Q1 2023 bond selling schedule for its Asset Purchase Facility portfolio. What is going on? Bank of Japan surprises with lift of yield cap on 10-year JGB’s The BoJ left the policy rate unchanged at -0.10%, but lifted the cap on 10-year JGB’s to 0.50% from 0.25%, triggering an avalanche of JGB selling that immediately took the 10-year JGB yields close to the new target. The market was caught very off-guard despite recent rumblings that the BoJ would likely eventually shift policy. Most observers assessed, given Governor Kuroda’s constant stout defense of the BoJ’s policy mix, that a change to BoJ policy would take place after Kuroda’s exit on April 8 of next year. This decision overnight finally shows a willingness to move that will have the market more likely to anticipate follow up moves after next April, even hikes of the policy rate. For now, this decision took the JPY some 3% higher overnight and sent global bond yields sharply higher and risk sentiment broadly lower as the tightening move comes at a time when many other central banks are shifting to a deceleration of their respective tightening regimes. Better German business climate than expected in December The headline German IFO business climate index, which is based on 9,000 monthly survey responses from firms in the manufacturing, service sector, trade and construction, was out better than expected in December. It climbed to 88.6 versus the prior 86.3 and expected 87.2. The current economic assessment and the expectations also improved to 94.4 and 83.2, respectively. Companies are slightly less pessimistic about the macroeconomic trajectory. Though a recession is certainly unavoidable in Germany, the impact of the energy crisis has been so far more limited than initially feared. On a flip note, ECB policymaker Gediminas Simkus, who serves as the Chairman of the Bank of Lithuania, indicated that a 50-basis points rate hike in February is a done deal. This is aligned with comments from ECB president Christine Lagarde at last week’s ECB press conference. US December NAHB housing market index slips further The NAHB housing index fell for a 12th straight month from 84 in December 2021 to 31 this month. However, the rate of decline moderated to its slowest in 6 months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment. Of the index’s three components, current sales conditions fell 3 points to 36, buyer traffic was unchanged at 20, but sales expectations in the next six months increased 4 points to 35, also indicating an improved outlook. BOE announces restart of long-end bond selling, triggering another sell-off in Gilts After pausing the sales of long-end bonds recently to help the market to stabilize after the September rout, the Bank of England has announced that it will now start selling evenly across short, medium and long maturity bonds starting from Jan 9, as part of its QT. 2yr gilt yields up 20bps and 10yr up 17bps. Still, gilt yields are well below the peaks near 5% struck in late September and early October, when prices slumped in response to plans for tax cuts and extra spending from former British Prime Minister Liz Truss's short-lived government. Further pressure on gilts cannot be ignored as BOE likely to raise rates by another 50bps at the Feb 3 meeting. European nations reached a deal to cap natural gas prices at €180/MWh The deal that will apply for one year from February 15 have no impact on markets this winter given the timing of the implementation and ample supply with stock levels still up 290 TWh year-on-year, the equivalent of 39 days of peak winter demand. The Dutch TTF benchmark gas contract trades near €100/MWh in response to milder weather during the next week and increased power production from renewables reducing demand for gas. The price of gas for the winter 2023/24 period meanwhile has slumped to €110, further reducing the outlook for economic pain next year. Gas consumption in Europe is set to shrink by more than 50 billion cubic meters in 2022, a 12-15% drop and “the sharpest decline in history,” led by price-driven demand destruction and mild weather according to Bloomberg Intelligence. What are we watching next? Follow-on from Bank of Japan move overnight The Bank of Japan move overnight was an uncomfortable one for global markets as it sent global bond yields sharply higher, including the US 10-year yield, which jumped over 10 basis points at one point overnight. Yields also rose elsewhere and this sudden new development in less liquid markets here toward the end of the calendar year could aggravate volatility risks across equity and bond markets. Earnings to watch The bar is set high for Nike earnings as sell-side analysts have recently hiked their price target on the stock and increased their expectations for 2023 on margins. The stock recently tried to retake the 200-day moving average above 110.00, but that effort failed and closed yesterday near 103 ahead of today’s earnings report after today’s close. FedEx will also report after the close. Today: Nike, FedEx, General Mills, FactSet Research Systems Wednesday: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1330 – US Nov. Housing Starts and Building Permits 1330 – Canada Oct. Retail Sales 1500 – Eurozone Dec. Consumer Confidence 2100 – New Zealand Dec. ANZ Consumer Confidence 2130 – API's Weekly Report on US Crude and Fuel Inventories  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – December 20, 2022 | Saxo Group (home.saxo)

USD/JPY drops more than 3.0% to refresh multi-day bottom after Bank of Japan tweaks Yield Curve Control (YCC) policy. Chatters surrounding Japan’s budget, Treasury bond buying also entertain Yen traders. BOJ Governor Kuroda shows readiness to ease policy if needed, USD/JPY stays pressured. Risk aversion fails to underpin US Dollar as Federal Reserve appears less hawkish. USD/JPY bears the burden of the Bank of Japan’s (BOJ) surprise policy tweak during early Tuesday, despite the latest rebound. While portraying the Yen trader’s mood, the quote initially slumped to the lowest levels since early August before the recent bounce from 132.66 to 133.60. Even so, the quote remains 2.75% in the red as we write. Bank of Japan surprises markets with YCC move, drowns USD/JPY Bank of Japan (BOJ) held its benchmark rate unchanged at -0.10% and kept the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero. In doing so, the Japanese central bank matched the market expectations and should have kept the USD/JPY intact. The surprise factor, however, was the BOJ’s alteration of the Yield Curve Control (YCC) and the bond issuance announcements. “The BOJ will expand the range of 10-year Japan government bond yield fluctuations from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points,” reported Reuters. Following that, the Yen pair plunged to the multi-day low of 132.66 ahead of bouncing back beyond 133.00. The BOJ not only affected the USD/JPY prices but also roiled the risk appetite and propelled the Treasury bond yields across the board, which in turn allowed the US Dollar to pare intraday losses. BOJ Governor Haruhiko Kuroda defends Yen buyers Having witnessed the BOJ-inflicted slump in the USD/JPY prices, Governor Haruhiko Kuroda allowed the Yen traders to lick their wounds while defending the easy money policies for one last time. In doing so, BOJ’s Kuroda highlights the need for a 2.0% inflation target, as well as shows readiness to ease monetary policy if needed. “Today's decision on yield curve control is not an exit of yield curve control or change in policy,” said BOJ’s Kuroda per Reuters. Also read: BoJ’s Kuroda: Necessary to achieve 2% inflation target sustainably, stably in tandem with wage growth US Dollar fails to cheer risk-off mood Despite the risk-aversion wave, the US Dollar Index (DXY) remains mildly offered near 104.40, down for the second consecutive day. The reason for the USD/JPY pair’s weakness could be linked to the Federal Reserve’s (Fed) less hawkish bias, as informed via the latest monetary policy meetings, as well as the softer US Purchasing Managers’ Indexes (PMIs) for December. Also likely to have weighed on the US Dollar are the strongly hawkish statements from the European Central Bank (ECB) officials, as well as upbeat German data. Risk catalysts will be crucial for Yen sellers Looking forward, USD/JPY pair bears need to pay close attention to the risk catalysts and the bond market moves for near-term directions amid a light calendar. Also important will be the US Building Permits and Housing Starts could join Germany’s Producers Price Index (PPI) data to direct immediate moves. However, major attention will be given to the Fed’s preferred inflation gauge, namely Friday’s US Core Personal Consumption Expenditure (PCE) – Price Index for December, expected 4.6% YoY versus 5.0% prior. USD/JPY technical analysis USD/JPY extends a downside break of the 200-DMA, as well as an upward-sloping trend line from early August, towards refreshing the multi-day low. Given the impending bear cross on the Moving Average Convergence and Divergence (MACD) indicator, as well as the downbeat Relative Strength Index (RSI), located at 14, not oversold, the USD/JPY pair is likely to extend the latest weakness. However, the RSI (14) is near the oversold territory and hence signals limited downside room, which in turn highlights the 78.6% Fibonacci retracement level of the May-October upside, near 131.70. Also acting as the downside filter is the August month low near 130.40 and the 130.00 round figure. In a case where the USD/JPY rebounds from the current level, the support-turned-resistance line from August, around 134.15 by the press time, could challenge intraday bulls. Following that, the 200-DMA hurdle surrounding 135.75 will be crucial to watch for the Yen buyers. Above all, a two-week-old horizontal resistance area near 138.00 could restrict the USD/JPY buyers from entering the ring. USD/JPY: Daily chart Trend: Limited downside expected

The Japanese Yen is set to strengthen during 2023, in the view of economists at HSBC. If the BoJ tweaks its monetary policy, the JPY may strengthen further “We believe the upward pressure on USD/JPY exerted by its yield differentials should cease when the Fed stops hiking.” “If the Bank of Japan tweaks its monetary policy (not our economists’ base case), the USD/JPY pair may fall even harder.” “A normalisation of extremes in valuation and improving Japan’s current account should also support the Japanese Yen.”

The Bank of Japan appears to be joining the ranks of the world's other central banks in deciding to take the first step toward tightening monetary policy. While it has not raised its official interest rate, it has increased the range for Japan's bond yields, which may make its interest rates a bit more attractive. Since September 2016. The Bank of Japan has kept a check on bond yields, at the time setting a target for the 10-year bond yield at 0% with a maximum deviation of 10 bps. This was meant to stimulate inflation along with other programs and provide cheap financing. The BoJ then expanded the expected fluctuation range, and when sellers of Japanese paper became too numerous and yields rose above the range, it triggered unlimited buying of those bonds. In July 2018, the fluctuation band was extended to 20 bps, and in March 2021 to 25 bps from the 0% level. Today, the range was widened to 50 bp, pushing yields towards it, to their highest level since 2015. With today's decision, the Bank of Japan (BoJ) kept its key short-term interest rate at -0.1% and the 10-year bond yield near 0%, as expected. At the same time, the central bank changed the yield curve's tolerance range in an effort to reduce some of the costs of prolonged monetary stimulation (the Bank had to launch unlimited bond purchases). The council said it would widen the 10-year government bond yield spread from the current +/-0.25 points to +/- 0.5 points. Meanwhile, the BoJ assessed that the economy was possibly to recover, with the impact of COVID and supply issues waning, while downward pressure continued due to high commodity prices and a slowdown in foreign economies, tradingeconomics reported. The annualized inflation rate is possible to rise in 2022 due to increases in the cost of food, energy and durable goods, before weakening in the middle of fiscal 2023. The council reiterated that it will take additional easing measures if necessary, and expects short- and long-term rates to remain at current or lower levels. Significant impact on the yen exchange rate Although interest rates were not changed, Japanese bond yields moved up, reducing their divergence from bonds of the US, Germany or other countries where a rate hike cycle is underway. As a result of this, the Japanese yen was able to gain decisively, falling from the JPY137 area to JPY133 this morning. Japan was thus able to take another step to support the yen, following its previous second successful currency intervention. Source: Conotoxia MT5, USDJPY, Daily Perhaps after a strong dollar, the time would come for a strong yen as well, and changing the target for bond yields may be just the first step. Further possible action, may be an interest rate hike, where the market expects an increase to 0.3 percent in 2023. This would mean a 40bp increase, which, assuming US rates can start falling or stop rising at the same time, could give the yen a boost after a disastrous 2022. 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 Bank of Japan announced a surprise change in its yield curve control policy, and will now allow JGBs to trade to an upper bound of 0.50%. While Governor Kuroda has explicitly warned this is not a rate hike, taming speculation of further BoJ normalisation in 2023 won't be easy. USD/JPY may break below 130.00. Elsewhere, expect no fireworks from Hungary The Bank of Japan in Tokyo USD: BoJ hawkish shift may have broad implications Markets have been shaken from their pre-festive low volatility torpor this morning, as the Bank of Japan announced a surprising change in its yield curve control (YCC) policy. The target band for the 10-year JGB has been widened to +/- 0.50% from the previous 0.25%, essentially allowing higher interest rates in the current inflationary environment despite still officially targeting 0.00% as the outright target. The move was accompanied by an increase in the amount of JGB purchases, from JPY 7.3tn per month to 9tn. The immediate impact on the yen has been sizeable, with USD/JPY dropping by around 3.0%, and currently trading around 133.00. The BOJ's role as an ultra-dovish outlier among global central banks had been a key driver of JPY weakness in 2022, and markets are now assessing whether today’s announcement is effectively a first step towards a broader policy normalisation process in Japan, which would quite radically change the outlook for the yen in 2023. Incidentally, there is a risk that speculation of even higher JGB rates in 2023 could spill over into global bonds and equities (like it did today). Governor Haruhiko Kuroda’s press conference has been all about pushing back against such speculation: he explicitly warned markets not to interpret this as a rate hike and said that he doesn’t think a further widening of the yield band is needed. Our suspicion is that markets may need more reassurance with this, especially considering that Kuroda is due to be replaced in April 2023 and the timing may suggest the BoJ may be laying the groundwork for normalisation under a new governor. For now, we think risks remain skewed to the downside for USD/JPY into the festive break, and we cannot exclude a break below 130.00 - also given the generally soft dollar environment. For now, the negative reaction in global equities is capping pro-cyclical currencies, and offering some USD support on balance, but broader dollar weakness is surely a possibility in the near term. DXY could press 103.50 by the end of this week. In the US, housing data will be in focus today, with housing starts expected to have dropped further in November as high mortgage rates continue to weigh on the property sector. Francesco Pesole EUR: Sidelined, for now EUR/USD has been on the sidelines of the post-BoJ market reaction, holding marginally above 1.0600. It’s likely that the downward pressure on the dollar from the BoJ's hawkish shift has been fully offset by the deterioration in risk sentiment, which negatively impacts the pro-cyclical euro. As discussed in the USD section above, there are lingering downside risks to the dollar and we could see EUR/USD test 1.0700 before Christmas. Anyway, volatility should become significantly thinner from Wednesday/Thursday, with today’s BoJ announcement having been the last major event in markets. The eurozone calendar includes consumer confidence data – which is expected to have slightly improved in December – and speeches by ECB’s Peter Kazimir and Madis Muller. Francesco Pesole GBP: No domestic drivers There is nothing to highlight in the UK calendar today, and the pound should continue to be driven by dollar dynamics. EUR/GBP initially had a positive reaction to the BoJ announcement, likely due to GBP’s higher sensitivity to the adverse response in global equities, but is now back at yesterday’s close. Still, GBP downside risks should be larger than for the euro if risk sentiment remains pressured today, and EUR/GBP may move to the upper half of the 0.87-0.88 band. Francesco Pesole CEE: NBH ends a dramatic year with a quiet meeting The economic calendar for today offers several macro numbers from Poland, led by industrial production. We expect November's output to have slowed significantly in year-on-year terms, from 6.8% to 0.7%, well below market expectations. Also, today we will see data from the labour market and industrial producer prices in Poland. Then in Hungary, the State Debt Management Agency (AKK) will present its financing strategy for next year. The government is currently in the process of revising the budget, but the main question will be what the government's assumption will be for the absorption of EU money. Later, we will see a decision by the National Bank of Hungary (NBH) at its last meeting of the year. The NBH has made it clear on several occasions that the temporary and targeted measures, introduced in mid-October, will remain in place until there is a material and permanent improvement in the general risk sentiment. Although we’ve seen some progress here, we don't think enough has changed to trigger an adjustment in the monetary policy’s hawkish “whatever it takes” setup. Although the EU story is still not over, tangible progress should keep the forint on the stronger side and limit potential losses. Moreover, the NBH liquidity measures have worked, and implied FX yields once again soared to record highs during December; on average, they are double that of regional peers, protecting the forint from a further sell-off in our view. Overall, we expect the forint to move towards 400 EUR/HUF and below that level next year. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Bank of Japan shocked markets by widening its target band for the 10Y JGB yield, lifting the upper ceiling to 0.5% from 0.25%. In consequence, the JPY jumped and the Nikkei index plunged. The financial market will try to find fair value for the time being Bank of Japan Governor Haruhiko Kuroda 0.5% 10Y JGB target band from 0.25% Higher than expected -0.1% BoJ policy balance rate   As expected "Today's move is not a rate hike," Kuroda said. The market responds, "Really?" We had expected the Bank of Japan to adjust its yield curve control policy around the end of 2023, but it came much earlier than we thought. We can't help but wonder, why now? As the Federal Reserve and other major central banks began to tighten policy, the Japanese yen plunged, and inflation began to take off, the market started to anticipate the first step towards normalisation by the BoJ earlier this year. Could high inflation be the cause? Well, Governor Haruhiko Kuroda reiterated that cost-push inflation is not sustainable and inflation will slow down to 2% next year.  At the press conference, Kuroda tried his best to minimise market expectations for further policy changes. He stressed repeatedly that today's move is not the first step towards an exit and a further widening of the yield band is not needed. We think today's decision has undermined the BoJ's credibility on future policy guidance. From the remarks made today, we are unable to answer our question, why now?.  Despite the denials, we think Governor Kuroda is trying to pave the way for policy normalisation before stepping down. A policy shift immediately after the leadership change is difficult and could miss the opportune time to end the decades-long ultra-low policy. He may be right that monetary policy should remain accommodative until a stable 2% inflation target is met and that the policy review is not needed in the short term. But, with today's tweak, his successor will have more flexibility to deploy monetary policy in the future.  We also expect that the BoJ will maintain its policy balance rate at -0.1% for a while and that the BoJ will take a wait-and-see approach until the next annual wage negotiation season (Shunto) in April/May.  However, market participants will likely bet on further tightening, which will likely create market noise that the BoJ did not intend.  Read this article on THINK TagsJPY JGB yields Bank of Japan 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

Bank of Japan Governor Haruhiko Kuroda shocked markets by doubling the 10-year bond yield ceiling. This caused yen to surge and government bonds to fall, helping pave the way for a possible policy normalization under the new governor. The policy statement said the bank now allows 10-year bond yields to rise up to 0.5% in an effort to increase the sustainability of monetary easing. But many interpreted this move as a starter to an exit from a decade of extraordinary stimulus policies. Nevertheless, the central bank kept its 10-year yield target unchanged at around 0% and left the short-term interest rate at -0.1%. It also said it would significantly increase bond purchases to £9 trillion ($67.5 billion) a month, which is higher than the currently planned £7.3 trillion. Yen strengthened to 132.68 just before the announcement, while the 10-year bond yield jumped to 0.46% after the decision. Accordingly, shares of Japanese banks rose in the afternoon as investors anticipated higher earnings at financial institutions. Stocks of Mitsubishi Financial Group also rose 9.6%, as did the stocks of the Mizuho Financial Group. But overall, shares were down 1.5%. The ripple effect spread far beyond Japan, with US stock indices falling sharply and Treasury bond yields rising. Although many people called for the bank to do more to improve the functioning of the bond market, no one expected such a change in December. The unexpected decision came as a shock to global financial markets, especially since the Bank of Japan's unwavering commitment to protect its 10-year yield cap has indirectly helped keep borrowing costs worldwide low. Before the Bank of Japan meeting, talks were about the likely policy direction after Kuroda resigns.   Relevance up to 09:00 2022-12-21 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/330280

The Japanese yen has sent the dollar tumbling on Tuesday. USD/JPY has fallen 3.26% and is trading at 132.44 in Europe. In the Asian session, USD/JPY fell as low as 131.99 but has recovered slightly. BoJ tweaks yield curve control At the end of its policy meeting, the Bank of Japan stunned the markets with a change to its yield curve control (YCC). The BoJ announced it would widen the band around the 10-year bond yield to 50 basis points, up from 25 bp. The move allows long-term interest rates to rise higher and the reaction was deafening, as the yen soared and climbed to its highest level since August 11th. The move was completely unexpected, as the BoJ meeting was expected to be a sleeper with no policy changes. It was just yesterday that I wrote in these pages that the BoJ was not expected to change policy until the changing of the guard in April 2023, when Governor Kuroda steps down. The BoJ move is certainly dramatic but needs to be kept in proportion. The BoJ is maintaining its YCC targets and said it would sharply increase bond purchases. This could be a signal that the Bank is tweaking its current ultra-loose policy and is not planning to withdraw stimulus. The BOJ has staunchly defended its yield cap with massive bond purchases, and this has distorted the yield curve and fueled a sharp drop in the yen, which has contributed to higher costs for imports of raw materials. BoJ policy makers may have become uncomfortable with these side effects and felt that the time was right to take a small step towards normalisation. This ‘baby step’ packed a massive punch as seen in the yen’s reaction, and the markets will be looking for hints at further moves from Governor Kuroda as his term winds down.   USD/JPY Technical USD/JPY has broken below several support levels. The next support level is 131.13 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Summary:  The Bank of Japan surprised markets with a tweak to it yield curve control policy, likely setting the stage for an eventual exit in 2023. Even though the move is said to be driven by financial markets, there are clear risks of inflation surging higher. That likely prompted Governor Kuroda to claim victory and ensure a smoother policy transition to the new Governor in April. Short JGB or long yen trades could have more room to run as Yen Carry trades likely reverse. What did the BOJ do? The Bank of Japan tweaked its long-held Yield Curve Control (YCC) policy in a surprise announcement at the December 19-20 meeting. The bank widened the band in which it would allow rates for 10-year Japan government bonds to move to -/+ 0.5% from -/+ 0.25% previously. Rest of the monetary policy levers were left unchanged, including the 10-year target still being held at 0%. Why did the BOJ tweak policy? Governor Kuroda stressed that the move is for financial market motives, not for economic reasons, potentially trying to limit expectations of further tweaks. However, hidden beneath this message was a significant adjustment higher in core CPI forecasts to ~3.5% from ~3% in the October report. This is a victory moment for Kuroda, as he can claim that he brought back inflation in Japan, while highlighting the success of the YCC policy. The move also acts as a smoother transition to the new governor, and further tweaks cannot be ruled out in 2023. I would highlight two reasons why we think this announcement was made earlier-than-expected, besides the fact that the BOJ loves to surprise markets (read: BOJ is poor at communication). One, with the Fed having slowed down its pace of rate hikes recently, and the drop in 10-year yields from 4.2% to sub-3.5% at one point, the pressure on the yen has come off. The BOJ doesn’t want to be seen as yielding to market pressure, and now seems to be a better time to tweak policy before yields rise again. Two, Kuroda wanted to take the credit of starting the policy tweaks, rather than leaving it all to his successor after his term ends in April. The expectations around BOJ’s policy review had picked up after weekend reports that the Kishida government is looking into reviewing a 2013 accord between the government and the BOJ, under which the central bank commits itself to achieving 2% inflation as soon as possible. An eventual exit? The effectiveness of a Yield Curve Control policy remains debatable, and it is especially hard to maintain this policy amid the global tightening wave that we have seen this year without a ton of collateral damage. The damage this year came in FX markets, as the Japanese yen plummeted to 32-year lows. The limits of the YCC policy were also tested in the bond markets. With the risk of Fed tightening more than expected in 2023 still intact, there is still a risk that markets will again test the limits of BOJ’s policy stance. Long-end JGB yields will likely test again the new upper limit of 0.5% after being up over 15bps following the announcement. We would potentially see bouts of strength in the Japanese yen now as expectations of an eventual exit from the YCC policy emerge. However Kuroda puts it, he seems to be setting the stage for an eventual exit and the markets will increasingly position for that. Investment implications The run higher in Japanese yields is likely to create further volatility in global equity and bond markets, especially because it comes at a time of thin liquidity and lack of other catalysts. As the market once again pressures the BOJ to move towards an eventual exit, the short JGB or long yen trades could potentially have more room to run. This is also supported by the likely reversal of yen carry trades as Japanese investors are getting positively rewarded to keep their cash at home during a global economic slowdown and periods of high macro uncertainty. This is not just yen positive, but also negative for foreign assets especially US Treasuries that have been the bulk of the assets held by Japanese investors. In terms of equities, this could mean a favourable stance towards Japanese financials vs. exporters and technology companies. Source: Podcast: Bank of Japan roils markets with a surprise policy tweak | Saxo Group (home.saxo)

Summary:  Today we look at the Bank of Japan shocking markets overnight with a surprise shift in its yield-curve-control policy, as it lifted the cap on 10-year JGB's to 50 basis points from 25 basis points. The JPY rose in stepwise fashion together with the jump in longer Japanese yields and global yields were also impacted, taking risk sentiment lower. In commodities, we discuss metals and natural gas. In equities, we discuss the outlook for European defense stocks, including Rheinmetall and cover upcoming earnings reports from Nike, where the bar of market expectations looks high, and from FedEx, where the bar of expectations is quite low. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Bank of Japan roils markets with a surprise policy tweak | Saxo Group (home.saxo)

The US Dollar index retreated following the BoJ policy announcement helping EUR/USD edge higher. Later in the day we have US building permit data which could reignite some bullish behavior in the US dollar. Moreover, forex traders focused on the Japanese yen today, which jumped on key Bank of Japan (BoJ) policy. EUR/USD The EUR/USD pair also gains today, receiving a trade above $1.06. Currently, trading is in the range of 1.0630-1.0640. This morning we heard comments from ECB policymaker Nagel who stated the Central Bank is still a long way from hitting its inflation goal reiterating that the ECB likewise need to be persistent on rates. Yesterday’s upbeat German IFO survey on Business Climate and this morning drop in German PPI, which hit a 9-month low. Improving data coupled with a slightly hawkish ECB turn last week may speak in favor of a continuation of the current EUR/USD rate. At present, the mood remains bullish. Read next: Voluntary Extradition Of Sam Bankman-Fried | The Inflation Reduction Act (IRA) Is A Path To Net Zero| FXMAG.COM USD/JPY USD/JPY dropped sharply today from trading above 137 to below 134. The pair is now trading below 133, 132.6420 to be precise The Japanese Yen launched higher after the Bank of Japan tilted monetary policy at its meeting today. The USD/JPY Pair has raced to a four-month low. The pair tried to break above the upper band of a descending trend last week but was unable to do so. Today’s attempt was also unsuccessful and the BoJ’s announcement aided maintenance of the trend channel. All of this contributed to the couple's sentiment, which is currently bearish. Most BOJ watchers had expected no changes until the current governor Haruhiko Kuroda's 10-year term ends at the end of March. While it kept broad policy settings unchanged he BOJ decided to let long-term yields to move 50 basis points either side of its 0% target, wider than the 25 basis point band previously. The move has had a negative impact on the US dollar and could boost the Yen as Japanese investors are given an incentive to bring money home while increasing the Yens haven appeal. AUD/USD The price of the Aussie pair was above the 0.6725 level at the beginning of the day, but then fell below $0.67. Trading is currently in the range 0.6665- 0.6670 The Australian dollar fell above $0.67 to its lowest level in a month after the Bank of Japan's surprise decision. The Australian was also under pressure as other major central banks offered a more hawkish outlook on policy than markets anticipated, adding to fears of a potential recession next year. Meanwhile, recent minutes from the Reserve Bank of Australia's meeting revealed that policymakers were considering a bigger rate hike of 50 basis points. GBP/USD At the beginning of the day, cable trading was very mixed. The price of the pair traded above $1.22 and then fell all the way down to $1.2088. Currently, the price is stabilizing in the range of 1.2150-1.2175. The overall picture of the pair looks bearish and the price trades mostly above $1.21. The pound posted a slight gain on Tuesday in weak trading ahead of Christmas, but was on track for its biggest quarterly gain against the dollar since 2009. The pound is up 8.8% against the dollar in the last three months of the year, putting it on track for its best quarter in more than 13 years. Goldman Sachs expects the pound to fall to $1.07 in three months and hold at $1.11 in six months. Source: investing.com, dailyfx.com, finance.yahoo.com

The unexpected shift of the Bank of Japan to hawkish surprised global markets as the decision paves the way for policy normalization. The bank raised the yield cap on 10-year bonds to around 0.5%, causing Japanese government bonds and treasuries to fall, while yen rose. US stock indices were also affected, similar to the Australian dollar and gold. Japan is the biggest creditor in the world and a tightening of domestic financial conditions could lead to a wave of capital coming home. This threatens to depress asset prices and raise global borrowing costs, while the economic outlook worsens. UBS Group said investors are likely to exit US, while Australian and French bonds, as well as developed market equities, could fall. Japan's benchmark 10-year bond yield jumped 21 basis points to 0.46%, before falling back to 0.4%. Trading of Japanese bond futures briefly halted on the Osaka exchange market after they had reached the cut-off threshold. Yen strengthened by as much as 3.5%, hitting 132.28 per dollar. AMP Services said this is not a tightening of monetary policy as the yield target is still zero and the Bank of Japan is still stepping up bond purchases. However, many see it as a move in that direction, hence the jump in yen and negative impact on global equity markets. Bank of Japan Governor Haruhiko Kuroda said no further widening of the yield corridor is needed and a change in control of the yield curve would probably be positive for the economy. The policy adjustment came after core inflation in Japan rose to its highest level in four decades. Speculation of a shift rattled markets on Monday after Kyodo news reported that Prime Minister Fumio Kishida plans to renegotiate a decade-old agreement with the Bank of Japan on a 2% inflation target. "The Bank of Japan's action is unequivocally negative for global bonds," TD Securities said. "If today's move was the first step towards the end of the YCC, yen could rise substantially as Japanese investors could start selling some of their unhedged global bonds in foreign currencies. This will be more bearish for the long side of US and European bond curves," they added Relevance up to 10:00 2022-12-21 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/330286

Summary:  The top story of the day was the unexpected decision from the Bank of Japan to raise its cap on the 10-year government bond yield to 0.50% from 0.25%. The Yen jumped versus all major currencies and strengthened by 3.7% to 131.80 versus the U.S. dollar. The U.S. 10-year Treasury yield surged 10bps to 3.68% while the S&P 500 managed to snap a four-day losing streak to finish slightly firmer. In extended-hour trading, Nike and FedEx gained on earnings beats. Chinese and Hong Kong stocks declined in a risk-off session. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished the session mixed S&P 500 pared the post-BOJ upward yield cap adjustment loss and managed to snap a four-day losing streak to finish 0.1% higher on Tuesday. Nasdaq 100 edged down by 0.1%. Energy, rising 1.5%, was the top gainer within the S&P500 as the WTI crude gained 1%. Consumer discretionary, dropping by 1.1%, was the biggest losing sector. On single stocks, Tesla (TSLA:xnas) was the biggest loser within both the S&P500 and Nasdaq 100. The electric vehicle maker tumbled 8% on Tuesday, following analyst downgrades. The stock shed 23.8% in December, significantly underperforming the 3.8% decline in Nasdaq 100 and the 3.4% loss in S&P 500. Nike (NKE:xnys) jumped nearly 12% in the extended-hour trading after the sportswear company reported revenue and earnings beats. Yields on 5-30-year US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) surged on the hawkish BOJ surprise From the Intermediate through the long-maturity Treasuries sold off on the Bank of Japan’s decision to move its cap on 10-year Japanese government yields to 0.5% from 0.25%. Large blocks selling came in the five-year and 10-year futures contracts. The 10-year yield jumped 10bps to 3.68%, breaking the upper bound (in yield) of the trading range in December. Yields on the 2-year, anchored by the Fed’s rate path, finished the session unchanged. The 2-10-year yield curve steepened by 9bps to 58bps. The housing data released on Tuesday was mixed. Housing starts shrank by 0.5% M/M, less than the -1.8% expected but housing permits were down 11.2% M/M in November, much weaker than the -2.1% consensus in the Bloomberg survey. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) declined in a risk-off day Overnight U.S. stock market weaknesses, concerns about the spreading of Covid-19 in mainland China, and the upward adjustment the of yield cap by the Bank of Japan contributed to the risk-off sentiment in the Hong Kong and mainland Chinese stock markets.  Hang Seng Index declined 1.3% and CSI300 Index plunged 1.7%. Technology stocks underperformed. Hang Seng TECH Index tumbled 3.1%, with Alibaba (09988:xhkg) and Tencent (00700:xhkg) dropping by around 3.4% each and Bilibili (09626:xhkg) tumbling 6.7%. Placement of shares at discount from two Hong Kong-listed Chinese developers, Agile (03383:xhkg) down 17.4%, and CIFI (00884:xhkg) down 16.5% weighed on the property sector. Country Garden (02007:xhkg) shed 8.8%. FX: USDJPY tumbled 3.7% to 131.80 on BOJ’s 25-bp hike to the 10-year JGB cap The Bank of Japan surprised with a 25 basis point hike to the 10-year JGB cap, even as Governor Kuroda tried to ease the impact of the move on markets in his post-meeting press conference with statements suggesting that was “not a rate hike” and that it is too early to consider a general exit from or review of its Yield Curve Control (YCC) policy framework. USDJPY shed 3.7% to 131.80. The Japanese Yen soared more than 3% versus major currencies. Saxo’s Head of FX Strategy, John Hardy notes that the scale of the JPY reaction and its more than 12% rally off the lows against the US dollar, together with far lower commodity prices help ensure that we are very unlikely to see further policy tweaks under Governor Kuroda’s leadership. The ability of the JPY to continue higher after this step-wise reset will depend on the follow-up direction in global yields. FedEx (FDX:xnys) surged 4.3% in the extended hours on results beating earnings estimates. Crude oil (CLF3 & LCOG3) bounced on API inventory drawdown WTI crude oil gained 1% to USD76.1 as the American Petroleum Institute (API) said crude oil inventories in the U.S. dropped by 3.1 million barrels last week. What to consider? BOJ’s surprise policy tweak Bank of Japan tweaked its long-held Yield Curve Control (YCC) policy in a surprise announcement after the December 19-20 meeting. The central bank widened the band in which it would allow rates for 10-year Japanese government bonds to move to -/+ 0.5% from -/+ 0.25% previously. The rest of the monetary policy levers were left unchanged, including the 10-year target still being held at 0%. In her notes, Charu Chanana suggests that the run higher in Japanese yields is likely to create further volatility in global equity and bond markets. As the market once again pressures the BOJ to move towards an eventual exit, the short JGB or long yen trades could potentially have more room to run. This is not just yen positive, but also negative for foreign assets. In terms of equities, this could mean a favourable stance towards Japanese financials vs. exporters and technology companies. For more details about the BOJ policy change, please refer to Charu’s notes. Results from Nike and FedEx beat expectations Nike reported results from FY23 Q2, that ended on Nov 30, beating analyst estimates in sales and margins. Adjusted EPS came in at USD0.85, well above the US0.65 forecasted by analysts. Although inventories increased by 43% Y/Y, the management attributed the buildup to “abnormally low levels” resulting from supply chain disruption a year earlier. The company’s management gave an upbeat assessment of the holiday season sales momentum. FedEx reported FY23 Q2 Adjusted EPS at USD3.18, beating the USD2.8 expected. The positive surprise resulted from a combination of price increases and cost cuts despite a decline in package volume. The logistics giant guided an additional USD1 billion of projected cost cuts in fiscal 2023.   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: – Yen soared to 131.80 versus the dollar and global bond yields rose after the BOJ raised its yield cap on 10-year bonds - 21 December 2022 | Saxo Group (home.saxo)

Summary:  The US equity market found its feet again yesterday, pulling itself off the lowest levels in over a month and closing approximately unchanged as traders mull whether there is more to wring out of this calendar year before capital is put to work in the New Year. The soaring JPY found resistance ahead of 130.00 in USDJPY, with higher US global yields pushing back against further upside after the big reset higher for the yen. Elsewhere, gold has pulled up to cycle highs.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rebounded yesterday from the intraday lows of 3,803 and the rebound has continued this morning with the index futures trading around the 3,867 level. Nike posted stronger than expected earnings and an optimistic outlook for the new year bolstering the view that US consumer spending is still going strong. Tesla is a key stock to watch today as shares were down 8% yesterday despite a positive session suggesting big flows are adjusting the price to the new reality of lower EV demand and demanding prices input materials for batteries. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and China stocks started the session firmer but fizzled out and were about flat at the time of writing. Chinese property developers continued to trade weak after recent rounds of placements and headlines in state-owned media reiterating the “housing is not for speculation” rhetoric. Tech names outperformed with Hang Seng TECH Index climbed 0.6%. In A-shares, consumption, lodging, and banking stocks gained while solar, auto and machinery underperformed. FX: JPY finds resistance as global yields reset higher There is some irony at work here as global yields jumped on the Bank of Japan decision to reset the yield cap on 10-year JGB’s to 0.50% yesterday, in that global yields reset higher. But if the BoJ is seen standing pat with its new policy, any further rise in yields can also serve to push back against follow-on JPY strength after the one-off reset (for now, at least.) that fell short of taking 130.00 to the downside in USDJPY before a significant bounce from yesterday’s lows. Elsewhere, the USD is mixed and not the focus, stuck in a tight range versus the euro, but with EURUSD having run out of upside momentum. Elsewhere in G10, the Aussie rallied against a weak NZD as another New Zealand confidence survey, the ANZ Consumer Confidence, slipped badly to 73.8 versus 80.7 and far and away the worst reading of the survey since its inception in 2004. Crude oil (CLG3 & LCOG3) holds onto its recent gains ... supported by a drop in US crude stocks, data pointing to a notably drop in Russian seaborne oil shipments this month and Saudi Arabia warning that OPEC+ will remain proactive and pre-emptive in managing the global oil market. Having been vindicated in the necessity of their November production cut as demand slowed, the comment from the Saudi oil minister points to a soft floor under the market below which additional cuts could be implemented if necessary to support the price. The risk of large price swings as liquidity dries up ahead of yearend cannot be ignored with focus today on EIA’s stock report. Crude oil prices were slightly higher, with WTI futures above $76/barrel and Brent futures above $80. Gold (XAUUSD) and silver (XAGUSD) surged higher on Tuesday ... after the Bank of Japan surprised the market by revising its yield-curve-control policy. The move saw the dollar weaken sharply against the Japanese yen while an accompanying rise in bond yields played no role as a potential headwind. Silver reached an eight-month high before running into some profit taking while gold closed saw its highest close since June above $1800. The extent of the move surprised the market and may signal some trigger happy investors not waiting for the new year to get involved amid expectations for an investment metal friendly 2023.  Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) surged on the hawkish BOJ surprise From the Intermediate through the long-maturity Treasuries sold off on the Bank of Japan’s decision to move its cap on 10-year Japanese government yields to 0.5% from 0.25%. Large block selling came in the five-year and 10-year futures contracts. The 10-year yield jumped 10bps to 3.68%, the highest close this month. Yields on the 2-year, anchored by the Fed’s rate path, finished the session unchanged. The 2-10-year yield curve steepened by 9bps to 58bps. The housing data released on Tuesday was mixed. Housing starts shrank by 0.5% M/M, less than the -1.8% expected but housing permits were down 11.2% M/M in November, much weaker than the -2.1% consensus in the Bloomberg survey. What is going on? Tesla shares slide another 8% even as Musk promises new Twitter CEO Tesla CEO Elon Musk promised to abide by the results of a Twitter poll to step down as the Twitter CEO, and yet the prospect of fewer distractions for Musk failed to help Tesla’s shares, which stumbled badly yesterday, also as two analysts cut their targets for the company. One could speculate that Elon Musk has engineered an escape route out of Twitter because things are deteriorating fast at Tesla and that Tesla is ultimately more important for his personal wealth and other money losing assets. Results from Nike and FedEx beat expectations Nike reported results from FY23 Q2, that ended on Nov 30, beating analyst estimates on sales and margins. Adjusted EPS came in at $0.85, well above the $0.65 forecasted by analysts. Although inventories increased by 43% y/y, the management attributed the buildup to “abnormally low levels” resulting from supply chain disruption a year earlier. Nike’s management gave an upbeat assessment of the holiday season sales momentum. FedEx reported FY23 Q2 Adjusted EPS at $3.18, beating the $2.8 expected. The positive surprise resulted from a combination of price increases and cost cuts despite a decline in package volume. The logistics giant guided an additional $1bn of projected cost cuts in fiscal 2023. Housing weakness continues in the United States Housing starts were mostly flat in November (minus 0.5 % month-over-month) while building permits continued to tumble (drop of 11.2 % month-over-month). Permits are now at their lowest level since June 2020. Many analysts consider that such a drop is consistent with an imminent recession. However, there are other signals showing the U.S. economy is still very resilient despite several headwinds (such as widespread inflation, tight labor market and high level of private debt). Nonetheless, we agree that the evolution of the housing market in the coming months will determine the pace of economic activity in the United States in 2023. This is the most important economic sector to monitor at the moment. What are we watching next? US Dec. Consumer Confidence This survey of US consumer confidence tends to correlate most closely with the labor market prospects in the US historically, although the impact of the massive inflation spike this year was felt in this survey during the spring and summer months despite the strong jobs market as confidence dropped from 128.9 in late 2021 to as low as 95.3 in July, before stabilizing, perhaps on gasoline prices in the US retreating sharply after June. The November survey came in at 100.2, a four-month low, and is expected flat at 101 for the December release later today. Earnings to watch Today’s US earnings focus is Micron and Carnival. Analysts expect Micron to report FY23 Q1 (ending 30 November) negative revenue growth of 46% y/y and adjusted EPS of $-0.01 down from $2.10 a year ago. The memory chip industry is going a tough period with falling prices and lower demand. Carnival is still cruising the high wave of travel and leisure post the pandemic with FY23 Q4 (ending 30 November) revenue expected to increase 205% y/y but still delivering negative earnings with adjusted EPS expected at $-0.87 improving from $-1.72 a year ago. Today: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1100 – UK Dec. CBI Reported Sales 1330 – US Q3 Current Account 1330 – Canada Nov. CPI 1500 – US Nov. Existing Home Sales 1500 – US Dec. Consumer Confidence 1530 – EIA's Weekly Crude and Fuel Stock Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – December 21, 2022 | Saxo Group (home.saxo)  

Yen shot up on Tuesday after the Bank of Japan made a very bold decision on monetary policy. However, what is more important is the statements of Governor Haruhiko Kuroda, which gave investors an indication of what to expect when the policy ends. Yesterday, Kuroda shocked markets by announcing that he will allow 10-year bond yields to rise to around 0.5%. This is obviously a strategic adjustment to buy time in determining the yield curve next year following the changes in central bank policy, when interest rates are forecast to rise. Currently, the yield on 10-year Japanese securities is at 0.46%. This has led to a rise in Japanese bank stocks as investors are waiting for higher returns from financial institutions. Kuroda said all decisions taken were in order to increase the effectiveness of monetary policy. Given that his term ends next year, there will be at least two more meetings under his leadership, which means that his successor will complete the path to policy normalization. But there are those who point out that higher yields will mean unrealized losses on Japanese government bonds, including those held by the Bank of Japan. A sustained policy change could also hit Japanese stocks, as well as break the latest bond yield peg and trigger a sell-off in dollar in favor of yen. That will lead to Japanese investors divesting from overseas investments, which could result in a sell-off in emerging markets. As mentioned earlier, the forex market reacted to this by moving quite strongly. In USD/JPY, there is a strong support around 130.20, and its breakdown will lead to another sell-off around 126.20 to 121.10. In EUR/USD, demand remains quite weak, but there is a chance to return to December highs if the European Central Bank retains its hawkish monetary policy. However, traders need to keep the quote above 1.0660 because only by that will euro hit 1.0700 and 1.0740. In case of a decline below 1.0580, pressure will surge, which will push the quote to 1.0540 and 1.0490. Relevance up to 05:00 2022-12-22 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/330368

The Bank of Japan's decision, described yesterday, to raise the range for interest rate fluctuations on Japanese 10-year bonds to 0.5 percent may still have its consequences for financial markets. These may no longer just be looking at a change in the control of the yield curve, but may increasingly assume a change in interest rates. Since the beginning of 2016. The Bank of Japan has held its main interest rate at -0.1 percent and holds the world record for this. Nowhere else, in any other country, are interest rates as low as in Japan. Even the Swiss have abandoned this and raised their main interest rate to 1 percent, while the Japanese, for the moment, have allowed a larger bond sell-off and an increase in the yield on their debt, under what is possible to be an onslaught of global interest rate increases. At present, however, the market seems to expect that this is only the beginning of the BoJ's actions. The next step the Bank of Japan may take is to change the interest rate itself. Investors in this market seem to expect it to rise to 0.3 percent in a year. Adding to this the expectation of a slow end to interest rate hikes in the U.S., it could turn out that in 2023 Japan would lead expectations for interest rate hikes. This could significantly affect the yen or the Japanese stock market. Yen exchange rate and Nikkei The Japanese yen oscillated around the 132-per-dollar level on Wednesday, after rising nearly 4% during the previous session to reach levels not seen in more than four months. Overall, after the second intervention in the foreign exchange market, which took place in October, the USD/JPY exchange rate fell by 14 percent. This was a retreat from levels last seen in 1990. Going back to that history, and especially to 1998, where the Bank of Japan also intervened in the market at JPY 147-148, the USD/JPY exchange rate fell to JPY 102 the following year. If the Fed ended the hike cycle in the first half of 2023, such a scenario could be repeated. Source: Conotoxia MT5, USDJPY, Weekly The Nikkei 225 index fell 0.68% to close at 26388, while the Topix index lost 0.64% and fell to 1893 on Wednesday, extending the sharp decline triggered by the Bank of Japan's surprise policy change. Technology stocks led the market lower. Meanwhile, Japanese banks extended gains in anticipation of better returns from rising interest rates, including Mitsubishi UFJ (3.9%). Sumitomo Mitsui (4.1%) and Mizuho Financial (2.2%). Source: Conotoxia MT5, Mitsubishi UFJ, Weekly Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The Japanese yen is unchanged on Wednesday, taking a pause after posting huge gains a day earlier. In the European session, USD/JPY is trading at 131.68. BoJ yield move sends yen soaring It was a day to remember for the Japanese yen, which gained a staggering 3.7% against the dollar. USD/JPY fell as low as 130.56, its lowest level since August. The yen’s upswing was triggered by the Bank of Japan, which stunned the markets by widening the yield control band to 50 basis points, up from 25 bp. The move, which was announced at the BoJ’s policy meeting, was completely unexpected as policy makers gave no hints of any changes prior to the meeting. The markets had assumed that any major policy moves would wait until after Governor Kuroda’s term ends in April. The band for 10-year yields has widened, but it’s important to remember that yield curve control policy, although modified, remains in effect, as the target of 0% hasn’t changed. At a press conference after the meeting, Governor Kuroda insisted that the move was not an interest hike. This is technically correct, although the effect of the wider band is the same, as Japanese bonds can now pay higher interest rates since the cap on yields is higher. Now that the dust has settled, the question is what’s next from the BoJ? The tweak to the yield control band can be viewed as a baby step towards normalisation, after decades of an ultra-loose monetary policy. There is now talk of the BoJ raising rates out of negative territory next year, which would mark a sea change in policy. The BoJ meets next in January, and the markets have priced in a rate hike at 22%.   USD/JPY Technical USD/JPY has support at 131.13 and 130.15  There is resistance at 132.83 and 134.12 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.  

Citing a draft of the plan, Reuters reported on Thursday, Japan's Ministry of Finance (MoF) plans to sell 190 trillion yen ($1.44 trillion) worth of Japanese government bonds (JGB) in the fiscal year beginning April 1, with cuts in the amount of short-term debt sold. Separately, Reuters noted that “private sector advisers of Japan's top economic council on Thursday called on the government to step up talks on how to ensure wages rise faster than inflation.” Related reads Japan’s PM Kishida: Will host a special session of council on economic, fiscal policy early next year USD/JPY Price Analysis: Gearing up for another break of 131.00 on impending bear cross

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

After a week full of interest rate rises, it seems that markets may finally be catching their breath, or at least most of them. The exception may be Japan, where the central bank there has announced a turnaround in financial policy. Macroeconomic data Monday saw the publication of several important macroeconomic data, including the German Ifo Business Climate Index for December, the RBA meeting minutes, the PBoC Loan Prime Rate and a statement and the Bank of Japan. The German Ifo Business Climate Index is an important index that measures business sentiment in Germany. The reading for December was 88.6 points, which was better than expected (87.4 points) and may signal an improvement in business sentiment in Germany. The previous reading for November was 86.4 points. The result may indicate that the German economy is in better shape than expected and could be a positive signal for other economies in Europe. The minutes of the RBA (Reserve Bank of Australia) meeting did not bring any surprises and contained no significant changes to the central bank's monetary policy, which is expected to continue to raise interest rates. The PBoC (People's Bank of China) interest rate remained at 3.65%, which was expected by the market. The Bank of Japan (BoJ) released its monetary policy statement and held a post-meeting press conference. The first steps were taken to tighten monetary policy, announcing a rate hike and increasing the level of government bond purchases. Because of this, the Nikkei index (JP225) may have fallen by more than 3% since the start of the week. Source: Conotoxia MT5, JP225, Daily On Tuesday, we learnt about the number of new building permits in the US, the reading for November was 1.342 million, worse than expected (1.485 million) and a decrease in permits compared to the previous month (1.512 million). The reading may indicate that the construction sector in the US is less active than expected, which could have a negative impact on the economy, potentially contributing to higher unemployment in the sector in the future. Wednesday brought the publication of more data. We learned about Canada's core inflation reading (excluding food and energy prices). The reading for November was 0.0% m/m, while 0.2% m/m was expected. This represents no change in the price level compared to the previous month (0.4% m/m.). On the same day, we learned the reading of the Consumer Confidence index, which measures consumer sentiment in the US. The reading for December was 108.3 points, which is better than expected (101.0 points) and represents an improvement in consumer sentiment compared to the previous month (101.4 points). This good result could be attributed to the pre-Christmas period. The last of the important publications concerned US crude oil inventories. The reading for last week was -5.894 million barrels (previously 10.231 million b.). Which could suggest a return to a further shortage of this crude. On Thursday, we learned of signs of a slowdown in the UK economy. The GDP reading for the third quarter of this year was 1.9% y/y. (2.4% y/y was expected). This is down from the previous reading of 4.4% y/y. Due to the holidays starting on Friday's session, some stock exchanges will close earlier than usual, which should be taken into account in investment intentions. The stock market Declines in most sectors in the US are unlikely to represent optimism about the 'Father Christmas rally' starting. We could see the largest in the new technology sector. TheTechnology Select Sector SPDR Fund (XLK), which tracks the sector's quotations, fell by 4.8%. Only the energy sector rose. This seems to have had something to do with rising energy commodity prices this week. Source: Conotoxia MT5, XLK, Daily This week gave us the last of this year's Q3 figures. Tuesday brought the release of financial results from Nike (Nike), the global footwear and apparel giant, among others. The company reported Q3 EPS of $0.85, better than expected ($0.65). Next is General Mills (GnrlMils), the food manufacturer reported EPS of 1.1, a reading that came as a positive surprise to analysts (1.06 was expected). Next is FactSet Research (FactSet), a data and analytics solutions company, reported Q3 earnings of 3.99 per share, 3.62 was expected. On Wednesday, we learned the results of Micron (Micron), a computer memory manufacturer, which reported an EPS loss of 0.04 in Q3 (-0.01 expected). On the same day, Cintas (Cintas), an apparel services company, reported Q3 earnings per share of 3.12, expected (3.03). Carnival Corp (Carnival-US), the cruise company, reported a loss of $0.85 per share in Q3, better than expected (-$0.88). Currency and cryptocurrency market After a week of decisions by as many as 11 central banks, we saw numerous interest rate rises. These seem to have changed some global currency market trends. The EUR/GBP pair saw the biggest increase, up 1%, but we saw the biggest changes in pairs linked to the Japanese yen. The USD/JPY exchange rate has fallen by more than 3% over the course of this week and now stands at around 132. This is a drop of more than 13% from its peak, and appears to have been triggered by Monday's announcement of a change in monetary policy by the central bank of Japan. Source: Conotoxia MT5, USDJPY, Daily The cryptocurrency market has stagnated. The price of bitcoin (BTCUSD) was virtually unchanged over the course of this week, rising by just 0.3%. One of the strongest gaining cryptocurrencies was ethereum (ETHUSD), which increased in value by 2%. The digital currency market appears to continue to remain in its sideways course, showing no signs of changing. It's time for Christmas to begin! As we begin the festive period, we will not know any more key data until the end of the year, and the markets have to accept that this year would probably do without the usual 'Father Christmas rally' during this period. Nevertheless, we would like this period to be the best it can be for all of us. The Conotoxia team sends its regards. Grzegorz Dróżdż, Junior Market Analyst 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 Central Bank of Japan's recent actions appears to have been intended as a warning. As of today, the primary measure of inflation in Japan has increased even further and reached its highest level since 1981, which will undoubtedly increase market speculation that the Bank of Japan will shock the markets once more by altering its monetary policy in 2023. The Ministry of Internal Affairs reports that consumer prices in Japan increased by 3.7% in November compared to the same month last year. The Bank of Japan's primary index's results and the economists' evaluation were in agreement. The growth of the index was primarily driven by higher food prices, which even outpaced the growth of energy prices. It is clear that a variety of government initiatives, such as funding travel, contributed to keeping prices below 4%, but the battle against high inflation is far from over. Those who trade Japanese bonds barely responded to these data: Benchmark 10-year bonds and five-year securities both saw modest increases, which caused yields to drop by one basis point to 0.205%. The foreign exchange market hasn't undergone many notable changes either. Notably, core inflation has gone above the Bank of Japan's 2% target for eight straight months. The main trend is strengthening, as evidenced by the current level of inflation, which is 2.8% when fresh food and energy are excluded. Now, speculation that the central bank is on the verge of a policy reversal will continue to be supported by recent actions of Bank of Japan Governor Haruhiko Kuroda and recent data. Let me remind you that Kuroda shocked the markets at the beginning of the week when he announced that he would now permit the yield on 10-year Japanese bonds to rise to about 0.5%, which is twice the prior cap of 0.25%. All of this is a tactical maneuver to buy time before determining the future yield curve, which will change after the Central Bank's policy is altered next year when it is anticipated that interest rates will be raised. Many economists now anticipate that after the new governor assumes office, a policy change could occur as soon as next spring. Regarding the outlook for monetary policy, many analysts now predict that core inflation in Japan will reach 4% in December of this year before dipping to 2.7% in the first quarter of 2023 as a result of new government subsidies. Furthermore, data for January won't be available until after the Bank of Japan meeting in January, although economists anticipate that these subsidies will start to have a significant impact on inflation in that month. Regarding the USDJPY pair's technical picture, it is clear that the area around 130.20 serves as strong support over the long term. After the most recent news, the level of 121.10 will be the furthest goal. Its breakdown will trigger another significant sell-off in the vicinity of 126.20. It is not necessary to mention that the demand for the yen will decline in some circumstances right now. Regarding the EURUSD's technical picture, the demand for the currency is still quite weak, but there is still a chance that it will reach its December highs. To achieve this, a break above 1.0660 is required, which will cause the trading instrument to surge toward the new December high of 1.0700. You can easily climb to 1.0740 above this point. Only the failure of support at 1.0580 will put more pressure on the pair and drive EURUSD to 1.0540 with the possibility of falling to a minimum of 1.0490 if the trading instrument declines. Relevance up to 08:00 2022-12-24 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/330634

The dust is beginning to settle after the Bank of Japan’s stunning move earlier this week.  At its policy meeting, the BoJ widened the yield curve on long-term bonds from 0.25% to 0.50%. The move blindsided the markets, which had anticipated a ho-hum BoJ meeting with no changes in policy. The announcement sent USD/JPY tumbling by over 500 points and has raised speculation that the BOJ could make further changes before BOJ Governor Kuroda wraps up his term in April. The yen has since settled down and the markets are keeping an eye on other releases. National Core CPI for November delivered as expected, as the 3.7% gain matched the consensus and ticked up from 3.6% in October. The BoJ also released meeting minutes, but these were from the October meeting. Some members voiced concern about the strong descent of the yen, saying it caused uncertainty and had many negative effects on the economy. It should be kept in mind that the yen was much weaker in October when these comments were made, but it does indicate that the yen’s strength is of concern to the BOJ. Another interesting comment was that the Bank needed to assess how the markets would react if the BoJ decided to exit its easy policy. After this week’s yield curve move, this point takes on added urgency, with rising speculation that the BoJ could tighten policy in the near term. Markets eye PCE Core Index In the US, there are a host of events today. The markets will be paying particular attention to the PCE Core Index, the Fed’s preferred interest indicator. The index is expected to slow to 4.6% y/y in November, down from 5.0% a month earlier. Personal Spending and Personal Income are also expected to soften. The US also releases durable goods, UoM consumer confidence and UoM inflation expectations. Investors will be paying close attention to the inflation and inflation expectation releases. The US posted strong numbers on Thursday. Unemployment claims rose to 216,000, up from 214,000, but investors liked that the reading was lower than the consensus of 222,000. As well, GDP for Q3 was revised upwards to 3.2%, up from 2.9% in the initial estimate. The solid is another indication that the economy is well-positioned to handle additional rate hikes, which the Fed has promised as it battles inflation.   USD/JPY Technical  USD/JPY is putting pressure on resistance at 132.83. Above, there is resistance at 134.12 There is support at 131.13 and 130.15 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

It has been quite a quiet start to the week with many major markets still closed for Xmas holiday, but no one saw Santa coming this year, have you? Japan, Azazon, USD On the contrary, the Bank of Japan led drama across the global financial markets reminded that the year will certainly not end on a positive footage, Amazon became the first US megacap to lose more than a trillion USD in market cap, and the expectations for the S&P500 are very much mixed… …even though the last trading week of the year is expected to be marked by a ‘Santa rally’. US PCE data, China A few encouraging news could, indeed, give a minor boost to equity markets, among them the softer US PCE data, and the Chinese reopening news despite hundreds of millions of new Covid cases that threaten a smooth coming back. Watch the full episode to find out more! 0:00 Intro 0:31 Kuroda bangs the last nail on Santa’s coffin 4:16 US inflation gives further easing signs 5:19 But stock investors may not get too excited… 6:17 Amazon lost $1 trillion market cap 8:28 Expect thin trading before year-end 8:56 Hectic China reopening could still boost crude oil 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. #hawkish #BoJ #ECB #Fed #USD #EUR #GBP #JPY #Amazon #crudeoil #China #Covid #reopening #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

Japan’s former Top Currency Diplomat Takehiko Nakao said on Tuesday, the Bank of Japan (BoJ) should alter current easing policy framework as side effects mount. Additional quotes BoJ’s latest moves 'good', seen as effort to reduce burden on next governor in unwinding monetary stimulus. Excessive yen strength troublesome, excessive yen weakness bad. 2% inflation target as stipulated in government-BoJ accord may be making monetary policy inflexible. Yen strengthening may be tolerated to a degree if caused by raising interest rates. Market reaction These comments fail to offer any respite to the Japanese Yen, as USD/JPY recaptures the 133.00 barrier. The pair is trading at 133.10, advancing 0.18% on the day.

Data released by the US Bureau of Economic Analysis on Friday revealed that the Core Personal Consumption Expenditure (PCE) price index rose 0.2% m/m in November. The annual core PCE price index, the Fed's preferred measure of inflation, fell to 4.7% over the same period from 5% in October. Ahead of the Christmas break, Wall Street's major indices posted gains on Friday and failed to find demand for the US dollar. China has said it will lift quarantine requirements for incoming visitors, further easing three years of border controls to contain COVID-19. China's reopening, which also entails a resumption of Chinese tourist outbound trips, will boost the consumer and service sectors outside the country, particularly in nearby Southeast Asia. As a result, the dollar weakened significantly on Tuesday as most emerging Asian currencies strengthened and risk appetite. Currencies in New Zealand and Australia also rose. It is too early to tell how China's reopening will affect global economic activity, but there appears to have been a positive shift in risk sentiment after the three-day weekend. Attention will also focus on the US economic report, which will include the October housing price index and November data on the balance of trade in goods. Investors, however, are likely to ignore these numbers and focus on risk perception. USD/JPY The yen's strength didn't last long and I'm already seeing a slight increase in USD/JPY today. Today, USD/JPY is back to trading above 133. The pair is trading around 133.30. The weakness of the pair, however, does not excuse the recent mixed data from the US and Japan, let alone comments trying to challenge the political hawks at the Bank of Japan (BOJ). That said, Japan's unemployment rate fell to 3.5% in November from 3.6% previously expected, while the jobs/apprentices ratio again printed 1.35 in the month in question compared to 1.33 market forecasts. Moreover, retail trade growth fell to 2.6%YoY against 2.8% of market consensus and 4.4% previously revised upwards. EUR/USD In recent days, the currency pair has been trading in a short range between $1.0580 and $1.0650. Currently, it is trading slightly above this range, signaling an uptrend. EUR/USD has continued its move higher. The pair is taking advantage of US dollar weakness extensively as risk flows dominate further moves to reopen China. Taking advantage of the weakness of the US currency, the EUR/USD pair is up today and is trading around 1.0650, mostly just above that level. Today's high level so far has been 1.0671.   GBP/USD GBP/USD lost its bullish momentum after encountering resistance near 1.2100 early in the European session on Tuesday. GBP/USD drops towards 1.2050 on light trading as UK markets are closed for Christmas. The pair is downplaying the risk sentiment surrounding China that is weakening the US dollar. China announced earlier in the day that it would lift quarantine requirements for travelers from January 8 as part of its reopening efforts. Over the weekend, Chinese officials said they would stop publishing daily revisions to the number of confirmed coronavirus cases. It is worth noting that the valuation of the US dollar through risk perception should continue to drive the pair's actions. Today, the situation of the cable pair is downside with the current trade at 1.2036. AUD/USD The Aussie trades in a strong tone on Tuesday, supported by positive market sentiment. The pair is rising for the third day in a row, extending its rebound from 0.6650. It is currently trading at 0.6737. Source: investing.com,  finance.yahoo.com Data released by the US Bureau of Economic Analysis on Friday revealed that the Core Personal Consumption Expenditure (PCE) price index rose 0.2% m/m in November. The annual core PCE price index, the Fed's preferred measure of inflation, fell to 4.7% over the same period from 5% in October. Ahead of the Christmas break, Wall Street's major indices posted gains on Friday and failed to find demand for the US dollar. China has said it will lift quarantine requirements for incoming visitors, further easing three years of border controls to contain COVID-19. China's reopening, which also entails a resumption of Chinese tourist outbound trips, will boost the consumer and service sectors outside the country, particularly in nearby Southeast Asia. As a result, the dollar weakened significantly on Tuesday as most emerging Asian currencies strengthened and risk appetite. Currencies in New Zealand and Australia also rose. It is too early to tell how China's reopening will affect global economic activity, but there appears to have been a positive shift in risk sentiment after the three-day weekend. Attention will also focus on the US economic report, which will include the October housing price index and November data on the balance of trade in goods. Investors, however, are likely to ignore these numbers and focus on risk perception. USD/JPY The yen's strength didn't last long and I'm already seeing a slight increase in USD/JPY today. Today, USD/JPY is back to trading above 133. The pair is trading around 133.30. The weakness of the pair, however, does not excuse the recent mixed data from the US and Japan, let alone comments trying to challenge the political hawks at the Bank of Japan (BOJ). That said, Japan's unemployment rate fell to 3.5% in November from 3.6% previously expected, while the jobs/apprentices ratio again printed 1.35 in the month in question compared to 1.33 market forecasts. Moreover, retail trade growth fell to 2.6%YoY against 2.8% of market consensus and 4.4% previously revised upwards. EUR/USD In recent days, the currency pair has been trading in a short range between $1.0580 and $1.0650. Currently, it is trading slightly above this range, signaling an uptrend. EUR/USD has continued its move higher. The pair is taking advantage of US dollar weakness extensively as risk flows dominate further moves to reopen China. Taking advantage of the weakness of the US currency, the EUR/USD pair is up today and is trading around 1.0650, mostly just above that level. Today's high level so far has been 1.0671.   Read next:Shopping On Etsy Continues To Be Popular| FXMAG.COM GBP/USD GBP/USD lost its bullish momentum after encountering resistance near 1.2100 early in the European session on Tuesday. GBP/USD drops towards 1.2050 on light trading as UK markets are closed for Christmas. The pair is downplaying the risk sentiment surrounding China that is weakening the US dollar. China announced earlier in the day that it would lift quarantine requirements for travelers from January 8 as part of its reopening efforts. Over the weekend, Chinese officials said they would stop publishing daily revisions to the number of confirmed coronavirus cases. It is worth noting that the valuation of the US dollar through risk perception should continue to drive the pair's actions. Today, the situation of the cable pair is downside with the current trade at 1.2036. AUD/USD The Aussie trades in a strong tone on Tuesday, supported by positive market sentiment. The pair is rising for the third day in a row, extending its rebound from 0.6650. It is currently trading at 0.6737. Source: investing.com,  finance.yahoo.com

The recent release of data, including exports, retail sales, and industrial production, signals that the Japanese economy is still very fragile and thus supports the Bank of Japan's view that easing monetary policy should continue Industrial production in Japan fell for the third consecutive month in November -0.1% Industrial Production %MoM sa Higher than expected Industrial production fell as global demand weakened Japan's industrial production declined -0.1% month-on-month seasonally adjusted in November (vs -3.2% in October and -0.2% market consensus), recording a third consecutive monthly drop. In sequential terms, IP growth contracted to -1.4% 3Mo3M sa (vs 5.8% in September), meaning sluggish manufacturing activities will drag the current quarter's GDP.  Even worse news is that manufacturing output is likely to deteriorate in the first quarter of next year, given that IP is unlikely to rebound for the next few months. The sluggish exports in early December suggest a weak IP in December. China's reopening will eventually boost Japan's IP, but we think the positive effects will only be realized by the second quarter of 2023 or the second half of 2023. In our view, the Bank of Japan will maintain its accomodative policy stance for a considerable time. The BoJ meeting minutes revealed that several board members distinguished yield curve control band widening from policy tightening while the BoJ announced an unscheduled bond buying, driving the JPY weakness, hitting 134 again this morning. The BoJ is trying to give the market a stronger signal that their easing policy has not come to an end yet.  November IP contracted in sequential terms Source: CEIC Read this article on THINK TagsJapan production Industrial Production Bank of Japan   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

USD/JPY has slipped marginally to near 134.00, however, the upside is still favored amid uncertainty in the market. Federal Reserve might look for returning to policy easing led by the recent decline in retail demand and economic activities. The expression of loose monetary policy continuation in the Bank of Japan’s summary of opinions has weakened the Japanese Yen. USD/JPY may display more upside after a Rising Channel breakout and bullish signs from the momentum oscillator. USD/JPY pair has sensed long liquidations after a vertical rally around 134.40 in the early European session. The asset has corrected marginally to near 134.10, however, the corrective move seems healthy for the major as the market sentiment is still risk-averse. The Japanese yen pair is expected to resume its upside journey for recapturing the critical resistance of 135.00 ahead. Meanwhile, S&P500 futures are displaying a subdued performance as the market participants are getting anxious amid the festive mood. The 500 United States stock basket witnessed selling pressure on Tuesday led by weakness in technology stocks and a decline in International Trade Deficit. The return on 10-year US Treasury bonds has trimmed below 3.85% but is still showing promising signs of recovery ahead. The US Dollar Index (DXY) is struggling to surpass the crucial resistance of 104.00, however, the upside is still favored amid uncertainty in the global market towards the rapid reopening approach of the Chinese administration. Federal Reserve might return to policy easing sooner Recent decline in the United States Durable Goods Orders and Personal Consumption Expenditure (PCE) Price Index have delivered an expression of a slowdown in inflation expectations further. A sheer decline in the demand for durable goods, and consumption expenditure by households are critical for a decline in inflationary pressures. And now, a decline in Tuesday’s International Deficit as firms are restricting themselves from expanding operations due to higher interest obligations is going to compel the Federal Reserve to return to policy easing context sooner. On Tuesday, the US Census Bureau reported that Exports of goods for November were $168.9 billion, $5.3 billion less than October exports while Imports of goods for November were $252.2 billion, $20.8 billion less than October imports. This indicates a decline in overall economic activities, which might result in lower employment opportunities in the CY2023. United States economy is far from recession Market participants have been debating over the United States economy getting into recession and a higher Unemployment Rate to achieve price stability. As the Federal Reserve is hiking interest rates dramatically, economists have been compelled to trim Gross Domestic Product (GDP) projections and firms get restricted from executing of expansion plans. Thomas M. Mertens, a Researcher from the Federal Reserve (Fed) Bank of San Francisco’s Economic Research Department came out with a recession predictor based on macroeconomic time series, particularly the jobless unemployment rate. He cited that no predictors indicate an upcoming recession over the next two quarters currently. And, the jobless rate does not currently signal an impending recession. Bank of Japan’s Summary of Opinions favors easy monetary policy ahead In the Summary of Opinions by the Bank of Japan, the central bank cleared that widening of the yield band was meant to address distortion in 10-year Japanese Government Bonds (JGBs) pricing but this is not a step toward an exit from ultra-easy policy, as reported by Reuters. The expression from the Bank of Japan’s summary of opinions indicates that the central bank must maintain the easy policy as the Japanese economy is in a critical phase in hitting the price goal. No doubt, the economy is showing signs of wage rises, and a positive economic cycle but it is appropriate to maintain an easy policy for time being. USD/JPY technical outlook USD/JPY is on the verge of kissing the horizontal resistance plotted from the December 14 low around 134.52. The US Dollar is extremely strong as the asset has delivered a breakout of the Rising Channel chart pattern formed on an hourly scale. The pair has scrolled above the 200-period Exponential Moving Average (EMA) at 133.88, which indicates that the long-term trend has turned bullish. Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which signals that the upside momentum has been triggered.     search   g_translate    

The Japanese yen continues to lose ground this week and is in negative territory on Wednesday. In the European session, USD/JPY is trading at 134.11, up 0.49%. Post-Christmas holiday trading remains thin, but USD/JPY has made steady gains and climbed 1% this week. The US dollar has recovered somewhat after last Tuesday’s slide when it fell a staggering 3.8% after the BoJ widened its yield curve band. The move blindsided the markets, which had not expected any major policy moves prior to the end of Governor Kuroda’s term in April. Summary of Opinions – no exit from loose policy Investors were all ears as the BoJ released today the summary of opinions from last week’s dramatic meeting. The summary of opinions showed that several of the nine board members said that the tweak to yield control was aimed at enhancing the current stimulus programme rather than ending it. This reiterated what Governor Kuroda stated in a press conference after the meeting. Still, speculation remains high that the BoJ could take further steps that tighten policy, and even exit the Bank’s ultra-loose policy, especially with inflation running at a 40-year high. The summary of opinions indicated that members discussed rising inflation and the possibility that higher wages would remove the risk of a return to deflation. The BoJ has been focused on wages, arguing that strong wage growth will ensure that inflation is sustainable, as opposed to inflation that is driven by higher costs for energy and raw materials. The government is also making wages a top priority, and there are indications that major companies and labour unions will negotiate higher wages in the spring. If the BoJ sees that wages are rising it could raise its yield curve control target, which is currently around 0% for 10-year bonds. The BoJ will likely be back in the headlines shortly, with its next meeting on Jan. 17th and 18th. Read next: Leading Used Tesla Prices Fall Faster Than The Market| FXMAG.COM USD/JPY Technical  USD/JPY is testing resistance at 134.12. Above, there is resistance at 134.82 There is support at 133.25 and 132.29 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The Japanese yen has posted gains on Thursday, putting the brakes on this week’s dollar rally of over 1%. In the European session, USD/JPY is trading at 133.64, down 0.60%. This week has been marked by low liquidity, with many traders closing their books or taking a holiday at the end of the year. Japanese markets have been open all week, and USD/JPY has shown more movement than the other majors. BOJ defends yield curve target In a week that has been light on economic releases, the Bank of Japan has provided plenty of material for the markets. The BoJ shocked the markets last week when it widened the yield curve band on 10-year bonds, from 0.25% to 0.50%. The move had the same effect as a rate hike and sent the yen sharply higher. After the move, Governor Kuroda said that the tweak was aimed at making the yield curve more sustainable rather than removing it. Investors remain unconvinced, with speculation rising that the BoJ could raise the cap to 0.75% or eliminate its yield curve control altogether. The BoJ has tried to dispel speculation that further changes to the yield curve are on the way. The Bank announced on Wednesday and again today unlimited bond purchases, with the aim of defending its yield curve target, which is around 0% for 10-year bonds. The tweak on the yield curve band did not affect this target, which the BoJ has insisted will remain in place. What we are seeing here is a continuation of a cat-and-mouse game between the BoJ and investors, with each side testing the resolve of the other. In October, the yen fell close to 152 before the Ministry of Finance intervened in the currency markets and propped up the yen. Inflation is on the rise in Japan and has climbed to 3.7%, a 40-year high. The BoJ, however, remains unconvinced that inflation is sustainable unless accompanied by stronger wage growth. If labour agreements in early 2023 result in higher wages, the BoJ could raise its yield curve control target, which would be a massive change in policy. Read next: EUR/USD Pair Remains Within Its Horizontal Trading Range, The Aussie Failed To Break The Resistance At 0.68| FXMAG.COM USD/JPY Technical USD/JPY tested support at 133.62 earlier. The next support level is 132.62 There is resistance at 134.86 and 135.98 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.  

USD/JPY is expected to surrender the 131.00 support as the USD Index has faced immense pressure. The FOMC minutes will provide a detailed explanation of December’s monetary policy decision. The BOJ is considering raising its inflation targets to 2% for CY2023 and 2024. The USD/JPY pair is hovering around 131.00 after a less-confident rebound from 130.78 as settled on Friday. The asset is hoping for a continuation of weakness, which might drag the asset again below the immediate support of 131.00. The major is likely to face significant heat amid weakness in the US Dollar Index (DXY). The USD Index remained in the grip of bears on Friday after surrendering its trading range of 103.47-104.57. The consolidation of two weeks displayed a breakdown as investors poured liquidity into risk-perceived currencies led by declining inflation expectations for CY2023. Analysts at Natixis cited the monetary policy expression by the Federal Reserve (Fed) is a restrictive one as the mortgage rate is higher than nominal wage growth in the United States economy. While S&P500 remained choppy on Friday as the trading activity was trimmed dramatically amid a festive market mood but ended on a subdued note. The 10-year US Treasury yields advanced further to 3.88% as the demand for government bonds dropped. This week, the critical event that will support the USD Index in gauging a decisive move will be the release of the Federal Open Market Committee (FOMC) minutes. The FOMC minutes will provide a detailed explanation of December’s monetary policy decision. Apart from that, the market participants will keep an eye on cues about economic projections and likely monetary policy action by Fed chair Jerome Powell ahead. On the Tokyo front, clear inflation projections for the next two years by the Bank of Japan (BOJ) are supporting the Japanese Yen. Nikkei reported on Saturday that the BOJ is considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024

EUR/JPY is likely to drop further to near 139.00 as investors are cautious about Euro ahead of German inflation. Rising wage growth is infusing fresh blood into the Eurozone inflation. The BOJ has raised inflation targets substantially for CY2023 and 2024. The EUR/JPY pair dropped to the psychological support of 140.00 as investors got cautionary ahead of the release of the German Harmonized Index of Consumer Prices (HICP), which will release on Tuesday. The cross dropped sharply late Friday as investors poured funds into the Japanese Yen led by the bond-buying program from the Bank of Japan (BOJ) last week. The Euro is likely to witness a power-pack action after the release of the German HICP. As per the projections, the inflation indicator is seen higher at 11.8% vs. the former release of 11.3%. Lately, European Central Bank (ECB) President Christine Lagarde cited the rising wage rate as responsible for the continuous escalation of inflationary pressures. ECB President cited that the central bank must prevent this from adding to already high inflation, as reported by Reuters. Meanwhile, analysts at Natixis believe that “In the Eurozone, the real long-term interest rate is well below potential growth, and the mortgage rate is lower than nominal wage growth; monetary policy is therefore completely expansionary.” Apart from the German Inflation data, investors will also focus on German Unemployment data. The Unemployment Change (Dec) is expected to escalate to 27K against the former release of 17K. While the jobless rate might trim to 5.5% from the former release of 5.6%. On the Tokyo front, the higher inflation forecast by the Bank of Japan (BOJ) is supporting the Japanese Yen bulls. Nikkei reported that the BOJ is considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024. While the core Consumer Price Index (CPI) is seen rising around 3% in fiscal 2022, between 1.6% and 2% in fiscal 2023, and nearly 2% in fiscal 2024

Summary:  Today, we look at how markets closed last year, noting the weakening of the US dollar in to year-end even as US treasury yields backed up into year end. Despite those higher yields, USDJPY trades near multi-month lows in anticipation of the Bank of Japan and the Fed moving in opposite directions with their policy for the balance of this year. Elsewhere, we dive into commodity positioning and the energy market as mild weather continues to drive gas and power prices down in Europe while crude oil actually rallied. A look at energy stories to track this year and more also on today's pod, which features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Source: Podcast: First weeks of a New Year often pivotal | Saxo Group (home.saxo)

The yen started 2023 with modest gains on Monday as traders weighed the risk of further technical strength amid thin holiday trading. The Japanese currency rose 0.3% to 130.77 per dollar in early trading in Tokyo. A close below the dollar-yen's August low of 130.41 would open up the door for further declines in the pair, according to chart watchers. Some investors were opening small short-dollar positions in case a break occurs in the absence of normal market liquidity, said some Asia-based currency traders familiar with the transactions who asked not to be named because they were not authorized to speak publicly. The yen is up about 16% from its October low amid government intervention, hopes for slowing US rate hikes and speculation about a possible policy shift from the Bank of Japan this year. The BOJ's unexpected December decision to tweak its yield curve control parameters is seen by many as a sign that its ultra-easy monetary policy might soon be coming to an end. Read next: Twitter Did Not Pay $136,260 Rent, Microsoft Reported Its Worst Quarterly Results In Years| FXMAG.COM Relevance up to 09:00 2023-01-03 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/331287

Summary:  The year is starting off with the US dollar on its back foot even as US treasury yields rose into year end as the market continues to believe that we are nearing the end of the Fed rate hike cycle, with easing to follow, while the ECB has grown increasingly hawkish and the Bank of Japan is seen further adjusting its policy mix under new leadership from early Q2. Will the first key data of 2023 on Friday play well with the market’s strong convictions? Today's Saxo Market Call podcast.Today's Market Quick Take from the Saxo Strategy Team FX Trading focus: USD stumbles into the New Year, with sterling also on its back foot. The JPY has risen to the top of the heap on the anticipation of a further shift in BoJ policy after Governor Kuroda’s exit in early April. Even with US yields backing up into year – particularly at the longer end of the curve – the market continues to express view is that the Fed is set for peak policy rates at the March or May FOMC meeting, followed by eventual cuts as soon as Q4. This has been the case for some time, with the only new information available in the last days of 2022 a particularly strong US Consumer Confidence reading for December that is rather out of synch with an anticipated dip into recession in the US. End-of-quarter and end-of-year flows may have been behind the surge in treasury yields and the weakening of the greenback, so we will need at least this week for a sense of how things are shaping up, and the most interesting test of the market’s conviction would be another batch of stronger than expected jobs and especially earnings data and another strong ISM Services print this Friday. Another important factor for the US dollar in the opening weeks to a couple of months of this year is the debt ceiling fight and how much brinksmanship the weak GOP majority in the US House is willing to engage in. As the ceiling approaches, the US Treasury runs down its general account with the Fed, currently at $400+ billion and capable of being run down to $100 billion or less, which is a net boost to USD liquidity. Once the ceiling is inevitably raised, with or without concessions from the Biden administration, the opposite effect swings into gear as the Treasury then builds its account again, sucking liquidity out of the market. EUR and especially JPY strength. The drivers (and some of the irony) of sharp JPY strength are discussed with the look at the USDJPY chart below. The driver of a strong euro into year-end was ECB President Lagarde finally getting religion on the inflation fight here very late in the cycle. The strongest evidence of how the market sees a divergence in the Fed vs. ECB forward is in something like the far forward 3-month short-term-interest rate contracts, which suggest that by the end of 2024, the Fed policy rate will be little more than 50 basis points above the ECB’s policy rate, at something like 3.50% for the Fed and just under 3.00% for the ECB. This has narrowed from well over 100 basis points in early November and something like 180 basis points early in 2022. A factor tempering the upside euro potential is concern that the ECB won’t be able to deliver as much as it would like for the market to believe it is capable of without triggering an ugly new aggravation of peripheral spreads as a weak economy like Italy’s can’t fund itself at 3% without QE. Italian Prime Minister Meloni has already http:been out complaining against the ECB’s communication style and the ESM. Read next: The First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM Chart: USDJPY USDJPY tanked into year-end, nearing the recent cycle lows even as US long treasury yields climbed into year-end. For most of 2022, long US yields were a very reliable coincident indicator, but the market has its sights next year on the decelerating Fed hikes that it eventually sees turning into rate cuts, while the Bank of Japan is seen further tinkering with its policy in the direction of tightening, particularly once Governor Kuroda’s replacement is found after his early April exit. Ironically, the anticipation of a BoJ shift is resulting in enormous QE to enforce the current regime. When yields were on the rise last year and the US 10-year yield first hit the current level of 3.85% in late September, the USDJPY rate was near 145.00. From here, the current USDJPY trajectory can only find support from a follow through from the BoJ in the direction of tightening (incrementalism remains a risk there) and a world that is diving into a classic disinflationary recession, with the Fed continuing to get marked lower. The challenge for this assumption would be a far stronger than expected global economy, with resilient US activity for another couple of quarters and inflation and a fresh surge in energy prices. Source: Saxo Group Overnight, we got a miserable official Non-manufacturing PMI for December from China as the end of Zero Covid early last month is likely reaching peak impact now and through the next few weeks, followed by a likely strong resurgence in Chinese demand. How the Chinese policy and its economy shapes up on the other side of the early Lunar New Year holiday (January 23) will be an important factor in how 2023 shapes up. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar and sterling starting off the year in worst shape. The latter may be a durable theme this year as the Bank of England is set for QT – a tricky proposition for a twin deficit country that will have to find buyers of its paper outside of the country. Elsewhere, the outsized JPY strength is the most prominent development as this year gets under way. It looks excessive relative to the recent rise in global bond yields. CAD is paying for the Bank of Canada’s dovishness, but oil is a bit resurgent. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Note that the “ATR heat” is fading to light orange (second quintile of last 1000 observations) for about half of the pairs tracked here as volatility has eased in recent weeks. Will be watching USD and JPY pair status over the coming week or two for developments, which are often important on calendar year rolls, as emphasized for EURUSD in my most recent FX Update. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights US Markets Closed 0145 – China Dec. Caixin Manufacturing PMI Source: FX Update: USD stumbles into the New Year. | Saxo Group (home.saxo)

Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank expresses his take on the impact of the Bank of Japan (BoJ) bond purchases on the Japanese Yen. Key quotes “The Bank of Japan’s (BoJ) decision to allow higher JGB yields had spontaneously been interpreted as the beginning of the end of ultra-expansionary monetary policy not only by me.“ “It seemed to be the general interpretation. In the meantime the market no longer seemed to be 100% certain whether that was correct. Because the BoJ justified its explanation with purely market-technical reasons. USD-JPY temporarily traded with a 134 handle.” “However, in particular the fact that Japanese central bankers will have to defend the new upper limit for JGB yields with even more determination resulted in a reversal. USD-JPY is once again trading at levels around 131.00 (while I write this), so roughly where the currency pair was trading following the BoJ decision.”  

The dollar-yen pair tested the psychologically important price level of 130.00 today, temporarily falling to the area of the 129th figure. The pair has updated a six-month low, but this is not surprising: USD/JPY bears consistently develops a downward trend. Looking at the weekly chart, we can see that the price is now declining as part of the next wave of downward movement. Three weeks ago, the Bank of Japan provoked price turbulence, which turned out to be in favor of the national currency. In general, the downward rally began in October last year, when the pair reached a multi-year price high (151.96). After that, the Japanese authorities conducted another currency intervention, thereby extinguishing the upward impulse. And further events also turned out to be in favor of sellers: the dollar weakened against the backdrop of slowing inflation in the U.S. and a decrease in the Fed's aggressiveness, while the yen received unexpected support from the Japanese regulator. And all this happened and is happening against the background of a kind of "election race" for the post of head of the Bank of Japan: traders react to statements by possible successors of Haruhiko Kuroda (as a rule, these statements are quite hawkish). At the same time, the dovish statements of Kuroda himself, who is guaranteed to leave his position in April, are ignored by market participants. And now the yen, after a short respite in the pre-New Year period, continues to strengthen its position due to several fundamental factors. First, there is growing confidence in the market that the Bank of Japan, having doubled the yield ceiling on 10-year bonds in December, has taken only the first step towards normalizing monetary policy. Last week, on New Year's Eve, Kuroda refuted this assumption. He stated that this decision of the central bank was due to "market and technical reasons." But traders, apparently, are betting that the regulator will further weaken its policy of controlling the yield curve in the future or abandon it altogether. The market is increasingly talking about the possible implementation of such a scenario. In particular, Columbia University professor Takatoshi Ito (who worked with Kuroda at the Japanese Ministry of Finance in 1999–2001) recently said that such a decision by the central bank is a kind of prelude to the rejection of ultra-loose policy. He did not agree with the current head of the central bank that inflation in Japan will slow down this year. Arguing his position, Ito points to the latest data on the growth of the consumer price index: in November, annual consumer inflation reached 2.8%, even without taking into account energy and food prices. This means that inflation may remain above the 2% target level in 2023, even if prices for energy resources and products stop rising. Moreover, according to Ito, this year's wage negotiations are likely to lead to significant increases, boosting consumers' purchasing power, triggering another spike in prices, due to stronger demand. By the way, Takatoshi Ito is one of the candidates to replace Kuroda as head of the Bank of Japan. Other likely successors to Kuroda are also saying in one form or another that the Japanese regulator may have to take the next steps towards normalizing monetary policy. In particular, former Vice Finance Minister for International Affairs Takehiko Nakao said that he favors a smooth transition from the central bank's ultra-loose monetary policy. In my opinion, the market has formed a common position on the interpretation of the December decision of the Japanese Central Bank. And this position boils down to the fact that at the end of last year, the Bank of Japan marked the beginning of the end of the ultra-loose monetary policy. In turn, "hawkish" comments of Kuroda's possible successors are further confirmation of this assumption. The yen is in high demand on the back of such conclusions. Also, we should not forget that Japanese currency has a status of a "safe-haven," so a negative news flow from China provides indirect support for USD/JPY bears. On Saturday, it became known that China's official Manufacturing PMI for December dropped to 47.0, contrary to expectations of a 48-point decline. As we know, the 50-point mark separates contraction from growth, while the Manufacturing PMI has been below the key level for the third consecutive month. China's Caixin Manufacturing PMI, released today, fell to 49.0 (with a forecast of a decline to 49.4). Economists polled by Reuters said the worsening epidemiological situation in China could lead to temporary labor shortages and increased supply chain disruptions. Meanwhile, a new wave of coronavirus infection is spreading in China at an unprecedented rate. Thus, the existing fundamental background contributes to the further decline of the USD/JPY pair. Today, traders tested the 129.50 support level (the lower line of the Bollinger Bands indicator on the daily chart), but then retreated to the area of the 130th figure. There is no doubt that the bears will again storm this price barrier in the medium term, overcoming which will open the way for them to the next support level at 129.00 (the lower Bollinger Bands line on the H4 timeframe). Relevance up to 09:00 2023-01-04 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/331353

The Japanese yen has posted winning sessions for three straight days and is in positive territory on Tuesday. Japanese markets are closed today for a holiday, so any strong movement from the yen is unlikely today. It’s a very light day on the economic calendar. There are no Japanese events, while the US releases Final Manufacturing PMI. Yen keeps rolling Japanese markets remain closed for an extended holiday but the good times continue for the yen. Since falling to 151 in October, the currency has rebounded and earlier today broke below the symbolic 130 level, for the first time since May. If USD/JPY closes the day below 130, that will give support for the downtrend to continue. The next target for a downside push is the 125 line, which has held since April. Investors would love to know what the Bank of Japan has planned in the coming months. The BoJ tweaked its yield curve band in December, a move that blindsided the markets and sent the yen flying higher. With Governor Kuroda winding up his 10-year term in April, there were no expectations that Kuroda would make any significant policy changes, and the focus was on his potential successor. Kuroda has insisted that the tweak was not a prelude to the Bank exiting its massive stimulus program, but the markets aren’t so sure. What is clear is that inflation continues to rise in Japan, which is putting pressure on the BoJ to tighten policy. This could take the form of further widening the yield curve band or eliminating the 0% target for 10-year yields. The BoJ next meets on January 18th and investors will be all ears. BoJ policy meetings used to be sleepy affairs, where board members dutifully announced they were maintaining current policy. This is clearly no longer the case, with the BoJ widening the yield curve band at the December meeting and board members discussing the impact that an exit from stimulus would have on the markets. Read next: New Record For Electric Car Manufacturer - Tesla Deliveries Increased By 40% Year-On-Year| FXMAG.COM USD/JPY Technical USD/JPY is testing support at 130.50. The next support level is 129.76, which has held since June There is resistance at 131.25 and 132.13 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Source: Japanese yen breaks below 130 - MarketPulseMarketPulse  

Risk aversion dominates markets at the start of the new year. It's a quiet day in Asia today. US ISM manufacturing data starts the pre-non-farm-payrolls data run  Source: shutterstock Macro outlook Global Markets: A very tentative start to the New Year from risk assets. US equities made small declines (S&P500 -0.4%, NASDAQ -0.76%),  though there were gains in Asian markets (CSI 300 +0.42% and Hang Seng +1.84%), despite the weak Caixin PMI data out of China. Yields on US Treasuries also hinted at some caution from investors. 2Y yields fell 5.6bp, and 10Y yields declined 13.6bp to 3.739%. Currency markets also echoed this rather gloomy backdrop, with EURUSD pushing back down to 1.0545, the JPY is up slightly to 131.31, the AUD has pulled back to 0.6719, and Cable is back below 1.20.  Most of the Asian FX pack lost ground to the USD yesterday, though the losses outside of the G-10 currencies were modest. The THB actually strengthened 0.58% on China re-opening hopes, and the VND also picked up some ground.   G-7 Macro: German inflation for December came in below expectations in December, registering a 9.6%YoY growth rate, down from 11.3% in November. This follows a 1.2%MoM decline in the price level. The decline was mostly driven by lower oil and gasoline prices (see also this note).  France releases December inflation data today. US manufacturing ISM data together with US auto sales rounds off a quiet day. China: The season of converting the dollar to CNY has come. Export receipt conversion should start around three weeks before the first day of the Chinese New Year (which this year starts on 22 January) and end around one week before that as manufacturers need to pay bonuses before workers leave factories for the holidays. That means demand for yuan in the onshore market should increase. What to look out for: FOMC minutes Japan Jibun PMI (4 January) Hong Kong retail sales (4 January) US ISM manufacturing (4 January) FOMC minutes (5 January) Philippines CPI inflation (5 January) Thailand CPI inflation (5 January) China PMI services (5 January) Singapore retail sales (5 January) US ADP, trade balance and initial jobless claims (5 January) Taiwan CPI inflation (6 January) US non-farm payrolls, ISM services, durable goods and factory orders (6 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

USD/JPY has rebounded after dropping below 132.00 as investors have shifted their stance to a risk-off mood. Upbeat US payroll data would serve as a reason for the continuation of hawkish policy by the Fed. The BOJ may continue to ease policy further to achieve higher inflation targets. The USD/JPY pair has picked bids after a corrective move below the crucial support of 132.00 in the Tokyo session. The asset has displayed a recovery as the risk-off impulse has rebounded firmly amid soaring anxiety ahead of the United States Employment data. S&P500 has sensed immense pressure as an expression of upbeat employment addition in the United States economy could serve as a reason for the continuation of hawkish monetary policy by the Federal Reserve (Fed) for the entire CY2023. The US Dollar Index has squared off its entire morning gains and is looking to recapture the immediate resistance of 104.00. Meanwhile, the 10-year US Treasury yields have also rebounded to near 3.72%. Friday’s US Nonfarm Payrolls (NFP) data will be keenly watched by the market participants. As per the consensus, the US labor market has witnessed an addition of fresh payrolls of 200K in December against 263K reported earlier. The Unemployment Rate is seen unchanged at 3.7%. Although inflation has been softened in the past few months led by higher interest rates, the Fed is still worried that the low jobless rate could spurt the price index again. The sheer demand for labor would be compensated by higher wages, which would result in higher retail demand as individuals will have more money in pockets for disposal. Read next: Exxon And Chevron Abandon The Global Market And Focus On The Americas| FXMAG.COM Before the release of the official US employment data, investors will look after Automatic Data Processing (ADP) Employment Change data, which is seen higher at 150K against the prior figure of 127K. On the Tokyo front, the Bank of Japan (BoJ) is likely to raise fiscal 2022 and 2023 forecasts for the core Consumer Price Index (CPI) in its new quarterly projections, as reported by Reuters. A scenario of a higher inflation forecast will fade rumors of policy shift as higher inflation will be augmented by more policy easing measures from the central bank.  

Summary:  Today, we look at the market continuing to stumble around in the range, with little conviction emerging so far this year. Will this mean a trigger-happy reaction to incoming data? Elsewhere, we look at the gold rally fading, crude oil ripping lower and the Japanese yen mean reverting to weakness after its spectacular two-month rally, a likely sign of near-term exhaustion for that move. We also discuss Amazon chopping more jobs than expected, the still tight US labor market and much more. Today's podcast features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. 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.   Read next: The Bank Of England Urgently Needs To Tame Stubbornly High Inflation| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Market stumbling around, awaiting incoming data | Saxo Group (home.saxo)

A glance at the Yen over the next few days might be interesting. Antje Praefcke, FX Analyst at Commerzbank, expects the USD/JPY pair to dive below the 130 level. How far does the BoJ go? “Next week's BoJ meeting will be exciting. After the surprise widening of the yield target in December, the big question is how far the BoJ will go. Perhaps next Wednesday we will get a first hint. Although it is likely to get really exciting starting in April, when the new Governor will take over, whose nomination is still pending.” “If there are already signs next week that the BoJ really is moving further away from its ultra-expansionary stance, I would expect USD/JPY to quickly fall below 130.”

The Japanese yen continues to have a quiet week. USD/JPY is showing little movement on Tuesday, trading at 131.84. Tokyo Core CPI hits 4.0% Tokyo Core CPI, a key inflation indicator, was higher than expected and in December hit 4.0% for the first time since 1982. This was up from 3.6% in November and above the forecast of 3.8%. Food and energy costs were the drivers behind the uptick, but higher prices were broad-based, casting doubt on the Bank of Japan’s argument that inflation is mainly due to import costs. The BoJ says that inflation is close to a peak, but inflation indicators such as Tokyo Core CPI don’t corroborate that view. The markets were caught flat-footed by the BoJ in December when it suddenly widened the yield curve control band, and wary investors are on the lookout for further policy changes, such as another widening of the band or eliminating its yield curve control target for long-term bonds. Higher inflation is putting pressure on the BoJ to respond, and the monthly policy meetings are no longer sleepy affairs that have no bearing on the markets. The BoJ meets again on January 18th and in addition to announcing policy will update its inflation forecasts. High inflation has taken its toll on consumers, and Household Spending declined in November for the first time since June, with a reading of -1.2%. This was down from 1.2% in October and missed the consensus of 0.6%. The government has introduced an economic stimulus package that includes subsidies for electric bills and is counting on the measures to push inflation lower. Still, the package isn’t expected to make an impact until February, which means inflation could continue to accelerate in January. Read next: According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM USD/JPY Technical There is weak resistance at 132.13, followed by 133.30 131.25 and 130.60 are the next support lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

GBP/JPY is failing to surpass the immediate resistance of 161.00 as BOJ is discussing an exit from its ultra-loose policy. Japanese administration and the BOJ will review their decade-long loose policy under novel BOJ leadership. The Pound Sterling may display significant action after the release of UK’s economic activities data. The GBP/JPY pair has sensed selling pressure after multiple failed attempts of surpassing the critical resistance of 161.00 from the past two trading sessions. The cross is likely to display volatile moves amid chatters over the review of decade-long easy policy under the new Bank of Japan (BoJ) leadership ahead. Discussions over a review of prolonged ultra-loose monetary policy by the BoJ are getting heated now.  Earlier, Japanese Prime Minister Fumio Kishida said that the administration and the BoJ must discuss their relationship in guiding economic policy after he names a new Bank of Japan (BOJ) governor in April. He further added that the administration is looking to revise its long-decade blueprint of beating deflation and may look for an exit from ultra-loose monetary policy. And, now former BoJ board member Sayuri Shirai said on Wednesday “Review of last 10 years can be conducted under new BoJ leadership, but difficult to envisage a major change in the policy framework.” It seems that the Japanese economy has considered high inflation environment a better way to combat the Japanese yen's weakness as other economies are constantly shrinking the supply of their respective currencies. Read next: According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM On the United Kingdom front, investors are awaiting the release of the data belonging to economic activities comprising Gross Domestic Product (GDP) figures, Industrial Production, and Manufacturing Production data, which are scheduled for Friday. Meanwhile, the Bank of England (BOE) has cornered poor execution from Prudential Regulation Authority for their faulty risk-management systems as banks faced high exposure due to sheer market volatility in CY2022. Events like the collapse of Archegos Capital demonstrated firms’ large and concentrated exposure to single counterparties, as reported by Financial Times.  

The problems of climate change are becoming a frequent topic of discussion. Many governments and central banks are taking action to increase ecological transformations. The difficult economic situation raises the question of whether, in the fight against inflation, it is necessary to undertake investment activities in ecology? In this article: Digitizing Asia Financing the ecological transformation through monetary policy Digitizing Asia The development of technology and digitization is very important. This was shown by the time of the pandemic, in which technology played a significant role. The digital landscape of Asia has grown in recent years, and its further development may be an even greater opportunity for the inhabitants of this region. Digital technologies can increase the efficiency of the public and private sectors, expand financial inclusion, improve access to education and open up new markets by enabling companies to serve distant customers. During the pandemic, for example, digitalization has improved the allocation of valuable resources to health and social services, enabling quick relief while controlling public spending leaks. Digitization helped maintain resilience during the pandemic, where combined with heavy fiscal support, remote working and online sales, it protected employees, students and businesses. The pandemic has accelerated the trend of digitization of the region. The percentage of patent applications related to remote working and e-commerce technologies has increased during the pandemic. As the data shows, Asia is the leader in online retail. But despite this, there are still regions in Asia where digitization is not at a satisfactory level, and the differences between highly digitized and low digitized regions may be of key importance for the whole of Asia. Greater digitalization can help boost productivity growth in Asia, which already has shown itself to be a leader in fields from robotics to e-commerce. See our latest blog for more. https://t.co/QDPoYNFZiM pic.twitter.com/cN22xOfdtv — IMF (@IMFNews) January 10, 2023 Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM Should the role of central banks in the fight against climate change be active? There are divisions among the world's most powerful central banks over their role in tackling climate change as policymakers focus on curbing inflation. US Federal Reserve Chairman Jerome Powell said the Fed would not become a "climate policy maker" or engage in matters beyond its congressional mandate. The Governor of the Bank of Japan, Haruhiko Kuroda, said that any climate-driven policy decisions must remain within the relevant mandates of central banks and avoid compromising the market neutrality of policy makers. Whereas, from the ECB, Isabel Schnabel said the Frankfurt-based institution needs to become more climate-friendly. Soaring inflation and rising interest rates have thwarted the ECB's plan to redirect its corporate bond holdings towards greener assets to support the energy transition. Should banks participate in the ecological transformation? There are many who are in favor of it, because by financing such investments, the country in which the bank undertakes such activities builds a positive image for future investors. But in a difficult economic situation where it is difficult to implement, the question arises whether to take action in this direction. It all depends on whether the governments of the countries will be able to undertake this task. Major central bankers dispute role in tackling climate change as they battle inflation https://t.co/tN2NI4I6oy — CNBC (@CNBC) January 11, 2023

Fed Chairman Jerome Powell gave no policy guidance at Tuesday's panel discussion in Stockholm, and with other Fed officials saying their next moves will depend on the data, investors are very focused on the US CPI data. The dollar has weakened sharply in recent months on hopes that U.S. inflation is declining, which, along with some signs of pressure on the U.S. economy, is fueling expectations that the Fed is nearing the end of its rate hike program. In terms of energy, both the UK and the Eurozone have benefited from the fall in oil and gas prices, but with sanctions and price caps tightening on Russia, Russian retaliation could push energy costs up again. USD/JPY The USD/JPY pair is rising today and trading above 132.7500. What's more, the pair keeps its trade above 132.0000 for second day The current term of BoJ Governor Haruhiko Kuroda ends in April, and former Bank of Japan (BoJ) board member Sayuri Shirai has called for a review of the Bank's policies over the past 10 years in light of the changing inflation landscape. Moreover, the generally positive tone in the equity markets is weakening the safe haven of the Japanese yen and providing some support for the USD/JPY pair. In addition, broader risk sentiment will be taken into account for short-term trading opportunities around the USD/JPY pair. Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM AUD/USD The AUD/USD pair traded above the $0.69 level in the Asian and European sessions. Currently the Aussie pair is below 0.69, trading above 0.6880 at the time of writing The Australian dollar remains high, continuing to push towards the five-month high seen on Monday near 0.6950. Today's retail sales were 1.4% month-on-month in November, well above the forecast of 0.6% and -0.2% previously. The year-on-year figure to the end of November was 7.4%, not the expected 7.2% and 6.9% earlier. The data shows a downward correction in retail sales in early 2021, but an acceleration in November. Today, the monthly CPI for November was also released, with the headline CPI year-on-year printed at 7.4%, above estimates of 7.2% and 6.9% earlier. Markets are currently divided over whether the RBA will deliver another rate hike in February. China changed its Covid-19 policy in December and the reopening of the world's second largest economy could provide further opportunities for Australian exports. Frosty relations between Australia and China appear to be thawing, which could provide additional stimulus to the Australian economy. Source: investing.com EUR/USD The EUR/USD exchange rate maintains a steady upward trend after reaching a 20-year low of 0.9535 in September. EUR/USD regained traction and turned positive during the day near 1.0750. Currently, the pair is trading just below this level (1.0743) European Central Bank (ECB) Governing Council member Mario Centeno said late Tuesday that the current process of interest rate hikes may be coming to an end. As for the inflation outlook, Centeno noted that inflation may encounter some resistance in January and February before starting to decline in March. Nevertheless, these comments had no noticeable impact on the euro's valuation. The hawkish narrative was reinforced by one of the more aggressive officials in Isabel Schnabel, while ECB's Villeroy spoke in today's speech, stating the need for additional rate hikes in the coming months. Given this, higher relative rate hikes could support the strength of the euro over the next few months. Read next: According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM GBP/USD GBP/USD extended its downward correction towards 1.2100 during European trading hours on Wednesday. Improving market sentiment seems to be helping GBP/USD to contain losses for now. The Bank of England (BoE) is projected to move slightly slower than other central banks (e.g. ECB), given that the rate hike cycle started much earlier than the ECB. Source: finance.yahoo.com, investing.com, dailyfx.com

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

Summary:  The market churned wildly in the wake of perfectly in-line US CPI data yesterday after perhaps hoping for even stronger signs of decelerating inflationary pressures than the data delivered. Alas, in the end the market celebrated the data, sending US treasury yields and the USD lower and risk sentiment higher, with the S&P 500 testing its 200-day moving average. Gold touched $1,900 per ounce.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities chopped around after the in-line December CPI data release, with the S&P 500 index taking a stab at trading above the 4,000 level and the 200-day moving average just above that level for the March future (and at 3,984 for the cash index – the cash index never traded north of 4,000 yesterday, peaking at 3997). For its part, the Nasdaq 100 has been interacting with the prior support areas now resistance around 11,550. Interesting days and weeks ahead as we trade up into pivotal technical levels just ahead of earnings season. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hang Seng Index had a lackluster session on Friday trading sideways around yesterday’s close. Mainland’s CSI300 advanced 0.8% led by a bounce in domestic consumption, brokerage, and insurance names. China’s exports in December fell 9.9% in U.S. dollar terms from a year ago and imports declined 7.5%. The Chinese authorities have reportedly drafted an action plan to help “quality” property developers to strengthen their balance sheets. Shares of Chinese developers however have generally retraced and registered modest losses. The three Chinese state-own oil companies traded in Hong Kong advanced between 1% and 3% on higher oil prices. NetEase, rising 3%, stood out among China internet names. FX: USD drops on in-line CPI data. JPY strongest on BoJ expectations, falling yields The US dollar fell after a chaotic knee-jerk reaction to in-line CPI data, as the market may have been leaning for a softer-than-expected surprise. In the end, US yields dropped and risk sentiment rallied anew, the ideal combination for USD bears. The selling was most intense for the balance of the day in USDJPY, which probed new cycle lows below 129.00 and much of the move coming ahead of the US data as the market was busy absorbing the news flow from earlier in the day on the potential for a shift in BoJ policy at next Wednesday’s BoJ meeting. Japanese 10-year bonds continued to test the 0.50% upper limit of the permitted trading band, rising to above 0.57% by late Asian hours hours and testing the central bank’s resolve. EURUSD broke above 1.08 to fresh highs of 1.0867 with expectations of Fed-ECB divergence setting a bullish tone. EURUSD also cleared the prior highs and traded as high as 1.0868, while AUDUSD touched a new high of 0.6983, just ahead of the key 0.7000 level. Crude oil (CLG3 & LCOH3) seen heading for a 6% weekly gain Crude oil has rallied strongly this past week on China’s improving outlook and after US inflation continued to cool, thereby supporting the general level of risk appetite, not least through a weaker dollar. China, the world's biggest importer is expected to hit record consumption this year, a development already gathering pace with Chinese buyers becoming more active in the physical market as import quotas are increased. Gains in the energy sector being led by gasoline after its premium over WTI rose to the highest since August. In the short-term WTI may now find some resistance at $80, where the 50-day moving average is lurking while in Brent that level can be found at $84.75. Gold trades near $1900 as cooling inflation softens up the dollar Gold is heading for a fourth weekly gain as US inflation continues to ease thereby supporting a further downshift in the Fed’s rate hike trajectory. A broadly dovish tone from Fed members also supported gold as the dollar and bond yields softened. Trading just below $1900 and within an area of resistance, today’s price action ahead of the weekend will be important in order to gauge the underlying strength. Physical demand may struggle in the short term as traders warm to higher prices, not least in India where demand according to Reuters plunged by 79% in December from a year earlier. In addition, we have yet to see demand for ETF’s, often used by long-term focused investors, spring back to life with total holdings still hovering near a two-year low at 2923 tons. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) drop, long yields perched near cycle lows The in-line US CPI data release yesterday saw a choppy market but eventually saw treasuries strongly bid later in the session, sending the 2-year to a test just below the prior 4.13% low at one point and the US 10-year yield toward the 3.40% pivot low from back in early December. A 30-year T-bond auction saw the strongest bidding metrices since last March. Read next: GM, Ford, Google And Solar Producers Would Work Together To Set Standards For Increasing The Use Of VPPs| FXMAG.COM What is going on? US December CPI in-line with expectation, boosts the case for a Fed downshift A further slowdown in US CPI as expected yesterday, as the headline slid to 6.5% YoY as expected from 7.1% YoY in November, stepping into the disinflationary territory on a m/m basis with a negative 0.1% print from +0.1% previously. Core inflation also eased in-line with expectations to 5.7% YoY in December from 6.0% YoY previously but still higher on m/m basis at 0.3% from 0.2% in November. Services inflation was still higher, being the stickier component of inflation, but with six consecutive months of softening in inflation, the Fed could take some comfort that its tightening moves are working. The market is pricing in another step down at the Fed’s next decision on Feb 1 to 25bps rate hike, but the terminal rate pricing still stands at sub-5% levels compared to a unanimous voice from the FOMC members calling for rates over 5%. Meanwhile, US jobless claims point to a tight labour market, unexpectedly falling to 205,000 from a revised 206,000 the previous week. Continuing claims also surprisingly improved, dropping to 1.63 million from 1.7 million. Resources companies: earnings upgrades could be on the cards Commodities companies are likely to start to upgrade their outlooks for 2023, ahead of reporting full year results in February. Iron ore, copper and aluminium companies in particularly are likely to upgrade their 2023 earnings as these respective commodity prices quickly entered bull markets +64%, +30%, and +20% respectively from their lows as China eased restrictions sooner than expected. The Iron ore (SCOA) price as an example, rose 2% alone in Asia today, hitting a new 6-month high. BHP shares in Australia hit a new record high of A$49.64 while Rio Tinto trades about 3% shy of its record, with both iron ore, and copper giants trading higher in anticipation of higher free cashflow in 2023. WASDE report sees corn prices jump the most since September The USDA on Thursday unexpectedly cut its outlook for US domestic production and available stocks of both corn and soybeans, a sign that an ongoing drought from last year may continue to underpin prices. The worst Argentinian drought in 60 years also led to a downgrade in the outlook for soybeans and corn production, some of that being partly offset by an expected bumper harvest in Brazil. One bright spot was wheat where the USDA raised its outlook for global production. Following the WASDE report corn (ZCH3) rose 2.5%, soybeans (ZSH3) 1.8% while wheat (ZWH3) was up by less than 1%. Sweden December CPI hits new cycle highs as weak krona aggravates inflation The December headline number came in at +2.1% MoM and +12.3% YoY vs. 1.8%/12.0% expected, respectively and vs. 11.5% YoY in Nov. The core data was +1.9% MoM and +10.2% YoY vs. +1.6%/+9.8% expected, respectively and vs. +9.5% YoY in Nov. What are we watching next? Bank of Japan meeting next Wednesday shaping up as major event risk The recent news flow and rumor mill sees the Bank of Japan announcing further tweaks to its policy next Wednesday at its meeting. Ironically, the anticipated further widening of its yield curve control “band” (de facto more of a “cap”) on 10-year JGB’s comes as long yields are dropping sharply elsewhere, accentuating the tightening of spreads between Japanese yields and those in, for example, Europe and the US. Earnings to watch The Q4 earnings season kicks off today with banking earnings from Bank of America, JPMorgan Chase, and Citigroup with consensus expecting earnings to continue contracting among US banks before coming back to growth in 2023. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession or maybe no recession at all in the US economy. With higher interest rates level expectations are that banking revenue will slowly begin to accelerate and if high interest rates persist for an extended period, the longer-term growth for banks could be quite attractive. In addition, US banks have extended credit at the fastest pace in 2022 since the year leading up to the Great Financial Crisis. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Today: DiDi Global, Aeon, Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, UnitedHealth, BlackRock, Delta Air Lines, First Republic Economic calendar highlights for today (times GMT) 1000 – Eurozone Nov. Trade Balance 1000 – Euro zone Nov. Industrial Production 1330 – US Dec. Import Price Index 1500 – US Fed’s Kashkari (Voter 2023) to speak 1500 – US Jan. Preliminary University of Michigan Sentiment 1520 – US Fed’s Harker (Voter 2023) 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 – January 13, 2023 | Saxo Group (home.saxo)

An on-consensus US December CPI release has allowed the FX markets to revert back to the main event – a potential sea-change in Bank of Japan (BoJ) policy and perhaps plenty of downside in USD/JPY. That is the hottest story in town right now. Soft US consumer sentiment and softening inflation expectations should also keep the dollar bias bearish today Looking at the FX options market, USD/JPY remains the stand-out interest USD: Slip sliding away An on-consensus US CPI release yesterday did not interrupt this year’s narrative of the US Federal Reserve being able to cut rates later in the year and the dollar being able to fall. As our US economist James Knightley wrote in his review of the release, it seems that it is mainly the shelter component holding the core month-on-month reading up here and shelter should start to come sharply lower in the second quarter. Consensus is now behind consecutive 25bp Fed hikes in February and March, followed by a Fed turning dovish over the summer and starting to deliver rate cuts later in the third quarter. The Fed taking rates back towards less restrictive territory remains a tailwind to risk assets – especially to emerging risk assets buoyed by China rebound expectations. Fund flow data show good momentum in Chinese equity ETFs, which is normally very supportive of the renminbi. It is a quiet day for US data, and a soft University of Michigan consumer sentiment plus declining inflation expectations can keep the dollar on the back foot. With USD/JPY expected to stay under pressure into next Wednesday’s Bank of Japan meeting, the DXY can stay biased to the 102.00 area near term. Chris Turner EUR: ECB will be happy with the stronger euro The ECB’s trade-weighted euro has now returned to levels seen last February. And actually, the year-on-year change in EUR/USD is now mildly positive. This will be welcome news to the ECB, where last summer’s 6% YoY EUR/USD decline was contributing to the inflation problem. With short-dated (two-year) USD swaps drifting to new lows for the move, EUR/USD swap differentials continue to move in favour of EUR/USD. And this is a theme which we suspect will play a greater role in EUR/USD pricing over the next 12 months. For today, the eurozone data calendar sees the release of November industrial production and the trade balance. We will also find out how much European banks have repaid of their targeted longer-term refinancing operations (TLTROs) drawings in January. The expectation is around €200bn, with the range being around €50bn-450bn. Any higher-than-expected repayment might be positive for two reasons: i) it would reduce excess euro liquidity and would be supportive of eurozone rates and ii) it might be seen as a sign of confidence as precautionary borrowing is paid back. Let’s see. EUR/USD remains on course for 1.0900 and possibly 1.0950. Weekend profit-taking may pose the biggest risk to EUR/USD, but 1.0750 should now be a good near-term base. Chris Turner JPY: Off to the races Looking at the FX options market, USD/JPY remains the stand-out interest. One-week implied volatility remains at a very high 20% and volatility for the Bank of Japan (BoJ) meeting next Wednesday is priced as high as 40% or a near 1.7% move in spot USD/JPY. As events showed yesterday with the 2% USD/JPY fall, even at these levels the FX options market may still be under-pricing volatility. This huge interest in USD/JPY is understandable. The BoJ may be on the verge of its biggest policy change in decades. Even short-dated JPY Interest Rate Swaps have started to move and are at the highest levels (near 30bp) since 2008! Clearly, USD/JPY has come a long way very fast, but some of the longer-term skews in the FX options market point to a structural shift in the market’s view in USD/JPY. We suspect few will want to stand in the way of the USD/JPY downside. 126.50 looks like the clear near-term target for USD/JPY. Chris Turner CEE: Higher EUR/USD is a small boost for region All the important numbers have already been published this morning. Romania's December inflation fell from 16.8% to 16.4% YoY, more or less in line with market expectations. In Hungary, on the other hand, inflation rose from 22.5% to 24.8 % YoY, less than the market expected. Later today, we will see the final December inflation number in Poland, which surprised in a flash estimate to the downside to 16.6% YoY. We'll also have some secondary data such as the current account in Poland, Czech Republic and Romania, and today, after the end of trading, Fitch will publish a rating review of Poland. The country is currently rated A- with a stable outlook and we do not expect any changes today. Also in Poland, the lower house of parliament will vote on a bill that should help unlock EU money and get access to €35.4bn. On the FX market, we found the CEE currencies almost unchanged after yesterday's US inflation number. However, higher EUR/USD today will give them a chance to erase this week's losses. But still, it shouldn't change much in the picture of a flat week. For the Polish zloty we see a return below 4.680 EUR/PLN and for the Czech koruna levels below 24.00 EUR/CZK. Hungarian inflation numbers should be good news for forint and we can go back below 396 EUR/HUF. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

It’s been another lively week in financial markets and one in which investors have become increasingly hopeful that 2023 won’t be as bad as feared. In a way, the week started with the jobs report the Friday before as it was this that enabled the enthusiasm to build. The labour market has been a major barrier to optimism as the Fed was never going to pivot quickly unless there were signs in the labour market that slack was building and wages cooling. We’re now starting to see that. That optimism has been compounded by the first monthly inflation decline in two and a half years and further sharp annual declines in both the headline and core readings. While the final hurdle to 2% may be the most challenging, there’s no doubt we’re heading in the right direction and the threat of entrenched inflation has greatly receded. Now it’s over to corporate America to potentially spoil the party as the enthusiasm on inflation is not yet matched to the economic outlook. We haven’t seen mass layoffs yet but a number of firms, starting in the tech space but spreading further, have warned of large redundancies in the coming months. The fourth quarter earnings season may bring investors back down to earth with a bang. The start of the year has been fantastic but the rest of it will still be very challenging. More bleak Chinese trade data That’s very evident in the Chinese trade data, as it has in the data of other major trading nations in recent months. Imports and exports both slumped again, albeit to a slightly lesser degree than expected. The drop in imports reflects the Covid adjustment which is likely weighing on demand and the local economy. Exports is a global issue, with those to the US and EU sliding the most, reflecting the challenging economic environment. That may not improve in the near term but there will be a hope that it could in the second half of the year. Can UK avoid recession? The optimists may put to some of the recent data as an indication of some resilience in the economy but I’m not convinced. Take the UK, for example. It may not be in a technical recession after all, with spending around the World Cup enabling a better performance in November, delivering growth of 0.1% after a 0.5% gain in October. Aside from the fact that December could be worse as a result, or some of those gains could be revised out, those numbers don’t change the reality of the cost-of-living crisis and if accurate, it more likely reflects shifted spending patterns as opposed to a more willing consumer. A recession may be delayed but the economy is still under immense strain. The end of the tightening cycle The Bank of Korea may be among the first central banks to bring its tightening cycle to an end, after raising the Base Rate by 25 basis points before removing reference to the need to hike further. This was replaced with a commitment to judge whether rates will need to raise rates depending on multiple factors including incoming data. I think most others won’t be far behind, with in most cases the end coming at some point in the first quarter. All we have to contend with then is the economic consequences of the tightening. BoJ under pressure to abandon YCC And then there’s the anomaly out there. I’m not talking about the CBRT which I just can’t take seriously and that’s saying something at the moment. The Bank of Japan shocked the markets in December by widening its yield curve control buffer around 0% and it’s been paying the price ever since. Another unscheduled bond buying overnight occurred on the back of the 10-year JGB breaching 0.5%, as investors bail on Japanese debt on the belief that the YCC tool is being phased out and will be abandoned altogether before long. This makes the meeting next week all the more interesting. Revival underway? The risk rally over the last week has even lifted bitcoin out of its pit of despair. It goes without saying that it’s been a tough few months for cryptos but the lack of recent contagion in the space, or new revelations, and the risk rebound in broader markets has lifted it off its lows to trade at its highest level since the FTX scandal erupted. It’s trading at $19,000 and traders may harbour some hope of a move back above $20,000, a level once deemed a disturbing low but now potentially representing a sign of a revival. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Latest thoughts on global central bank policy (continued) Growing more cautious In a period of extreme market volatility due to the political turmoil originated by the mini-budget announcement in September, later scaled down by the new government, the BoE had to hike by 125 bps over the past two meetings, bringing the policy rate to 3.5% in December. Although the last 50-bp move was anticipated, the Monetary Policy Committee (MPC) vote was a dovish surprise with two members voting for no change. The policy calibration will be set on a meeting-by-meeting approach with a particular focus on wage developments and the persistence of domestic price pressures they are likely causing. The burden of proof is thus on data and a faster-than-expected weakening in the labor market, which could lead to a slowdown in tightening going forward. Internal divisions within the MPC will deepen as the United Kingdom is expected to enter a recession. We now expect a terminal rate of 4.5% with one more 50-bp increase in February, although the policy path will be more data dependent than before, and  two more 25-bp hikes in March and May. After the delayed start due to abrupt moves in long dated gilts (UK government bonds) in the wake of the mini-budget, active quantitative tightening began in November without further complications. Close to peak rate After having slowed down its pace of hiking to 25 bps in November, Norges further hiked its policy rate to 2.75% in December. Despite data coming in on the hawkish side, the deceleration of tightening stemmed from a more careful calibration as some signs of transmission to the real economy became visible. Although the labor market remains tight and wage growth resilient, vacancies and labor shortages are decreasing, and house prices are falling faster than anticipated. The expected policy path was revised downward in the long end and now anticipates some cuts from 2024 onwards. As Norges Bank was the first central bank to embark on its hiking cycle (in September 2021), it will likely be the first to end it, but the hawkish indications from the Fed and ECB on the length of the cycle might add some pressure down the line. We still expect a peak rate of 3.25% by May, acknowledging downside risks to the call. Attentive calibration going forward With fewer meetings scheduled compared to regional and global peers, the Riksbank hiked by 175 bps over the last two meetings to a 2.5% repurchase (repo) rate. Going forward, a quickly deteriorating housing market and hawkish pressures from other central banks will require a delicate balancing act. Sweden’s interest-rate sensitivity is enhanced by a leveraged household sector, which will be hit by increasing interest expenses, limiting the upside for rates as house prices are already plummeting.  On the other hand, the clear hawkish ECB message will challenge the historical interest-rate differential premium between the two. We expect another 50-bp hike in February, while a further 25 bps in March  will depend on the most recent inflation and housing developments. The rate path uncertainty remains particularly high also due to two new board members, including the Governor Erik Thedéen. As the Riksbank previously announced, it will cease quantitative easing (QE) reinvestments this year and it expects the balance sheet to shrink relatively fast compared to other central banks. Slows pace of hiking, signals more tightening in the pipeline   The SNB slowed the pace of tightening at its December meeting with a 50-bp increase. With this third hike, the Bank has lifted its policy rate by a cumulative 175 bps since the tightening process began in June 2022—the fastest increase since 2000. The bank has also signaled that additional hikes cannot be ruled out just yet. While the SNB’s decision to hike in March will likely be guided by its evaluation of  the Swiss franc’s value in the coming months, we also note that the SNB’s inflation forecasts remain broadly unchanged since its September meeting. This suggests that not only does the central bank not believe that the policy rate is high enough to slow down inflation, but it also does not yet consider its policy to be restrictive given that inflation is likely to re-accelerate in late-2024. Therefore, while our base case is for a 25-bp hike, if the franc continues to hold well until the March meeting, the SNB could opt  to stay on hold. The SNB has also vowed to remain active on the foreign exchange market, with Chairman Thomas Jordan even confirming the SNB had sold foreign currency in recent months. Surprise, surprise!  In a surprise move, the BoJ tweaked its Yield Curve Control (YCC) framework at its December policy meeting, widening the band for 10-year Japanese government bonds (JGB) yields to move from 25 bps to 50 bps around its 0.0% target. While making it amply clear that this change was neither tightening nor  an exit from its accommodative policy, it does signal that even the last dovish central bank finally caved to market pressure. If the move’s sole intent was to smooth market conditions, we cannot rule out further tweaks. However, for a sustained pivot to a tightening stance, the central bank will need to continue to keep an eye on the inflation-growth mix. While growth is holding up well as the economy opens and supply chain pressures ease, inflation is becoming more entrenched. The core Consumer Price Index (CPI) in November touched 3.7%, the highest in four decades and well above the 2% target. We will continue to monitor the evolution of price pressures in Japan to predict a clear tightening move, including wage pressures and services inflation. For now, we remain more bullish on inflationary pressures in 2023 and a likely pivot in 2023.   Source: cbw-0123-u.pdf (widen.net)

We expect Japan's GDP growth to slow in 2023 but to remain above its potential rate, supported by an accommodative macro policy environment. The near-term outlook is bleak due to high inflation and weak global demand conditions In this article Japan: At a glance 3 calls for 2023 Normalisation of Bank of Japan policy – a long and tough road ahead Wage growth is key to watch Fiscal policy is supporting growth   Inflation hasn't peaked yet in Japan and is likely to hit 4.0% in early 2023 Japan: At a glance After a slight contraction (-0.2% quarter-on-quarter seasonally adjusted) in the third quarter of 2022, we expect GDP to rebound (0.6%) in the fourth quarter. A stronger yen and more relaxed border controls are likely to improve trade conditions, plus the fiscal stimulus programme will support a fourth-quarter recovery. However, the rebound should be limited as cost-push inflation puts pressure on corporate margins and household spending. We expect GDP to grow by 1.0% year-on-year in 2023, slightly lower than the 1.2% growth we expect for 2022. Weakening demand from the US, EU, and China will hurt exports and manufacturing, while limited wage growth will slow private consumption in the first quarter. Inflation hasn't peaked yet in Japan and is likely to hit 4.0% in early 2023, but it will soon decelerate back to the 2% range in the second quarter. Fiscal policy will continue to support the recovery while monetary policy will reduce the extent of accommodation, but at a slower pace than the market currently expects.  GDP and inflation outlooks CEIC, ING estimates 3 calls for 2023 1Normalisation of Bank of Japan policy – a long and tough road ahead The Bank of Japan's (BoJ's) unexpected decision to broaden its yield curve control band in December has paved the way for policy normalisation. But the path forward will face many challenges. A cloudy growth outlook early in the year could prevent the new central bank governor from taking immediate action, while cost-push inflation is likely to begin to subside in the second quarter. In our view, wage growth will rise more slowly than the 3% sought by the BoJ. Considering these factors, we believe the new governor will first adjust the BoJ's forward guidance in the second quarter and then call for a policy review in the third quarter. We also believe that revisiting inflation targets could be a consideration. Eventually, we expect the BoJ to lift the mid-point target for the 10Y Japanese government bond (JGB) from 0% to 0.25% in early 2024. If GDP recovers to pre-pandemic levels sooner than we expect, the timing could be moved up to the end of 2023. We also expect the BoJ to raise its short-term policy interest rate from -0.1% to 0.0% in the second quarter of 2024. That supports our view that the JGB yield curve will flatten by about 15 basis points and thus the 10Y JGB yield will come down to the 0.30-0.35% range by the year-end.  2Wage growth is key to watch We expect the job market to tighten in the short term as hospitality and tourism-related employment continues to rise, benefiting from the government's travel subsidy programme and the return of inbound travel. However, manufacturing jobs will likely decrease, mainly due to sluggish exports. Although the government offered incentives for wage increases this year, we anticipate that actual wage growth will be less than 3%. Base salaries may pick up, reflecting high inflation, but most of it is expected to be offset by a reduction in bonuses and other incentives as corporate earnings are likely to be squeezed. It is also questionable whether wage growth of 3% can be sustained in the upcoming years.  3Fiscal policy is supporting growth The second FY22 supplementary budget of 29 trillion yen (5.5% of GDP) will boost near-term growth, providing energy subsidies, maternity and childcare-related support, and vocational training support. In addition, the Cabinet approved a draft budget of 114.4 trillion yen for FY23, which is a 6.3% year-on-year rise from FY22's original budget. However, most of the positive impact of fiscal policy will be concentrated at the end of 2022 and early 2023. The budget rise in FY23 is mainly due to a large increase in defence spending (26.3% YoY), thus its policy impact on the real economy should be limited. In addition, if the government raises taxes and cuts other programmes to finance defence spending, it could hurt private consumption and result in a sudden drop in approval ratings.  Japan forecast summary table CEIC, ING estimates TagsWage growth Japanese inflation GDP Fiscal Stimulus Japan Bank of Japan

China MLF decision and Indonesian trade are Asia's highlights on a quiet day for the G-7 as the US is on holiday. The JPY and JGBs remain in the spotlight ahead of Wednesday's Bank of Japan meeting Source: shutterstock Macro outlook Global Markets: US stocks made further gains on Friday, though on a relatively modest scale as the boost from low inflation data earlier in the week began to fade. Some of the zing also went out of the bond market too. 2Y US Treasuries, which had looked overbought at levels below the lower bound of the Fed funds rate (4.25%), saw yields rising 8.7bp, reversing most of Thursday’s decline. Yields on the 10Y US Treasury rose 6.4bp to just over 3.50%. It’s a public holiday in the US today so markets may be a little uninspired today. But there is still some room to close the gap between the implied peak Fed funds rate (currently 4.92%) and 5.0% (ING f) or 5.0%+ (consensus Fed view), and this gap will probably be closed, even if you think the Fed will pivot later this year. Given some fairly extreme speculative positioning (commitment of traders’ report) this raises the possibility of some tactical positioning, even if strategically, you consider the broader move in yields from here to be lower. EURUSD drifted a bit lower on Friday but remains above 1.08. Most of the rest of the G-10 pack is pretty steady, the exception being the JPY, which has been getting a lot of support from investors betting on a change in policy at Wednesday’s meeting. Practically none of the consensus of forecasters thinks the BoJ will actually move, but no one will want to miss out by being on the wrong side of any surprise on either yield curve control or policy rates. 10Y JGB yields remain above 0.50%. The rest of the Asian FX pack made solid gains on Friday, catching up with the G-10’s moves the day before. The IDR led the charge, rising 1.24%, followed by the THB (1.16%) and PHP (0.84%). G-7 Macro: There is nothing of much interest on the G-7 macro calendar today. China: The PBoC will announce its 1Y Medium Lending Facility (MLF) policy rate decision today. The consensus is for a pause at 2.75%. There could, however, be an extra liquidity injection on 1Y MLF volumes. One reason is that the Chinese New Year holiday is coming and liquidity is usually tight before this. But this is not certain, as the PBoC has already been injecting liquidity to cover the holiday period through open market operations. Another reason is that the PBoC could inject extra liquidity via the MLF at the beginning of the year rather than cutting the required reserve ratio to support what is usually strong loan growth in the first quarter. The market should perceive more liquidity injections as supportive measures for economic growth. Indonesia: Trade data will be released on Monday.  The market consensus points to a second straight month of contraction for imports as energy imports slide after global energy prices moderate.  Exports are likely to remain in expansion but settle at 7.4%YoY, resulting in a trade surplus of roughly $4bn, much lower than the high of $7.5bn recorded in 2022.  Smaller trade surpluses suggest that the IDR may lose some support in 2023. What to look out for: China activity data Japan PPI inflation (16 January) China medium term lending facility (16 January) Indonesia trade balance (16 January) Philippines remittances (16 January) Australia consumer confidence (17 January) China GDP, retail sales and industrial production (17 January) Singapore NODX (17 January) Japan core machine orders and industrial production (18 January) BoJ policy meeting (18 January) Taiwan GDP (18 January) US retail sales, PPI, industrial production and MBA mortgage applications (18 January) Japan trade balance (19 January) Australia employment change (19 January) Malaysia BNM policy meeting (19 January) Bank Indonesia policy meeting (19 January) US initial jobless claims and housing starts(19 January) South Korea PPI inflation (20 January) Japan CPI inflation (20 January) US existing home sales (20 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  U.S. equities charged higher with the S&P 500 rising above its 200-day moving average despite bond yields surging higher on profit-taking. The four biggest U.S. banks reported Q4 earnings, beating expectations but the weaker outlook for net interest income and higher provision for credit losses weighed on share prices initially before reversing and finishing the session higher. Stocks in Hong Kong and mainland China gained as the Chinese Government took up “special management shares” in local units of Alibaba and Tencent. The Japanese Yen strengthened to 127.87 against the dollar on mounting speculation on BOJ policy adjustment at this week’s meeting.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) gained as bank stocks bounced U.S. equities opened lower as shares of banking stocks initially got hit by disappointing guidance on net interest income and credit loss provision, despite reporting Q4 earnings beating expectations. Shares of JP Morgan, (JPM:xnys), Bank of America (BAC:xnyg), Citigroup (C:xnys), and Wells Fargo (WFC:xnys) recovered fully from early losses and more, having finished Friday between 1.7% and 3.3% higher. Consumer discretionary names gained, with Target (TGT:xnys) and Amazon.com (AMZN:xnas) each rising around 3%. The S&P 500 Index edged up 0.4% to close at 3999.09, breaking to the upside its 200-day moving average (currently at 3981.22). The Nasdaq 100 Index rose 0.7% to 11,541.48, above its 100-day moving average (currently at 11523.33). Tesla (TSLA:xnas) fell 0.9% after the EV giant cut prices in the U.S. and Europe. Share of General Motors (GM:xnys) slipped 4.8% and Ford (F:xnys) plunged 5.3%. Delta Airlines (DAL:xnys) declined 3.5% on Q1 guidance which was below analyst estimates. Yields on US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) jumped on profit-taking Yields on Treasuries bounced from their lows and finished the Friday session cheaper on profit-taking. Selling concentrated in the front end and saw the yields on the 2-year jump 9bps to 4.23%. Yields on the 10-year rose 6pbs to 3.50%. The 2-10 year curve went more inverted at -73bps. The University of Michigan survey’s inflation expectations came in mixed. A softer print in the 1-year inflation expectation, falling to 4.0% Y/Y in January from 4.4% Y/Y in December was offset by the ticking of 5-year inflation expectation to 3.0% Y/Y from 2.9% Y/Y a month ago. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) continued to rally Hong Kong and mainland Chinese stocks rallied last Friday afternoon. Hang Seng Index gained 1%, bringing its advance to nearly 10% since the beginning of the year. China’s CSI 300 climbed 1.4% last Friday and gained 5.2% so far in 2023. Within the Hang Seng Index, healthcare and consumer stocks gained the most. Wuxi Biologics (02269:xhkg), up 6.4%, was the best performer, followed by Chow Tai Fook Jewellery (01929:xhkg), up 4.8%. Hang Seng TECH Index gained 1.5% on further signs that the regulatory crackdown against Chinese internet platform companies is being replaced by institutionalized and hopefully more predictable supervision and regulation. The Chinese authorities have taken up “special management shares” in local units of Alibaba (09988:xhkg), up 1.7%, and Tencent (00700.xhkg), up 2%. Didi is reportedly to gain approval for relaunching its ride-hailing app at app stores. The People’s Bank of China has reportedly drafted an action plan to help “quality” property developers to strengthen their balance sheets. Trade in shares of Chinese developers was mixed. The three Chinese state-own oil companies traded in Hong Kong advanced between 1% and 2% on higher oil prices. NetEase, rising 4.7%, stood out among China internet names. Australia’s share market is a touch away from a record high; gold stocks charge in 2023 The Australian share market (ASXSP200.I) opened 0.5% higher on Monday with interest rates sensitive stocks charting the most, in anticipation of the Fed’s likely downshift in policy following on from last week's roll over in monthly CPI. The Aussie share market is trading at a two week highs, just a puff or 2.6% from its record high. The most momentum in 2023 is from the Mining sector, up 9%, in anticipation of higher earnings from China’s reopening. Gold stocks are the biggest shiners this with the most momentum, in anticipation of a higher gold price as global growth moderates, while the US dollar and bond yields retreat. At Saxo, we believe Gold may be likely to have a correction in the shorter term, but in 2023 gold should see a strong year of buying amid appetite from global central banks, as our head of Commodity Strategy mentioned.  Silver Lake Resources, De Grey Mining , Remelius Resources, up 18-23% so far in 2023. FX: JPY takes centre stage this week The Japanese yen gained by over 3% against the USD last week, moving from highs o f132.87 to lows of 127.46 on Friday. The yen was also stronger on all the crosses amid Bank of Japan’s unscheduled bond buying operations as the markets continued to test the policy yield cap of 0.5%. USDJPY and yen crosses will remain key this week as well as BOJ meets for the first time this year and speculation about a further policy tweak is rife. EURUSD gained to 1.080+ levels amid better growth prospects for Eurozone and a dovish bent in US CPI and Fed communications that has shifted the February rate hike pricing towards 25bps. AUDUSD has been basking in China’s reopening glory, testing 0.7000, but Australia’s employment data will be key this week. GBPUSD also has a host of UK data from CPI to retail sales to labor market to consider which could bring the 200DMA of 1.2000 in focus. Crude oil (CLG3 & LCOH3) opens steady after last week’s gains Crude oil prices were steady in the Asian morning hours after recording over 8% gains last week on China’s reopening optimism. WTI traded near $80/barrel while Brent was close to $85.50. China’s road traffic levels are continuing to rebound from record low levels following the easing of COVID-19 restrictions. A congestion index comprising the 15 cities with the most vehicles registrations has risen by 31.3% vs a week earlier. China’s crude oil imports rose to 48mt in December, up by 2.8% m/m. Meanwhile, increased import quotas by China saw oil demand pick up in the physical market. Sentiment was also bolstered by expectations of the Federal Reserve slowing its interest rate hikes, following lower than expected inflation. Higher inventory levels were to be expected, driven by the late December cold blast reducing exports while temporarily shutting down some refineries. Iron ore (SCOA) reverses amid China pledging crackdown Iron ore fell in Singapore back to $120.90 a ton from highs of $126 last week after China’s National Development and Reform Commission (NDRC), the top economic planner, said in a statement on Sunday that it would crack down on illegal activities including spreading false information, hoarding and price gouging to keep the iron ore market stable. Corn (ZCH3) closes the week with strong gains following the US crop output report Corn prices recorded their biggest weekly gain since August as droughts curb the world’s supply buffer. The US Department of Agriculture unexpectedly cut its outlook for US domestic production and available stocks of both corn and soybeans, a sign that an ongoing drought from last year may continue to underpin prices. The worst Argentinian drought in 60 years also led to a downgrade in the outlook for soybeans and corn production, some of that being partly offset by an expected bumper harvest in Brazil. Corn prices were up over 3% in the week and Soybeans up over 2%. Read next: The UK Economy Expects A Slightly Fall In Inflation, Expected To Fall By 0.1%| FXMAG.COM What to consider? U.S. bank Q4 earnings beat but guidance on interest income and credit loss provision disappoint The four largest commercial banks in the U.S., JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo reported Q4 earnings beating analyst expectations. Q4 profits grew 6% at JPMorgan and 2% at Bank of America and fell 21% at Citigroup and 50% at Wells Fargo from a year ago. Revenues at JPMorgan Chase, Bank of America, and Citigroup in Q4 came in above analyst estimates while those at Well Fargo missed. Despite the overall solid earnings and revenues, provisions for credit losses were higher than expected and the outlooks guided by the management of these large banks on net interest income were weaker than analyst estimates. JPMorgan Chase made a provision for credit losses at USD 2.3 billion, above the street estimate of USD 2.1 billion.  JPM is guiding net interest income of $73bn in 2023, below the USD74.4 billion analyst estimate. CEO Jamie Dimon says there is still a lot of uncertainty around the impact of the macro headwinds and that the bank’s macroeconomic outlook has deteriorated modestly. Bank of America guided below expectations net interest income at USD 14.4 billion in Q1 2023. Wells Fargo reported a negative surprise on credit provisions ($57mn vs est. $860mn). Wells Fargo’s CFO is also saying that the bank is preparing for the economy to worsen. Bank of Japan prepares to buy more Japanese Government Bonds The Bank of Japan again broke its daily record for Japanese government bond purchases Friday as yields defied its 0.5% cap, in a sign of the rising market pressure for another policy tweak by the central bank as it meets this week in its first meeting of 2023. The BOJ bought roughly 10 trillion yen ($78 billion) in JGBs over the past two days, with a 5 trillion yen purchase on Friday topping the high it had just set Thursday and is preparing to purchase more Japanese government bonds on Monday, according to the Nikkei. China’s exports declined 9.9% Y/Y in December; the import volume of iron ore grew while copper shrank In U.S. dollar terms, China’s exports in December fell 9.9% Y/Y in December, further decelerating from the -8.9% in November but slightly better than the -11.1% feared as per the survey by Bloomberg. In real terms, that is, after adjusting for inflation in export prices, the decline in exports was deeper. The fall in exports was most notable to the European Union, which fell 17.9% Y/Y in December versus -9.3% in November. Export to the US shrank 18.4% Y/Y in December, negative but having improved from -24.7% Y/Y in November. On the other hand, exports to ASEAN grew by 6.6% Y/Y in December, accelerating from 5.9% in November. Imports shrank 7.5% Y/Y in December, less negative than -10.6% Y/Y in November and above the consensus estimate of -10.0%. The improvement however was largely a result of the base effect. In volume terms, the import of crude oil slowed to 4.2% Y/Y in December from 11.8% in November. Coal imports rebounded to almost flat in December from a fall of 7.8% Y/Y in November. Iron ore imports grew 5.6% Y/Y in December, reversing from a 5.8% decline in November. Copper import shrank 12.7% Y/Y versus a rise of 5.8% a month ago. Tesla cut prices in the US and Europe Tesla cut prices across models in the U.S., including shedding the price of its baseline Model Y lower by almost 20% and its high-performance Model 3 by 14%. The price reduction may allow buyers to entitle to federal tax credits. Telsa is also cutting prices in Germany, France, and other European countries by about 13%. Recently, Telsa has cut prices in China. China took up “special management shares” in Alibaba and Tencent The Chinese authorities have taken up “special management shares” also known as “golden shares” in local units of Alibaba and Tencent (00700.xhkg) apparently to exert influence over business decisions far beyond the around 1% equity stake that otherwise represents under normal situations. Investors generally welcome the move as it tends to signal that the Chinese authorities are shifting from a less predictable and heavy-handed crackdown on internet platform companies to more institutionalized, consistent, and predictable regulation and supervision of the industry.  Comments from the Davos forum on watch The World Economic Forum’s annual meeting kicks off in Davos, Switzerland this week. The theme this year is “Cooperation in a Fragmented World’, suggesting deglobalisation trends remain key to watch as has been a regular theme at Saxo. The meeting brings together heads of nineteen central banks and 56 finance ministers. Comments on key global issues, ranging from inflation to recession, as well as energy and food crisis will remain on watch. Geopolitical crisis will also constitute a key discussion as the war in Ukraine rages on and US-China tensions may come back in focus.   For a global look at markets – tune into our Podcast.   Source: Market Insights Today: U.S. bank Q4 earnings beat but weaker outlook; Yen surged on BOJ policy adjustment speculation; US holiday - 16 January 2023 | Saxo Group (home.saxo)

Summary:  US equity markets ended last week on a high note, as the US S&P 500 Index closed above its 200-day moving average and within a point of the psychologically pivotal 4,000 level as Q4 earnings season is now under way. The currency market could steal the limelight this week as a pivotal Bank of Japan is up on Wednesday. Will Governor Kuroda declare victory on bringing inflation back to Japan and shift policy again, triggering a further spike in the Japanese yen?   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continue to toy with key resistance levels as Q4 earnings season got underway on Friday, dipping intraday but ending the week on a high note, just one point shy of the psychologically important 4,000 level in the S&P 500 index (cash index, the future trades clear of 4k), which is also just above the 200-day moving average and near other technical levels. Today is a market holiday in the US, but through next week’s heavy calendar of megacap earnings reports, traders will watch whether the market can clear this key resistance area and make a bid to surpass the December pivot highs near 4,100 for the cash index. The Nasdaq 100 index has more work to do, still trading almost 600 points below its 200-day moving average and the December pivot highs above 12,100. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) The CSI300 surged over 2%, led by pharmaceuticals, computing, and nonbank financials. Expectations of reacceleration of economic activities as a result of reopening and relaxation of regulation continued to boost market sentiment. Corporate filing information showed that The Chinese authorities had recently taken up “special management shares” also known as “golden shares” in local units of Alibaba and Tencent (00700.xhkg) apparently to exert influence over business decisions far beyond the around 1% equity stake that otherwise represents under normal situations. Investors generally welcome the move as it tends to signal that the Chinese authorities are shifting from a less predictable and heavy-handed crackdown on internet platform companies to more institutionalized and predictable supervision of the industry. By mid-day Monday, Alibaba and Tencent each gained about 1% and the Hang Seng Index advanced 0.7%. FX: JPY takes centre stage this week as BoJ to meet Wednesday The Japanese yen gained over 3% against the USD last week, moving from highs of 132.87 to lows of 127.46 on Friday. The yen was also stronger on all the crosses amid Bank of Japan’s unscheduled bond buying operations as the markets continued to test the policy yield cap of 0.5% ahead of the BoJ meeting this week and speculation of further policy tightening (more below). The US dollar was also broadly weaker, as EURUSD posted marginal new cycle highs overnight above 1.0870. AUDUSD has found a bid of late on anticipation of China’s reopening, testing 0.7000 overnight but reversing back a bit lower into early European trading today. Australia’s employment data will be key on Thursday. GBPUSD will focus on the host of UK data, from labour market data tomorrow morning, to the CPI release on Wednesday and Retail Sales data on Friday. Crude oil (CLG3 & LCOH3) trades softer after last week's strong gains Crude oil prices were steady to softer in early Monday trading after recording over 8% gains last week on China’s reopening optimism.  China’s road traffic levels are continuing to rebound from record low levels following the easing of COVID-19 restrictions. A congestion index comprising the 15 cities with the most vehicles registrations has risen by 31.3% vs a week earlier. Meanwhile, increased import quotas by China saw oil demand pick up in the physical market. Sentiment was also bolstered by expectations of the Federal Reserve slowing its interest rate hikes, following lower than expected inflation. Shale executives looking to substantially increase drilling would need US oil prices to climb to $89 a barrel, according to the latest energy survey by the Federal Reserve Bank of Kansas City. OPEC and IEA release their monthly oil market reports on Tuesday and Wednesday. Gold and copper trades softer following last week's surge Gold together with copper has been the in-demand commodities at the start of the year on China demand recovery hopes and not least the softer dollar and bond yields as the market adjust lower their expectations for future US rate hikes. Gold reached an eight-month high and copper a six-month high overnight before running into some light profit-taking. With RSIs on both in overbought territory, the underlying strength of both metals will sooner or later be tested, and the dollar probably holds the key. Hence the importance of Wednesday’s BoJ meeting, the outcome of which may trigger a major move in USDJPY (see below). Gold demand in India may suffer a temporary setback as traders adapt to near record prices. In addition, we have yet to see demand for ETF’s, often used by long-term focused investors, spring back to life with total holdings still hovering near a two-year low. US Treasury yields rebounded slightly Friday (TLT:xnas, IEF:xnas, SHY:xnas) After trading near the cycle lows of late last year into 3.40% for the 10-year benchmark on benign inflation data last week and a series of very strong auctions for especially longer-dated US Treasuries, the 10-year yield rebounded toward 3.50%. US treasury markets are closed for a holiday today. Read next: The UK Economy Expects A Slightly Fall In Inflation, Expected To Fall By 0.1%| FXMAG.COM What is going on? Iron ore loses heat, falling 4.5% after China accuses parties of price gouging The key steel making ingredient, iron ore (SCOA) fell 4.5% to $119.85 in Asia today, after China’s top economic planner, the National Development and Reform Commission (NDRC), said its cracking down on illegal activities such as hoarding and price gouging as it attempts to keep the iron ore price stable, after the iron ore price had risen 65% from October. Still iron ore inventory levels are lower than they were a year ago, when China’s economy was effectively in lockdown. Shares of iron ore majors, however, remained near their record highs with investors remembering that China has made such accusations in the past, and the iron ore price has recovered. BHP ended slightly higher, closing around record high territory, Rio fell slightly from its records while Fortescue Metals fell 2%. Corn (ZCH3) closed last week with strong gains following the US crop output report Corn prices recorded their biggest weekly gain since August as droughts curb the world’s supply buffer. The US Department of Agriculture unexpectedly cut its outlook for US domestic production and available stocks of both corn and soybeans, a sign that an ongoing drought from last year may continue to underpin prices. The worst Argentinian drought in 60 years also led to a downgrade in the outlook for soybeans and corn production, some of that being partly offset by an expected bumper harvest in Brazil. Corn prices were up over 3% in the week and Soybeans up over 2%. Part of the rally being driven by wrongfooted speculators who ahead of the report had cut bullish corn bets by 24%. Hedge funds opened their 2023 accounts by aggressively cutting exposure across the agriculture sector With energy also being sold, the latest COT report covering the week to January 10 saw buying being concentrated in just a few metal contracts led by copper and gold. Overall, the gross long across the 24 major commodity futures tracked in our weekly update fell by 15% to 1,194,000 contracts, the biggest one-week drop in six months. The changes were in line with price development across the different sectors with gains in precious (0.6%) and industrial metals (1.7%) being offset by losses in energy (-3.9%) grains (-2.7%), softs (-3%) and livestock (-1.5%). What are we watching next? Bank of Japan meeting on Wednesday shaping up as major event risk The recent news flow and rumor mill sees the Bank of Japan announcing further tweaks to its policy this Wednesday at its meeting, with a further JPY surge on Friday a clear sign that the market sees the meeting as a major event risk. As well, the Bank of Japan again broke its daily record for Japanese government bond purchases Friday as yields defied its 0.5% cap. The BOJ bought roughly 10 trillion yen ($78 billion) in JGBs over the past two days, with a 5 trillion yen purchase on Friday topping the high it had just set Thursday and is preparing to purchase more Japanese government bonds today, according to the Nikkei Somewhat ironically, the anticipated further widening of the BoJ’s yield-curve-control “band” (de facto more of a “cap”) on 10-year JGB’s this week or at a future meeting comes as long yields are dropping sharply elsewhere, accentuating the tightening of spreads between Japanese yields and those in, for example, Europe and the US. Earnings to watch The Q4 earnings season continues this week, with a relatively light schedule before next week’s mother lode of mega-cap earnings reports.  The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession, or even whether there will be a recession at all in the US economy. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. Interesting names this week include a former high-flyer like Netflix, which has achieved a more than 100% rally of its 2022 lows coming into this week’s report, even if it trades at under 50% of its peak valuation back in late 2021. Tuesday: Sartorius Stedim, Morgan Stanley, Goldman Sachs, Interactive Brokers Wednesday: EQT, Charles Schwab, PNC Financial Services, Kinder Morgan Thursday: Procter & Gamble, Netflix Friday: Investor, Sandvik, Ericsson, Schlumberger Economic calendar highlights for today (times GMT) US Markets Closed for Martin Luther King, Jr. Holiday 1300 – Poland Dec. Core CPI 1500 – UK Bank of England Governor Beaily to testify on financial stability 2330 – Australia Jan. Westpac Consumer Confidence 0200 – China Dec. Industrial Production/Retail Sales/Q4 GDP Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 16, 2023 | Saxo Group (home.saxo)

Earnings season kicked off last Friday when the big US banks reported their Q4 results. The results were mixed. But overall, despite the skyrocketing inflation, and slowing economy, the banks continued raking in the dough… US banks Further good news is that, the major US banks said that they all expect ‘mild recession’, and that unemployment in the US would rise to between 4.9 and 5.5% depending on who is talking- fueling dovish Federal Reserve (Fed) expectations and the equity bulls. Forex In the FX, all eyes are on the Japanese yields, and the yen, as last week saw the 10-year JGB yield go past the Bank of Japan’s (BoJ) 0.50% ceiling, boosting rumours that the BoJ could abandon the YCC policy. In Europe, the euro shines brighter with every ray of sunlight that pushes away the risk of energy shortage and recession. In the US, a warning from Treasury Department that the US will reach the debt limit on January 19th and will need extraordinary measures from Congress to avoid a government default, is weighing on the US dollar, while boosting appetite in gold. Energy And, in energy, US crude cleared the 50-DMA to the upside last Friday. Watch the full episode to find out more! 0:00 Intro 0:48 Mixed US bank earnings support stock rally 4:03 Japanese yen bid on hawkish BoJ expectations 6:14 Fed doves, warnings of US default weigh on USD, boost gold 8:12 US crude rallies past 50-DMA 8:43 Euro shines brighter with every ray of sunlight Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #bank #earnings #BoJ #policy #decision #YCC #Europe #mild #winter #USD #EUR #JPY #XAU #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      

Summary:  Today, we look at an interesting week ahead as US equities continue to trade up against a pivotal resistance area (just above the 200-day moving average and just below the 4,000 level for the US SP& 500 index) as earnings season set for a big blast next week. Today US markets are closed. The event risk of the week, meanwhile, is the hotly anticipated Bank of Japan meeting on Wednesday, with markets unsure on whether Governor Kuroda and company are set to deliver further policy tweaks. Futures positioning in commodities, especially metals and the latest on natural gas in Europe and more on today's pod, which features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: The Swedish Real Estate Market Will See Significant Price Drops| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Market bracing for BoJ impact Wednesday | Saxo Group (home.saxo)

At the start of the new trading week, the dollar-yen pair updated its multi-month price low, reaching 127.25. The pair was last in this price area in May last year. The yen is strengthening ahead of the Bank of Japan's January meeting, which will be held the day after tomorrow, January 18. Traders ignore Kuroda Rumors that the Japanese regulator will continue to move towards monetary policy normalization are supporting the national currency. In my opinion, Bank of Japan is really on the threshold of cardinal changes, but these changes will probably take place not in January but in the spring of this year, when a new leader will take over the helm of the Japanese central bank to replace the consistent "dove" Haruhiko Kuroda. All of his potential successors are delivering rather hawkish messages, while Kuroda himself maintains a dovish attitude. Therefore, one should not expect any sensations from the January meeting: the current head of the central bank will most likely repeat the previously announced messages about commitment to accommodative policy. Nevertheless, the yen continues to strengthen its position, despite Kuroda's soft comments. The USD/JPY pair has been within the downward trend since October last year, when the Japanese authorities re-conducted a currency intervention. Then a series of events followed in favor of the development of a bearish scenario: first, the dollar weakened throughout the market (against the background of slowing inflation in the U.S. and rumors of a slowdown in the Fed rate hike), and then the Bank of Japan unexpectedly doubled the yield ceiling on 10-year bonds. According to a number of experts, the central bank has taken only the first step towards normalizing monetary policy. And although Haruhiko Kuroda, as they say, "directly" refuted this assumption (stating that this decision was due to "market-technical reasons"), traders, apparently, are betting that the regulator will further weaken its policy of control over the yield curve in the future or even abandon it altogether. The market is increasingly talking about the possible implementation of such a scenario. Recall that yield curve control was one of the key factors behind the 12% devaluation of the Japanese currency against the dollar. And after the Bank of Japan expanded the range of yield tolerance from the target level in December, the yen strengthened by more than six percent. It is noteworthy that traders ignore Kuroda's dovish statements, who not only refutes hawkish intentions, but also expresses readiness for further steps to ease monetary policy. Despite such announcements, there is growing confidence in the market that the Bank of Japan will announce further adjustment to the yield curve management procedure or even abandoning it in the coming months. Some analysts suggest that this will happen as early as Wednesday, following the results of the January meeting. Read next: Lowering The Price Of Electric Vehicles Is Supposed To Be Tesla's Unusual Strategy To Generate Demand In The US Market| FXMAG.COM Downward outlook for USD/JPY In my opinion, market expectations are too high, so the results of the January meeting of members of the Japanese regulator may not be in favor of the yen. But the trading principle "buy on rumors, sell on facts" is now playing on the side of the USD/JPY bears: during the Asian session on Monday, the yen was in high demand. Setting aside intraday price fluctuations, we can assume that the pair retains the potential for further decline, both in the medium and long term. First, don't forget about the weakening dollar. The latest CPI growth report, which reflected a slowdown in U.S. inflation, put pressure on the greenback. The probability of a 25-point rate hike at the Fed's February meeting rose to 93%. In addition, the market again started talking about the fact that the Fed may end the cycle of raising interest rates ahead of schedule, and its final level will be below the aanounced level of 5.1%. Secondly, the yen will only strengthen its position in the near future, even if the outcome of the Bank of Japan's January meeting is not in its favor. In just 3.5 months, Haruhiko Kuroda will leave his post, while his likely successors, in one form or another, say that the Japanese regulator may have to make the next steps towards normalization of monetary policy. In particular, former Vice Minister of Finance for International Affairs Takehiko Nakao said he supports a smooth departure from the central bank's ultra-loose monetary policy. Another contender, Columbia University professor Takatoshi Ito, voiced a similar position. Technical picture of the pair The technical picture also speaks about the priority of the downward scenario: on the daily chart, the pair continues to be on the lower line of the Bollinger Bands indicator, as well as under all the lines of the Ichimoku indicator, which shows a bearish Parade of Lines signal. Considering medium-term and long-term trading, it is advisable to use corrective bursts to open short positions to the first support level at 127.25 (the price low of the current year) and 126.50 (the lower line of the Bollinger Bands indicator on the weekly chart).   Relevance up to 09:00 2023-01-17 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/332370

The dollar started the week on the back foot to a seven-month low against a basket of major competitors in Asian trading, with the yen in particular, as investors increased bets that the Bank of Japan would further improve its yield control policy. USD/JPY Year-on-year PPI by the end of December amounted to 10.2%, above the previous forecasts of 9.5% and 9.7%. The month-on-month figure for December was 0.5%, above 0.3% expected and 0.8% earlier. The data revealed upward revisions. From a macro perspective, the soaring PPI is problematic for corporate Japan, with companies facing a dilemma related to rising production costs. The upcoming central bank meeting, expectations of an upward revision of the bank's inflation forecast, and the imminent announcement of a new BOJ chairman are also likely to fuel expectations for a policy change. A generally positive tone around the equity markets undermines the safe-haven Japanese Yen and lends some support to the USD/JPY pair. Now the pair is above 128.20. Source: investing.com Source: finance.yahoo.com AUD/USD The AUD/USD pair started the new week on a positive note and climbed to its highest level since mid-August during the Asian session, surpassing the 0.70 level. Unfortunately, the Australian pair failed to hold above 0.70 and is now trading above 0.6970. Iron ore, Australia's main export, fell slightly on Monday but remains well above its low of last October. Tomorrow, China's GDP data will be watched closely for clues on the health of the world's second-largest economy. Higher commodity prices and China's quick re-opening from Covid restrictions have also supported the currency, with Australia's main trading partner partially lifting restrictions on Australian coal exports after an unofficial ban in 2020. Markets are currently divided over whether the RBA will make another rate hike in February. Read next: McDonald's Will Be Replaced In Kazakhstan By The Russian Vkusno & Tochka| FXMAG.COM EUR/USD EUR/USD showed a decent gain after breaking the critical resistance of 1.0840 in the Asian session. Although the EUR/USD pair failed to hold above 1.0840 and then dropped significantly, it has recovered and is trading above 1.0830. The publication of the expected decline in the US consumer price index (CPI) for December increased the chances of further slowing down the pace of policy tightening by the Fed. It is worth noting that in December the Fed announced a less hawkish monetary policy. The Fed raised interest rates by 75 basis points (bp), but after observing a significant decrease in inflation, it may change the scope of the increase. In the euro area, the European Central Bank (ECB) wants to reach the final interest rate faster. ECB Governing Council member and French central bank governor Francois Villeroy de Galhau, quoted last week, said the central bank should aim to reach its final interest rate by the summer. GBP/USD GBP/USD halted the correction, recovering to 1.2200 in the European session on Monday. The US dollar continues to rebound despite betting on smaller rate hikes by the Fed. Furthermore, a bank holiday in the US market could also keep volatility high around the GBP/USD pair with limited liquidity. Attention is now focused on the testimony of Bank of England (BoE) Governor Andrew Bailey before the Treasury Select Committee of the UK Parliament. Source: investing.com, finance.yahoo.com

Summary:  US equity and bond markets were closed on Monday for a holiday. Mainland China stocks surged 1.6% as northbound flows reached over RMB15 billion and were in net buying for the 9th day in a row. Ryan Cohen is building a stake in Alibaba. USD saw a rebound but will likely be driven by the Japanese yen in the next few days as the Bank of Japan meeting kicks off today. While China’s Q4 GDP scheduled to release today was expected to slip to 1.6% Y/Y, more than half of Chinese provinces are setting 2023 GDP growth targets at above 5.5%. The rally in industrial metals paused amid profit-taking ahead of the Lunar New Year.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) Closed for U.S. holiday US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Closed for U.S. holiday China’s CSI300 (03188:xhkg) gained 1.6%; Northbound net buying for the 9th day CSI300 rose 1.6%, led by brokerage, household appliances, pharmaceuticals, and semiconductor names. Northbound net buying through Stock Connect was RMB15.8 billion on Monday, the 9th day in a row of net buying for a total of around RMB80 billion. Coal miners, autos, and media stocks retraced. Hong Kong’s Hang Seng Index had a choppy session, rising initially to make a new recent high but failing to hold and sliding to losses in the afternoon before closing nearly flat. The news that the Chinese regulators allowed Didi to resume registration of new users failed to boost the sentiment for internet stocks. On the other hand, Meituan (03690:xhkg) slipped 3.3% as investors feared that the company’s ride-hailing business might lose market share as Didi returns. Hardware names, AAC (02018:xhkg) up 11.4%, Techtronic (00669:xhkg) up 6.2%, and Sunny Optical (02382:xhkg) up 4.0%, stood out as top performers. The automaker, Brilliance (01114:xhkg) tumbled 8.2% after announcing a special dividend of HKD0.96 per share from the disposal of its stake in Brilliance BMW below the street estimate of HK$1.5 per share. FX: USDJPY seeing a barrier at 129 USDJPY was seen fluctuating around 128.50 in the Asian morning session as Bank of Japan meeting kicks off with speculations of a further policy tweak continuing to build. GBPUSD also failed at another attempt on 1.2300 while AUDUSD returned below 0.7000 ahead of the key China activity data due today, despite January consumer confidence coming in higher at 84.3 from 80.3 previously. A break above 0.7000 could bring the tough resistance of 0.7125 in focus. NZDUSD testing a break above 0.6400. Crude oil (CLG3 & LCOH3) prices soften Crude oil prices eased on Monday with WTI falling below $79/barrel and Brent back towards $84/barrel as profit-taking emerged after the 8% rally last week. The World Economic Forum’s annual meeting began with warnings of global recession. This was aided by signs of stronger Russian supply. Seaborne crude exports soared by 30% to 3.8mb/d last week, the highest level since April. India was the biggest buyer, snapping up 33 times more crude than a year earlier. There is a lot to digest in the oil markets, with demand concerns and sanctions on Russian supply and risks of OPEC production cuts. Meanwhile, volatility in gas prices also underpins, suggesting crude oil prices can continue to see two-way price action in this quarter. US natural gas higher but European gas prices fall US natural gas settled back above $3.50, higher about 7% on Monday with risks of cold weather at the end of the month. European gas however fell sharply on a strong supply outlook. Dutch front month futures were down more than 15% as full stockpiles in China eased concerns of supply tightness in the LNG market. Chinese importers are trying to divert February and March shipments to Europe amid weak prices at home and high inventories. This is despite a cold snap expected this week. Iron ore selling eases; and respective equities hold record highs shaking off China’s accusations The key steel making ingredient, iron ore (SCOA) has fallen 5.3% from its high, including Tuesday’s 0.4% slide, which takes the price to $118.90. Still the iron ore price holds six months highs and is up 56% from its low. The pullback was triggered by China’s top economic planner, the NDRC accusing market participants of hoarding and price gouging after the iron ore price strongly rallied from October’s low in anticipation of demand picking up from China easing restrictions. Iron ore inventory levels are still lower than they were a year ago, which fundamentally supports iron ore price. And the technical indicators indicate the longer term rally could continue. The 50 day moving average is approaching the 200 day moving average. Historically when the 50DMA cross the 200 DMA buying has picked up. Also consider iron ore majors shares, BHP, Rio Tinto Fortescue are holding in record high territory, as investors remember China has made such accusations in the past of price gouging, and the iron ore price previously recovered over the medium to longer term. Brakes on Copper rally; Aluminium continues to surge higher A slight recovery in the US dollar on Monday paused the strong rally that has been seen in industrial metals so far this year. Copper fell as signs of weak demand persist. The Yangshan copper cathode premium over LME has declined to USD31.50/t, compared with the 10y average of USD72/t. Stockpiles of copper in Shanghai Futures Exchange warehouses are also higher. HG copper dipped back to $4.14 from highs of over $4.20 last week. Aluminium bucked the trend to push higher as inventories continue to fall. Expectations of stronger demand as China reopens also boosted sentiment. Rio Tinto (RIO) reported 4Q iron ore shipments of 87.3mt, +3.8% YoY vs est 86.2mt and still sees 2023 shipments of 320-335mt while mined copper output guidance raised to 650-710kt from 500-575kt previously.   What to consider? China GDP and activity data While the reopening of China from Covid containment is a highly positive development for the Chinese economy, the initial shockwave of infections could be significantly disruptive to economic activities in the near term. The median forecast of economists surveyed by Bloomberg on China’s Q4 GDP growth is 1.6% Y/Y decelerated from 3.9% Y/Y in Q3. Disruption in production activities resulting from infection-induced absence from work is expected to drag the growth of industrial production to 0.1% Y/Y in December from 2.2% in November. Retail sales are expected to shrink 9% Y/Y in December, decelerating further from -5.9% Y/Y in November as dining, retailing, and deliveries were slowed by inflection. Full-year fixed asset investment is expected to come at 5%, down from 5.3% in the first 11 months of the year. More than half of provinces and municipalities in China are targeting above 5.5% GDP growth for 2023 According to China’s Securities Daily, the 28 provinces and municipalities that have released their 2023 GDP targets set them at 6% on average. Hainan is the most aggressive with a 9.5% target. According to data from the Shanghai Securities News, more than half of the 31 provinces and municipalities that have released 2023 work reports, are setting their GDP growth targets above 5.5% for 2023. Economically important provinces of Zhejiang, Jiangsu, Guangdong, and Shandong set their targets at above 5%. BOE’s Bailey comments hint at relief from energy and inflation but worries about labor market The rally in cable has cooled off recently even as the decline in USD has continued. The pair is looking for direction and there may be some key catalysts to watch this week. Bank of England Governor Andrew Bailey spoke on Monday at the Treasury Select Committee hearing, saying that the risk premium on UK assets after the Truss government’s policy shock in September has gone. Still, confidence remains fragile, and risks also remain from China’s chaotic exit from Zero Covid, the continued fallout from the war in Ukraine and the shrinking of Britain’s labor force. Focus will now turn to economic data, with labor market data due today, CPI on Wednesday and retail sales on Friday. Any signs that labor market is cooling or CPI has topped out could mean the BOE could start to consider a slower pace of rate hikes going forward, and that could see the 200DMA in GBPUSD at 1.2000 get threatened. Japan’s military focus supports our optimistic view on the Defence equity basket Japan is looking to overhaul its security policy as geopolitical threats in the region and globally grow. PM Kishida’s G7 tour last week saw multiple deals not just with the US, but focus was also seen on enhancing military ties with Germany, Canada and France, including mutual troop access with the UK and upgrading of defence ties with Italy. The plan to build more nuclear reactors is also a step in that direction. Japan and India also held their first joint air drills as they step up military exercises with other countries amid concerns about China's assertiveness. Japan is looking to boost its 2023 defence budget substantially to a record 6.8 trillion yen, an increase of 20%. This further supports our optimistic view on our Defence equity theme basket as further deglobalization continues to suggest defence spending will remain a key focus. Activist investor Ryan Cohen built a stake in Alibaba According to the Wall Street Journal, Ryan Cohen has built a stake in Alibaba. Cohen is a Canadian investor who is know for investing and attracting a large crowd of retail investors to invest in meme-stocks such as GameStop. His buying into Alibaba may attract retail investors from North America to follow. For a 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: - China A shares see large Northbound buying, Ryan Cohen building a stake in Alibaba - 17 January 2023 | Saxo Group (home.saxo)

Summary:  The highly-watched Bank of Japan policy decision due Wednesday has spooked tremendous volatility and warrants a cautious stance. But whether we see further policy tweaks this week or not, speculation for BOJ to remove its yield curve control will likely to build into BOJ chief nominations due February 10, spring wage negotiation in March and a change of hands at the helm in April. There is a lot at stake with regards to the upcoming Bank of Japan decision on January 18. Quiet unusual for those who have spent years covering Japan macro and realize how it was so easy to miss headlines from BOJ meetings previously. But with the implied volatility in overnight USDJPY options at over 50%, the highest levels since 2016 (see Chart below), all eyes will be glued to the BOJ announcements this week. USDJPY traded to lows of 127.23 on Monday before rising back towards 129 on Tuesday morning – all this despite the US bond markets being closed on Monday. Enough reason to believe that the focus for the Japanese yen has moved to domestic events, rather than being a pure play of yield differentials. USDJPY Overnight Option Implied Volatility. Source: Bloomberg, Saxo Markets Why BOJ could further tweak its policy this week? The surprise December move to shift the ceiling of the trading band for 10-year Japanese government bonds from 0.25% to 0.5% was the first step to removing massive stimulus Bond yields have since tested the new cap, and breached it for the last three consecutive days prompting the BOJ to announce unscheduled bond buying worth over 10 trillion yen. A local media report last week also said that the central bank will evaluate the side effects of its massive monetary policy easing, which fuelled further speculation that another policy tweak may be on the cards. December Tokyo CPI touched 4% levels and the latest PPI numbers have risen to double digits at 10.2% YoY, suggesting Japan’s inflation has not yet started to cool Increasing case of a global soft-landing would likely continue to support Japan’s exports and overall growth But the BoJ loves to surprise the markets. With so much speculation built in for this week’s tweaks, officials may rather choose to wait to see the full impact of last month’s move before taking further action. But whether the BOJ announces a change this week or not, bears are unlikely to give up with Governor Kuroda set to retire in April and the next BOJ chief will likely be under pressure to exit negative rate policy before too long. That selection process could be taking place over the next month, with nominations likely by February 10. Hawkish names would spur further expectations that the BOJ will eventually end its YCC policy. Thereafter, focus will shift to spring wage negotiations due in March. Many Japanese corporate, including Uniqlo owner Fast Retailing, Nippon Life Insurance and Suntory Holdings, have already announced wage hikes. BOJ Governor Kuroda continues to emphasise the need for wage growth in Japan to consider removing stimulus. Finally, the change of hands at the helm of the BOJ in April, with a new Governor and two new deputy Governors set to take charge, could further continue to fuel speculation of a policy shift. So the direction of where this is headed seems correct, but the timing is uncertain. It may be worth considering a bearish outlook on Japan equities (JP225) and a positive outlook on Japanese banks (Topix Bank ETF), but the current volatility levels suggest a cautious stance may be warranted this week.   Source: Macro Insights: Bank of Japan meeting playbook – bracing for volatility | Saxo Group (home.saxo)

Summary:  The US equity market is back on-line today after trading into the pivotal 4,000 area for the S&P 500 Index, as traders wonder whether the recent rally can extend on hopes for a soft landing scenario or whether the bear market will return on downbeat news from the incoming earnings season. But the big event risk of the week is the Bank of Japan meeting up tomorrow, as markets brace for possible further policy tweaks from the Bank of Japan.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities are back on-line today after closing Friday into the key resistance/pivot area around 4,000 in the S&P 500 index (the cash index closed 1 point shy of 4,000 on Friday, the future has traded well above that level), which is also just above the 200-day moving average and near other technical levels. Through next week’s heavy calendar of megacap earnings reports, traders will watch whether the market can clear this key resistance area and make a bid to surpass the December pivot highs near 4,100 for the cash index. The Nasdaq 100 index has more work to do, still trading almost 600 points below its 200-day moving average and the December pivot highs above 12,100. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) The Hang Seng Index pulled back 1.2% and the CSI300 Index retreated by 0.4% as of writing despite China’s Q4 GDP, industrial production, retail sales, and fixed asset investment coming in better than feared. Q4 GDP grew 2.9% Y/Y (consensus 1.9%; Q3: 3.9%). Separately, according to data from the Shanghai Securities News, more than half of the 31 provinces and municipalities that have released 2023 work reports, are setting their GDP growth targets above 5.5% for 2023. Economically important provinces of Zhejiang, Jiangsu, Guangdong, and Shandong set their targets at above 5%. The recent rallies are looking exhausted facing profit-taking pressure. FX: JPY takes centre stage this week as BoJ to meet Wednesday The FX market is bracing for the Bank of Japan meeting up in Asia’s Wednesday session (see preview below) with JPY crosses generally backing up, led by USDJPY pulling all the way above 129.00 at one point overnight after its Friday low just below 127.50. Worth remembering that a BoJ surprise that brings JPY volatility is more of a broad JPY story than a USDJPY story and aggravated volatility that triggers a generalized risk off could support both the yen and the US dollar. Action has generally been sluggish elsewhere, with AUDNZD rolling over a bit and the US dollar finding a some support as the US is back online today. Crude oil (CLG3 & LCOH3) take stock following last week's 8% rally Crude oil trades steady near the top of its current range, after data showed China growing by more than expected in the fourth quarter. Overall, the market has seen a bid this month on China’s reopening optimism. Exports of deeply discounted Russian crude oil soared last week as it continues to circumvent sanctions Later today OPEC will publish its monthly oil market report with the IEA to follow on Wednesday. For now, further upside seems limited with China and parts of Asias about to go dark next week as the Lunar New Year holiday begins. EU gas slumps to 16-month low as supply keeps coming Natural gas prices in Europe slumped on Monday to levels not seen since 2021 as already elevated stock levels look set to get a boost from the resale of LNG previously destined for China. Just like Europe, China has seen mild winter weather and together with increased consumption of coal stockpiles of gas are elevated forcing buyers to send LNG cargoes to Europe instead. The Dutch TTF benchmark future (TTFMc1) closed at €55.5 on Monday, down more than 60% during the past month. EU gas stocks are currently 81.5% compared with a long term average around 62%. Copper rally pauses while aluminum continues higher A slight recovery in the dollar on Monday was all it took to trigger an overdue correction in copper which has surged higher during the past couple of weeks on raised expectations for a pickup in demand as China reopens. However, as we have warned recently, the recovery in demand is unlikely to be felt until well after the Lunar New Year holiday, and following a recent surge in speculative buying, the contract has increasingly been left exposed to profit taking, potentially taking it lower to test key support in the $4 area. Aluminium meanwhile hit its highest since June, up 9% on the month, and with visible inventories being at their lowest since 2002 Goldman Sachs warns about further strong gains in the months ahead. Gold consolidating with the dollar finding a bid Gold trades softer ahead of Wednesday’s BoJ meeting which may trigger an outsizes reaction in the dollar. Following weeks of mostly short covering speculators have now moved to mostly long accumulation, and it's during the early stages of this phase the market remains most vulnerable to a setback as recently established longs are less sticky than long held ones. Given the length gold has travelled in recent weeks a correction all the way back down to $1852 would not alter the overall bullish technical picture. US Treasury yields rebounded slightly Friday (TLT:xnas, IEF:xnas, SHY:xnas) After trading near the cycle lows of late last year into 3.40% for the 10-year benchmark on benign inflation data last week and a series of very strong auctions for especially longer-dated US Treasuries, the 10-year yield rebounded toward 3.50% on Friday and traded slightly higher overnight after coming back from the long holiday weekend. The next US macro data point of note is perhaps tomorrow’s December Retail Sales release. What is going on? Nationwide strike in France on 19 January France is going into a nationwide strike on 19 January as trade unions are protesting the government’s plan to push back the minimum retirement age to 64 and to accelerate a previous reform, called the Touraine reform, which provides for the extension of the required contribution period to 43 years by 2035. Before Covid, the government also tried to implement a pension reform which caused a massive wave of demonstrations across the countries – there was basically almost no public transport in main cities for weeks. This is still uncertain how long the strike will last. But the trade unions are planning to keep fighting as long as needed. Expect a blockage in several sectors (refineries, metro, rail transport, education). At the moment, we don’t think the strike will have a noticeable negative impact on GDP growth this quarter. However, should the strike go beyond Thursday, this could reduce GDP growth by 0.1 or maximum 0.2 point in Q1, in our view. BOE’s Bailey comments hint at relief from energy and inflation but worries about labour market The rally in cable has cooled off recently even as the decline in USD has continued. The pair is looking for direction and there may be some key catalysts to watch this week. Bank of England Governor Andrew Bailey spoke on Monday at the Treasury Select Committee hearing, saying that the risk premium on UK assets after the Truss government’s policy shock in September has gone. Still, confidence remains fragile, and risks also remain from China’s chaotic exit from Zero Covid, the continued fallout from the war in Ukraine and the shrinking of Britain’s labour force. Focus will now turn to economic data, with labour market data due today, CPI on Wednesday and retail sales on Friday. Any signs that labour market is cooling or that CPI has topped out could mean the BOE could start to consider a slower pace of rate hikes going forward, and that could see the 200DMA in GBPUSD at 1.2000 get threatened. China’s population officially shrinking Official Chinese data released today showed an 850,000 drop in the Chinese population to 1.41 billion at the end of last year, the first official population drop since 1961. Births numbered 9.56 million in 2022, down just over a million from the prior year and at the lowest level since 1950, while deaths totalled 10.41 million. UK December claims data improves, November earnings data rises again The UK reported November Employment and earnings data today, with the Unemployment Rate steady for the month at 3.7%, while Employment Change rose 27k vs. 0k expected. Average Weekly Earnings rose more sharply than expected at 6.4% YoY ex Bonus vs. 6.3% expected and 6.1% in Oct. Alsot out this morning were December Jobless Claims data, which rose 19.7k vs. 16.1k in November (revised down from 30.5k, while the Payrolled Employees Monthly Change rose +28k vs. +60k expected and the November number was revised down to +70k from +107k. What are we watching next? Bank of Japan meeting tomorrow shaping up as major event risk The JPY has traded cautiously this week, ahead of the Bank of Japan meeting that has traders bracing for new policy tweaks after the Bank of Japan surprised in December with a widening of its trading “band” (de facto a “cap”) to 0.50% from 0.25%. The market has violated the band several times in recent days, requiring a heroic scale of intervention from the BoJ to enforce it. In question is whether the BoJ is willing to signal a further widening of the band and even an end to the last negative policy rate in the world of –0.10% before Governor Kuroda exits the scene in April after 10 years at the helm of the BoJ. Even if the BoJ fails to unveil new measures, the market may remain convinced that a further tightening shift is slowly under way and will arrive at latest with the arrival of a new BoJ Governor. The market is pricing a policy rate of more than +0.25% by the end of this year. Earnings to watch The Q4 earnings season continues this week, with a relatively light schedule before next week’s mother lode of mega-cap earnings reports. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession, or even whether there will be a recession at all in the US economy. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. The two large US investment banks Morgan Stanley and Goldman Sachs are up today, not particularly good bellwethers for the US economy. On the other hand, Procter & Gamble, the consumer products giant, releases its earnings on Thursday and may offer interesting colour on the US consumer. The fast-growing French biotech lab equipment maker Sartorius Stedim reports today as well. Today: Sartorius Stedim, Morgan Stanley, Goldman Sachs, Interactive Brokers Wednesday: EQT, Charles Schwab, PNC Financial Services, Kinder Morgan Thursday: Procter & Gamble, Netflix Friday: Investor, Sandvik, Ericsson, Schlumberger Economic calendar highlights for today (times GMT) During the day: OPEC’s Monthly Oil Market Report 1000 – Germany Jan. ZEW Survey 1315 – Canada Dec. Housing Starts 1330 – US Jan. Empire Manufacturing 1330 – Canada Dec. CPI 2000 – New Zealand Dec. REINZ House Sales   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 17, 2023 | Saxo Group (home.saxo)

Bond markets face a number of bearish risks today, which have to be weighed against the underlying bullish tone. Look out for a strong ZEW, bond supply, and pre-BoJ positioning Source: Shutterstock Bearish risks for a strong bond market Germany’s ZEW survey is the first potential banana skin in the European morning. As a survey of investor confidence, calling its direction is relatively straightforward: it should improve. The warmer-than-usual winter weather, reductions in gas prices, and surprising resilience of hard economic data all point in that direction. This is particularly true when compared to the gloom prevailing in the last months of 2022. Bond supply so far this year has been well absorbed Bond supply so far this year has been well absorbed by investors betting on declining inflation, and despite record-breaking volumes in the first two weeks of January (see chart below). However, occasional sovereign and corporate deals, especially the unswapped types, have tended to lead to temporary bond market weakness. Usually, these seem to have been bought into, like the morning sell-off in yesterday’s session, but there is no guarantee that investors would do so today, especially given the event risks later in the week. High bond supply so far this year hasn't caused yields to rise Source: Bond Radar, ING Last chance to position for higher JGB yields This is particularly true due to the proximity of the January Bank of Japan meeting. Today is the last European and US trading session before a meeting where the Bank is increasingly expected to lift the 10Y Japanese Government Bond (JGB) yield target once more. Back in December, when that cap was lifted from 0.25% to 0.50%, 10Y Bund and Treasuries rose by roughly 50% of the sell-off in JGBs. Assuming a 25bp sell-off, one would expect European and US yields to jump by 13bp. Consensus is increasingly shifting to a higher yen With consensus increasingly shifting to higher yen rates - see for example 10Y swap rates hovering around 1% - this means the risk around the meeting is likely two-way, however. Shorting 10Y JGBs comes with a hefty carry and roll cost so a delay in shifting the cap higher may well result in short-covering. Note also that the steady selling of US and European bonds by Japanese investors in 2022 should reduce the foreign impact of higher JGB yields. Japanese investors have sold foreign bonds over the whole of 2022 Source: Japanese Ministry of Finance, ING Economic optimism isn't always good for bonds All this has to be weighed against the underlying strength in bond (and other) markets evident since the start of the year (in fact since late October if one excludes the late December sell-off). At its heart, the ‘everything rally’ is driven by an improvement in macro conditions, especially by the belief that inflation is getting under control. There is no obvious catalyst for a change of tone on today’s calendar but note that investors could at any point wake up to the potentially inflationary consequences of some of the drivers of their economic optimism, for instance better European growth, resilient job markets, or China reopening. Two of these risks were highlighted by Bank of England Governor Andrew Bailey yesterday. Today's events and market view Germany’s ZEW survey should be a good gauge of how much investor sentiment has improved. Based on the market reaction to lower gas prices and inflation, we would guess a lot. In the US session, the Empire Manufacturing Survey is the main release. Germany is scheduled to sell €5bn 5Y bonds. Greece has mandated banks for the sale of a new 10Y benchmark, John Williams, of the Fed, is the only central banker listed on today’s calendar but the World Economic Forum, known informally as Davos after the Swiss mountain resort, is sure to produce a flurry of quotes from economic leaders. 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

Summary:  Today, we look at the upcoming Bank of Japan meeting, noting the extreme anticipation around the event, together with the likelihood of considerable intraday volatility in the wake of the event, even if the Bank of Japan tries to deliver as little as possible, as we all know that new leadership and a likely further tightening of policy is in the pipeline with Kuroda's replacement after April. A look at crude oil, copper, upcoming earnings and macro data and more on today's pod, which features macro strategist Charu Chanana on the BoJ, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it. Read next: Alibaba And Its Share Buyback Program Which Is Supported By Ryan Cohen, Microsoft Corp. Plans To Incorporate AI Tools| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Bank of Japan in a corner, can’t avoid volatility | Saxo Group (home.saxo)

OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discuss the speculation around the Bank of Japan’s yield curve control, Davos, and cryptos. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The Japanese yen is in calm waters on Tuesday, as the Bank of Japan’s two-day meeting starts today. In the European session, USD/JPY is trading at 128.76, up 0.18%. Markets eye BOJ meeting The markets are keeping a close eye on the BOJ meeting. The central bank shocked the markets at the December meeting with a policy tweak that widened the bank around 10-year JBs to 0.50%, up from 0.25%. The speculation that the BOJ could follow through with additional moves at this meeting has pushed USD/JPY back below the 130 level. On Monday, USD/JPY touched 127.21, its lowest level since May. It seems likely that further moves are coming from the BOJ, but it’s unclear whether the BOJ will announce the changes on Wednesday or will wait until the new BOJ Governor takes over in April. Unlike the Fed, the BOJ appears to have no interest in telegraphing its plans and is keeping mum, which is making this meeting that much more dramatic. I expect to see some volatility from USD/JPY on Wednesday – if the BOJ does make any policy tweaks, the yen will likely continue to improve. Conversely, if the BOJ maintains the status quo, traders will be disappointed at the lack of action and the yen would likely lose ground. The BOJ has spent over six trillion yen ($86 billion) since Friday to defend its new 0.50% cap on 10 JGB, as sellers continue to flood the bond market. The central bank could widen the band to 0.75% or make a radical change and discard its yield curve control altogether. Let’s not forget that the BOJ is expected to increase its inflation forecast at the meeting, which would mark a step closer to normalization and would be bullish for the yen. USD/JPY Technical There is resistance at 129.40 and 130.82 128.40 and 127.54 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The US dollar is under pressure as the market seems to expect the Federal Reserve to ease its aggressive monetary policy later this year. USD/JPY The yen was close to a seven-month high as investors took a breather ahead of a potential change in policy at the Bank (BOJ). At the last meeting, the Yield Curve Control (YCC) program was changed, setting a range of +/- 0.50% around zero for Japanese government bonds (JGB) for up to 10 years. They previously targeted +/- 0.25% around zero. While they are not expected to change their prime interest rate, which currently stands at -0.10%, another change to the long-term yield target range is being discussed. Today, USD/JPY managed to break above 129 but failed to hold. The USD/JPY pair stabilized above 128.50. AUD/USD The Australian dollar jumped towards yesterday's six-month high against the US dollar, with China's GDP much better than forecast. China's GDP printed at 2.9% year-on-year in the fourth quarter versus expectations of 1.6% and 3.9% previously. At the same time, other Chinese data were released, and industrial production for the year to end-December was 1.3% instead of the expected 0.1%. On the monetary policy side, the local market favors a quarter-point hike from the Reserve Bank of Australia (RBA) to 3.35% in February, with some chance it could stop at its first meeting since May. Australian government bond yields remained stable, albeit close to last week's one-month lows. Monday's drop in the AUD/USD pair did not affect the prevailing uptrend. The pair of the Australian in the morning session was approaching the key level of 0.6975, the pair managed to exceed this level, but did not hold it and fell in the European session. Currently the Aussie Pair is trading above 0.6955. Read next: Alibaba And Its Share Buyback Program Which Is Supported By Ryan Cohen, Microsoft Corp. Plans To Incorporate AI Tools| FXMAG.COM GBP/USD The British pound edged higher on Tuesday after data showed a tight labour market and accelerating pay growth. GBP/USD trades above 1.2200, bouncing back from daily lows after the UK jobs report. The UK unemployment rate stabilized at 3.7% in November, while average hourly earnings rose more than expected. GBP/USD raises bids to reverse early-week pullback from monthly high. Broad US dollar pullback lays foundation for cable pair recovery ahead of key jobs report. Talks of Brexit labor shortages, UK labor strikes and British Prime Minister Sunak's difficulties are being explored by the GBP/USD bulls. The Bank of England is expected to raise interest rates at its tenth consecutive meeting on February 2 in an attempt to bring inflation down further. Today's UK employment data becomes more important for GBP/USD traders. The pair traded close to 1.2200 in both the Asian and European sessions and also fell below 1.2200. Currently, the cable pair is rising and trading above 1.2260 EUR/USD The latest German economic sentiment index, ZEW, rose in January, beating both last month's reading and market forecasts. The positive reading, the first since February 2022, points to "a notable improvement in the economic situation over the next six months" Today's ZEW release had little or no impact on the euro, which has been treading water against the US dollar so far. EUR/USD remains above 1.0800. The euro is expected to take center stage as the European Central Bank (ECB) aims to peak interest rates by the summer. The EUR/USD pair started Tuesday trading around 1.0830. In the European session it fell below this level. It managed to cross 1.0840 but dropped to around 1.0835 Source: investing.com, dailyfx.com, finance.yahoo.com

The dollar-yen pair soared by more than 350 points during the Asian session on Wednesday, reacting to the results of the January meeting of the Bank of Japan. If yesterday the pair fixed a low at 128.02, at the moment, the price has peaked at 131.60. Traders are playing back the "dovish" results of the January meeting of the members of the Japanese regulator. Expected "sensation" On the one hand, nothing sensational happened today. The previous rhetoric of the head of the central bank, Haruhiko Kuroda, was clearly dovish: he did not get tired of repeating that the December decision to expand the allowable range of fluctuations in the yield of ten-year government bonds does not indicate a reversal of the monetary rate of the central bank. Therefore, it would be surprising if he changed his position and supported the next steps to normalize monetary policy at the January meeting. On the other hand, traders, contrary to Kuroda's dovish assurances, still bet (judging by the behavior of the yen) that the Bank of Japan would make further adjustments to the policy of controlling the yield curve or completely abandon it. Note that the yield of Japanese government bonds on Monday again exceeded the new target yield range, reaching 0.51%. But in the end, the conservatism of the consistent "dove" Kuroda won. The Japanese central bank has made it clear that it does not intend to abandon the ultra-loose monetary policy, which it has adhered to for years. The regulator kept the parameters of the monetary policy and worsened the forecast for the growth of the Japanese economy. The short-term interest rate on deposits of commercial banks with the central bank was left at -0.1% per annum, the target yield on ten-year government bonds is near zero. No changes were made to the yield range. Also, there are no changes in the central bank's outlook on interest rates. Disappointing (for the yen) macroeconomic forecasts The Bank of Japan's quarterly outlook report said the country's economy is likely to recover weakly "as the effects of the coronavirus pandemic and supply constraints ease." At the same time, price growth is expected to "narrow by the middle of the next fiscal year" (in Japan, the fiscal year, as you know, is set from April 1 to March 31). According to the central bank's economists, prices may deviate to the downside "because wage growth will not increase as expected." Inflation is estimated to be around 3% this fiscal year and decline to 1.6% next year. In addition, the Bank of Japan worsened its forecast for the country's GDP growth in the current fiscal year from the previously expected 2%. Arguing for its decision, the central bank pointed to a slowdown in economic growth abroad and high prices for raw materials. The regulator also worsened its forecasts for the next fiscal year (2023): economy is estimated to grow by 1.7% against the previous estimate of 1.9%. Summing up all of the above, in the "bottom line," we have the following situation: 1) the Bank of Japan has retained the range within which the yield of 10-year government bonds can fluctuate (+/- 0.5%); 2) allowed (predicted) a slowdown in inflation in the second half of 2023; 3) worsened the forecast for the growth of the country's economy—both in the current fiscal year and next. It's too early to write off the yen The announced results of the January meeting a priori do not imply tightening monetary policy. And yet, it is not worth writing off the Japanese currency. Moreover, it is risky since many market participants surely desires to make money on the upward dynamics of USD/JPY. This is a rather risky venture as the upward momentum may fade by medium-term, and the pair will turn downward again. First, in just three months—in April of this year—Kuroda will leave his post after 10 years in office. Despite the actual inaction of the central bank at the January meeting, the pressure from the market will not disappear anywhere, and will only increase over time. While the likely successors of Haruhiko Kuroda at least allow for a scenario in which the central bank will take further steps to normalize the monetary policy. Secondly, the yen may be supported by inflation, which, apparently, is not going to slow down in Japan. On Friday, January 20, key inflation data for December will be published. According to preliminary forecasts, the general consumer price index will show an increase in inflation by 4.0%. If the indicator comes out, at least at the forecast level, it will be a new high for the last 41 years. The CPI excluding fresh food prices should also show positive dynamics (expected to rise to 4.1%), as well as the consumer price index excluding food and energy prices (this indicator should rise to 3.0%). Recall that the corporate goods price index published the day before yesterday (which measures the prices of goods purchased by Japanese corporations) rose in December by 10.2% year-on-year, exceeding the average market forecast of growth by 9.5%. If the inflation figures comes out, at least at the forecast level (not to mention the "green zone") on Friday, the yen may again begin to enjoy increased demand, despite the "dovish" results of the January meeting. Conclusions Thus, at the moment, it is best to take a wait-and-see position for the USD/JPY pair, watching the price move upwards. As the upward impulse fades, short positions can be considered with the first target at 128.70 (the middle line of the Bollinger Bands indicator on the four-hour chart) and 127.25 (the lower line of the Bollinger Bands on the same timeframe)   Relevance up to 07:00 2023-01-19 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/332590

Bank of Japan (BoJ) meeting is under the spotlight today  Source: shutterstock Macro outlook Global Markets: US stock markets traded sideways on their return from the long weekend, and equity futures are suggesting another nervous day ahead. The EURUSD has nosed back below 1.08 as of writing, but rather than reflecting a general sense of market unease, the cause seems to be specific to the EUR. Bloomberg is running a story today suggesting that ECB President, Christine Lagarde, is leaning towards smaller hikes after a 50bp February increase, and this may be tempering the EUR’s strength. There is a bit more life elsewhere in the G-10 FX space. For example, the AUD has risen to 0.699. Cable is also looking stronger, up at 1.2285 and the JPY is also fractionally stronger at 128.21 ahead of the BoJ meeting today (on which more below). Asian FX was mostly weaker yesterday. The CNY dropped half a per cent, rising at one point to 6.78 before settling a little lower, and this despite the better-than-forecast GDP figures yesterday. The IDR and PHP were also softer on the day. US bond markets gave a mixed performance, with yields on 2Y bonds dropping 2.7bp, while those on the 10Y Treasury rose 4.4bp to 3.548%. The Fed’s Barkin is reported to have said that it is “too soon” to end Fed hikes, which one could interpret as meaning that he sees the case for ending hikes as building, and therefore needing pushback. They say “never fight the Fed”, but equally, you might well take the advice “never take the Fed at face value”. G-7 Macro: US advance retail sales for December will be the most watched data release today. A 0.9% MoM decline is the median forecast number – which may be received reasonably by markets as pointing the economy in the right direction for lower inflation and an eventual pivot by the Fed. PPI data will probably add impetus to this, with a small month-on-month decline expected. Elsewhere, we have UK December inflation and final Eurozone inflation figures neither of which should provide markets with too much cause for concern.    Japan: The Bank of Japan (BoJ) is expected to stand pat today after announcing a surprise band widening in December. 10Y JGB yields have traded above 0.50% over the past few days, which suggests that the market is expecting another widening of the yield band or even abandoning the yield curve control (YCC) policy in near future. In our view, the economy is not ready for a reduction in stimulus yet. Today’s core machinery orders data recorded a fall of 8.3% MoM in November (vs 5.4% in October and -1.0% market consensus) and other recent activity data have also been weak. We believe that the BoJ’s outlook will support our view. We expect the BoJ's GDP forecast for FY2022 and FY2023 to be revised lower. For CPI, we expect the BoJ to revise their forecast up a bit, but for it to remain below 2.0% next year. Another reason for the BoJ to leave policy alone today is that another band adjustment would probably just increase market expectations for even more policy tightening after that, and this is not what the BoJ would like to see. Taiwan: GDP for 4Q22 will probably show slower growth than the previous quarter due to weaker external demand for semiconductors. This should result in annual GDP growth of around 2% in 2022 compared with 6.53% in 2021. We expect more headwinds from external demand in 2023 while the central bank will likely continue to shadow the Fed in raising interest rates. Both factors mean a challenging year for Taiwan’s economy in 2023.  What to look out for: BoJ discussion on Yield Curve Control Japan core machine orders and industrial production (18 January) BoJ policy meeting (18 January) Taiwan GDP (18 January) US retail sales, PPI, industrial production and MBA mortgage applications (18 January) Japan trade balance (19 January) Australia employment change (19 January) Malaysia BNM policy meeting (19 January) Bank Indonesia policy meeting (19 January) US initial jobless claims and housing starts(19 January) South Korea PPI inflation (20 January) Japan CPI inflation (20 January) US existing home sales (20 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

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

In keeping its key rate and yield curve control policy unchanged at today's meeting, the Bank of Japan probably wanted to convey a message to the market; don't fight the BoJ. After the decision, the Japanese yen plunged to the 131 level while the 10Y JGB yield reached 0.38%. We think market volatility can continue for a while yet     Bank of Japan Governor Haruhiko Kuroda -0.1% Policy balance rate   As expected 0.0% 10-year JGB yield target   As expected BoJ watch The next BoJ meeting will be held on 9 and 10 March, the last of which will be led by Governor Haruhiko Kuroda. His successor's nominee will be submitted to the parliament around 10 February and thus we will know who will replace him by then. We think it will be difficult to make a major policy change at his last meeting, and so the next move should be taken after the new governor comes on board. Although Governor Kuroda emphasised today that there is no need to widen the yield range further and yield curve control is sustainable, this view could change under the new governorship. As such, we think that today's comments will only be valid until early April. We maintain our view that the BoJ will keep its negative policy rate and yield curve control policy by the end of 2023, for now. We expect the new governor to first adjust the BoJ's forward guidance and then call for a policy review, but we will revisit our BoJ policy outlook once we know who is the next governor. The BoJ downgraded its GDP outlook The Bank of Japan also released its latest forecast for economic activity and prices today. The BoJ trimmed down its GDP outlook for FY22 from 2.0% year-on-year to 1.9% and from 1.9% to 1.7% for FY23. Meanwhile, in the case of CPI, the FY22 forecast is slightly raised from 2.9% to 3.0%, but the FY23 forecast remains unchanged at 1.6%. The new set of forecasts indicates that the BoJ will continue to pursue its 2.0% "sustainable" target as the recent higher-than-usual CPI is only transitory and will soon pass the peak. We believe that risks to growth are skewed to the downside based on recent weak activity and forward-looking data thus the economy is not ready for a reduction in stimulus yet.  A lower growth outlook Source: BoJ USD/JPY: A volatile bear trend The BoJ’s decision to leave its policy tools unchanged clearly disappointed an FX market positioned for further adjustment. Arguably the market had got ahead of itself, where the recent run-up in two-year yen swap rates to 0.30% suggested that a rate hike might even be on the table in the not-too-distant future. These swap rates have now dropped back to 0.15%, taking the yen with them. USD/JPY remains priced as one of the most volatile currencies in the G10 FX space and notably delivers on those expectations of volatility. One week realised volatility is being delivered at 20% versus the priced levels of 19%. We expect that volatility to continue, especially in the March/April window when Governor Kuroda will hand over the reins of the BoJ governing board. USD/JPY has been at the vanguard of the broad dollar decline since October – helped in part by the $70bn of FX intervention undertaken by Japanese authorities. We expect further broad dollar weakness this year as Federal Reserve easing expectations build in the second quarter. This should probably mean the current USD/JPY correction stalls in the 132.50/133.00 area, with outside risk to 135. We have an end 1Q23 target of 128 and our current year-end target of 125 should probably be closer to 120. JGB: No change in YCC means more JGB purchases, but slow foreign spillover Even after the BoJ’s failure to lift the YCC cap on 10Y JGB yields once more after its December move, it seems the widely held view in the market is that that cap will have to be lifted, or removed altogether, at some point this year. Even after today’s drop, 10Y JPY swaps still trade around 0.80%, well above the JGB cap, and we expect them to return to the 1% area soon. Trading JGBs has become a risky endeavour with shorts prohibitively expensive and longs liable to get run over by another surprise move by the BoJ. Delaying further changes to YCC will likely force it to continue purchases The BoJ has reportedly bought JPY 34tn of JGBs since its decision to lift the cap from 0.25% to 0.50% in December. Delaying further changes to YCC will likely force it to continue purchases even if selling pressure slows in the coming days. Cornering the JGB market even more does not sit well with the stated aim of improving JGB market functioning in our view, but it seems a willingness to shield broader markets and the economy from too abrupt a move has taken precedence. Japanese investors were net sellers of foreign bonds for most of 2022 Source: Japanese Ministry of Finance, ING   We think the short-covering seen in Treasuries and Bunds today overstates the spillover from BoJ decisions into foreign markets. As JGB yields rise, and rate differentials narrow, we think Japanese investors will increasingly favour domestic bonds over foreign ones. This should occur progressively, however. Net selling of foreign bonds already started in 2022 and only amounted to $14bn equivalent per month. This will add up over time, but this is not enough to change the trajectory of the US and European bond markets on their own. Read this article on THINK TagsJPY JGB yields Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

Summary:  The focus is squarely on the Bank of Japan decision today and significant volatility may be on the cards. Mixed earnings, ranging from a weaker Goldman Sachs report but better-than-expected Morgan Stanley results, kept the US equity markets broadly range-bound. China’s activity data surprised to the upside, but population decline is a concern. Stage is being set for a dovish turn in the ECB, and UK’s CPI will be on the radar today. Industrial metals regained momentum, while Gold continues to face correction risk.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished nearly unchanged while the Dow Jones Industrial slipped 1.1% on Goldman’s miss in earnings Nasdaq 100, up 0.1% and S&P 500, down 0.2% were little changed in a choppy session, supported by a 7.4% gain in Tesla (TSLA:xnas) and an increase of 4.8% in Nvidia (NVDA:xnas).  The Dow Jones Industrial however fell 1.1%, dragged by the declines of 6.4% in Goldman Sachs (GS:xnys) and 4.6% in Travellers (TRV:xnys). Goldman Sachs reported a 66% Y/Y fall in Q4 earnings to USD3.32 per share, much below the USD5.56 consensus estimate. On the other hand, Morgan Stanley (MS:xnys) rose 5.9%, after reporting a 40% fall in earnings to USD1.26 per share, beating the USD1.25 expected by street analysts. Among sectors in the S&P, the material sector, falling 1.1%, was the biggest laggard. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) ended mixed as curve steepened A much weaker-than-expected print of the Empire Manufacturing Index, shrinking to -32.9 vs consensus of -8.7, and a Bloomberg report suggesting that the ECB may slow its next rate hike to 25bps in March from 50bps, saw the yields on the Treasury front ends lower. Yields on the 2-year fell 3bps to 4.20%. Yields on the longer ends however rose. The 10-year notes finished 4bps cheaper at 3.55%. On Wednesday, traders are eyeing the outcome from the Bank of Japan. Hong Kong’s Hang Seng (HIF3) retreated and China’s CSI300 (03188:xhkg) was flat despite Q4 GDP better than feared The Hang Seng Index pulled back 0.8% and the CSI300 Index was flat despite China’s Q4 GDP, industrial production, retail sales, and fixed asset investment coming in better than feared. Q4 GDP grew 2.9% Y/Y (consensus 1.6%; Q3: 3.9%). Healthcare names were the biggest drag to the Hang Seng Index as Wuxi Biologics (02269:xhkg) tumbled 6.1% on placement by its majority shareholder. XPeng (09868:xhkg) slipped 2.3% after cutting the prices of its EVs by around 12% and dragged down the share prices of other EV makers. Chinese property names finished the session mixed in a tug-of-war between optimism from supportive policies and continuously sluggish sales data. China’s residential property sales fell 26.7% Y/Y in December. Infant and toddler product stocks fell on the record low 0.677% birth rate released in China. In A-shares, baijiu (Chinese white liquor), food and beverage, bank, media, and pharmaceutical names retreated while electronics, defense, and machinery stocks gained. FX: All eyes on JPY GBPUSD was the best performer in the G10 FX space on Tuesday, rising to test the 1.23 handle, as labor market data came in better than expected. Focus shifts to the UK CPI release today where a further deceleration in price pressures remains likely. NZD and AUD also gained further, bumped higher more so in the US session rather than China’s better-than-expected activity data in the Asian hours. AUDUSD may be looking at another break above 0.7000. EURUSD plummeted from 1.0869 to 1.0775 on dovish ECB expectations (read below). The key focus today however will be on USDJPY and yen crosses with BOJ decision due today. Crude oil (CLG3 & LCOH3) pushes higher Crude oil edged higher as OPEC set a more optimistic tone on demand. Secretary General Haitham Al Ghais said he’s optimistic about the outlook for the global economy. The oil producer group said that a potential slowdown in advanced economies is countered by accelerating growth in Asia. The market is expected to tighten as Russia’s supply suffers from G7 price caps and China’s demand recovery underpins. Meanwhile, the growing case of a soft-landing this year has cooled off global demand slowdown concerns, while reports of ECB’s slowing the path of its rate hikes (read below) also underpinned. WTI futures rose to $81/barrel while Brent was at $86. IEA’s monthly market outlook will be released today. Metals boosted by upbeat China data Better than expected economic data from China helped boost sentiment in the base metal sector. China’s December activity data came in better-than-expected, while protests in Peru continued to cloud the supply outlook for Copper. HG Copper was back above $4.20. Prices for Iron ore also rose in Singapore to back above $120, locking in gains of over 1%. Gold, however, continues to face correction risk as ETF flows and risk reversals have remained flat for weeks with no sign of demand despite the recent rally. We believe the direction in gold is correct but the timing is wrong, raising the risk of a short-term correction driven by recently established speculative longs.  Read next:GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting| FXMAG.COM What to consider? Bank of Japan meeting playbook – bracing for volatility The highly-watched Bank of Japan policy decision due Wednesday has spooked tremendous volatility and warrants a cautious stance. But whether we see further policy tweaks this week or not, speculation for BOJ to remove its yield curve control will likely to build into BOJ chief nominations due February 10, spring wage negotiation in March and a change of hands at the helm in April. Read our full preview here or listen to yesterday’s podcast. China GDP and activity data came in better than expected At 2.9% Y/Y, China’s Q4 GDP print was well above the consensus forecast of 1.6% while decelerating from 3.9% Y/Y in Q3. Full-year GDP growth came in at 3% in 2022, higher than the consensus forecast of 2.7%. Retail sales, shrinking 1.8% Y/Y in December (vs consensus: -9.0%, Nov: -5.9%), were better than feared. Nonetheless, the positive surprise largely came from a surge of 39.8% Y/Y in medicine sales and a rise of 10.5% Y/Y in food sales on stockpiling in December when China abandoned Covid-19 containment measures. Industrial production growth slowed to 1.3% in December, above the median forecast of 0.1%, from 2.2% in November. Fixed asset investment growth picked up to 3.1% Y/Y in December from 0.8% Y/Y in November, with infrastructure investment slower to 10.4% Y/Y in December from 13.9% Y/Y in November and manufacturing investment improved to 7.4% Y/Y in December from 6.2% in November. China’s population declined for the first time in six decades According to the National Bureau of Statistics, China’s population fell to 1.4118 billion in 2022, a decline of 0.85 million, from 1.4126 billion in 2021. The birth rate slipped to 0.677%, the lowest since records began in 1949. China is planning new restrictions on live streaming According to the Wall Street Journal, Chinese regulators are planning to impose new regulations to cap internet users’ digital tipping as well as tighter censorship of the content. ECB’s dovish surprise likely as inflation slows The ECB is considering a slower pace of rate hikes than Christine Lagarde indicated in December. While a 50bps increase next month remains the most likely outcome, a 25bps move in March is gaining support. Inflation in the Eurozone is slowing, and a sharp drop in natural gas prices suggest that we can continue to expect lower inflation in the months to come atleast until the 2023 winter risks emerge. The final CPI print for December for the Euro-are will be released today and ECB’s minutes of the December meeting are due tomorrow. Gloomy US survey data – NY Fed manufacturing The NY Fed's Empire manufacturing survey tumbled to -32.9 in January from -11.2 in December, well beneath the consensus -9 and marking the lowest level since mid-2020 and the fifth worst reading in the survey’s history. Both new orders and shipments plummeted sharply, and moderation in input and selling price growth was seen. Fed member Barkin (non-voter) repeated that median CPI is still too high, saying that he needs to see inflation convincingly back to target before Fed pauses rate hikes and that he is not in favour of backing off too soon. UK December claims data improves, November earnings data rises again, CPI up next The UK reported November Employment and earnings data yesterday, with the Unemployment Rate steady for the month at 3.7%, while Employment Change rose 27k vs. 0k expected. Average Weekly Earnings rose more sharply than expected at 6.4% YoY ex Bonus vs. 6.3% expected and 6.1% in Oct. Also out this morning were December Jobless Claims data, which rose 19.7k vs. 16.1k in November (revised down from 30.5k, while the Payrolled Employees Monthly Change rose +28k vs. +60k expected and the November number was revised down to +70k from +107k. UK CPI is due to be released today. Vietnam’s political shakeup The latest political shakeup in Vietnam highlights the stability risks that emerging markets generally face. President Nguyen Xuan Phuc has announced he is stepping down, sparking a potential power shift among the communist-ruled country's leaders. The news that he is quitting comes during an anti-corruption drive led by hard-liners. The shift in power could potentially have repercussions on the ability of Vietnam to continue to capture manufacturing moving out of China.   For a 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: D-day for Bank of Japan; ECB’s dovishness; China’s growth is a positive surprise but population falls - 18 January 2023 | Saxo Group (home.saxo)

The Bank of Japan (BoJ) kept its below-zero interest rate and its faltering yield curve control policy unchanged. No-action sent the Japanese 10-year yield tumbling by up to 14 bp – that’s almost a 30% plunge. The dollar-yen spiked above the 131.50 level, losing more than 2.50% against the greenback. Equities In equities, confusion and lack of direction best described yesterday’s sentiment in the US. US futures US futures were pointing at a negative start, then turned higher in early trading as we heard a lot of talk about "green shoots" and "bright spots" in the economy when Chinese Vice Premier talked in Davos yesterday saying that he expects China's economy to return to normal this year. S&P 500  The S&P 500 shortly traded above the 4000 level, but reality soon hit the fan with mixed earnings from Goldman and Morgan Stanley, and brought the top sellers in. earnings And the top sellers kept selling into the 4000 level to the end of the session. Finally, the index closed the session 0.20% lower, spot on the 2022’s down-trending channel top and above the critical 200-DMA. The first set of earnings doesn’t support a sustainable move above that 200-DMA level. Read next: Alibaba And Its Share Buyback Program Which Is Supported By Ryan Cohen, Microsoft Corp. Plans To Incorporate AI Tools| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:45 BoJ fights the hawks 3:00 FX update 5:29 S&P500 offered at 4000… 6:59 …as mixed earnings hammer optimism 7:59 Tesla better bid despite Jefferies PT cut 8:36 Meme traders refuse to buy Alibaba 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. #BoJ #YCC #JPY #JGB #USD #EUR #GBP #inflation #bank #earnings #Alibaba #Tesla #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      

Yesterday saw another positive session for European markets, although the FTSE100 underperformed despite hitting a new 4 year high. US markets returned from their long weekend break with a choppy and somewhat mixed session, with the Dow and S&P500 struggling while the Nasdaq 100 finished slightly higher, as various earnings announcements painted a mixed picture of the US economy. Bond yields also chopped between negative and positive territory as yields ended the day little changed. BoJ tweaks bond program Asia markets have spent the day still digesting yesterday's economic numbers from China, as well as today's Bank of Japan rate decision. The Japanese yen has seen some decent gains over the past few weeks, with those gains accelerating after the Bank of Japan caught markets by surprise last month by widening the band of its yield curve control to between -0.5% and +0.5%, from +/-0.25%. It would appear that with current governor Kuroda set to leave in April that the BoJ wanted to start seeding the ground for a possible shift in the coming months, however as with everything related to monetary policy markets have already started to front run any possible change.. The 10-year JGB has consistently tested above the upper bound of the 0.5% in the past few days testing the central banks resolve in the process. The central bank has been consistent in maintaining that they aren't in any rush to make major adjustments to its yield curve control policy yet, however events appear to have overtaken them, as volatility has increased. The Bank of Japan's challenge today has been to try and reset market expectations, as well as try to avoid a further rapid appreciation in the yen, in the same way they wanted to manage the declines in their currency over the past few months. Suffice it to say they appear to have succeeded, pushing back on the recent moves that have pushed the yen higher. This morning the Bank of Japan kept monetary policy unchanged, which wasn't a surprise, but they also announced they would continue large scale bond buying and be more flexible about duration in order to keep policy settings loose. Yields on JGB's fell back sharply from the 0.5% upper bound in the wake of the announcement. Today's pushback or reset whatever you want to call it, shouldn't have been too much of a surprise given recent yen moves. Japanese central bank officials have always been particularly sensitive to sharp short term moves in either direction where the yen is concerned in the same way they were about recent yen weakness. The direction of the move is less of a concern rather than the speed of it, and in slowing the yen move lower the BoJ is merely resetting market expectations about future policy change, with the US dollar rising back above 130.00 UK inflation set to slip back in December After the peak of 11.1% in October, headline CPI fell back to 10.7% in November in a welcome sign that we could well be past the peak, when it comes to price rises.Recent falls in oil and gas prices are also likely to start to feed into the underlying numbers, while PPI inflation has also been falling in recent months, though given problems with the PPI calculations we haven't had clear visibility on that in the past couple of months, as the ONS continues to review how that is calculated. Today's December inflation numbers are expected to show that inflationary pressures continue to subside, but are only expected to fall modestly to 10.5%, with core prices also still high at 6.2%. We already know that food price inflation is trending in the mid-teens, which means that headline CPI is expected to remain above 10% for a while. It's also important to remember that RPI is even higher. With average wage growth trending at 6.4% and unemployment still low, the gap between wages and inflation is still quite wide, although it is narrowing from both directions. This probably means we can expect to see another 50bps rate hike from the Bank of England when it meets in just over 2 weeks' time, although any decision is unlikely to be unanimous, given the 3-way split last time. Headline CPI in the EU is also expected to be confirmed at 9.2% in December with core prices at 5.2%. EUR/USD – has struggled to overcome the 1.0870 area, prompting a fall to 1.0780. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. GBP/USD – ran out of steam at 1.2300 yesterday, with the risk that the move above 1.2000 level is running out of steam, despite the decent rebound from the 1.1830/35 area. The next big resistance lies at the 1.2350 area. We need to hold above the 1.2000 area for further gains to unfold. EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a drift back towards last week's low at 0.8770/80. Below 0.8770/80 retargets the 0.8720 area. USD/JPY – has recovered off 127.20 area this week, just shy of the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Has squeezed back above the 130.00 area and could extend back through 132.60 on towards 134.80 without undermining the downward momentum. FTSE100 is expected to open 10 points lower at 7,841 DAX is expected to open 32 points higher at 15,219 CAC40 is expected to open 11 points higher at 7,088 Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

Holy Bank of Japan! The Bank of Japan (BoJ) kept its below-zero interest rate and its faltering yield curve control policy unchanged.  No-action sent the Japanese 10-year yield tumbling by up to 14 bp – that's almost a 30% plunge. The dollar-yen spiked above the 131.50 level, losing more than 2.50% against the greenback.   The BoJ revised its GDP lower for this year, but kept its inflation forecast unchanged at around the 3%. And yet, the producer price inflation in Japan spiked above the 10% in December.   It feels like the BoJ doesn't want to face the reality, and isn't acting according to the market's needs.   Anyway, I think that traders will continue defying the BoJ's YCC strategy and try to break its back, but we will likely see more volatility in the yen, as the policymakers keep fighting the market – perhaps not to lose face?   On the currency front, we can't rule out the possibility of an advance above the 133 level, the minor 23.6% Fibonacci retracement on Oct to January retreat. The negative trend in USDJPY will remain intact below the 136 level, the major 38.2% retracement level.   Yen selloff supports the dollar index.  If the yen changes direction, the impact on the dollar index will also be felt – and it will be positive.   The dollar index is stronger this morning.  The EURUSD is below the 1.08 mark, and could extend losses toward the 1.0630, the lower end of the actual positive trending channel.   And yet, the ZEW data released yesterday showed that investor expectations for the German economy jumped to the highest level in almost a year and German Chancellor Olaf Scholz said that he is sure Germany will avoid recession this year, thanks to China's reopening and growing confidence that the energy-price squeeze is easing.   And now that the Euro-area economy is performing better than many anticipated in the face of record inflation and the energy crisis, the European Central Bank (ECB) is expected to raise the rates by 50bp in February and in March, and by another 25bp in May or in June. That should throw a floor under the euro weakness and may not let the euro slide too low against the dollar.   Across the Channel, Cable does particularly well, since Britain revealed a near-record pace of 6.4% in wages growth between September and November year on year. The latter will unlikely ease the anger of those striking for a better pay – headéine inflation in Britain came in at 10.5% in December, as core inflation didnt ease as expected - dwarfing the near-record pay rise. The latest numbers will only force the Bank of England (BoE) to deliver yet another rate hike next month to avert a further wage-price spiral. And that's positive for sterling.   S&P500 struggles finding buyers above 4000  Confusion and lack of direction best described yesterday's sentiment in the US.   US futures were pointing at a negative start, then turned higher in early trading as we heard a lot of talk about "green shoots" and "bright spots" in the economy when Chinese Vice Premier talked in Davos yesterday saying that he expects China's economy to return to normal this year.  The S&P 500 shortly traded above the 4000 level, but reality soon hit the fan with mixed earnings from Goldman and Morgan Stanley, and brought the top sellers in.   And the top sellers kept selling into the 4000 level to the end of the session. Finally, the index closed the session 0.20% lower, spot on the 2022's down-trending channel top and above the critical 200-DMA.  But the first set of earnings doesn't support a sustainable move above that 200-DMA level.   If we dive into the latest bank earnings, Goldman Sachs and Morgan Stanley earnings were mixed. Golman reported a 69% drop in Q4 profit as the slump in deal-making and its wealth management business weighed on Q4 results. Goldman shares closed the session almost 6.50% lower.   Morgan Stanley was also hurt by weakness in deal-making, but the wealth management and trading revenue grew. The shares closed almost 6% higher.   Note that Morgan Stanley set aside $85 mio for credit losses compared to only $5 mio a quarter ago, as proof that the bank is not optimistic about what's to come this year, either. Therefore, the 6% rally was certainly a bit exaggerated. 

Today the US releases data on retail sales and PMI indices, which are supposed to show support for inflation fading. USD/JPY At the two-day meeting, the BOJ unanimously maintained its YCC targets, set at -0.1% for short-term interest rates and around 0% for 10-year yields. The Japanese yen weakened by more than 2 percent in the wake of the Bank of Japan's monetary policy announcement in January. If the losses continue, this will be the best one-day performance for the USD/JPY pair. To understand why the yen weakened so quickly here, one has to go back to what happened in December. Last month, the central bank shocked the markets by widening the yield curve band around 0% to plus/minus 50 basis points. It was from +/- 25 bp. The central bank also increased asset purchases to 9 trillion yen each month from 7.3 trillion previously. The markets saw this as a move by the central bank towards normalizing policy. Therefore, investors were strongly focused on further corrections today. When this did not happen, these bets were voided. The USD/JPY pair strengthened and traded above 131. After this recovery, the pair began to fall to a level around 129.10. AUD/USD The Australian and New Zealand dollars gained on Wednesday on the retreating yen. The Australian jumped 2.0% to 91.36 yen. For now, the BJ's pledge to keep yields low has provided relief to global bond markets and the Australian 10-year yield fell 8 basis points to 3.57%. The main event of the week in the country will be data from the Australian labor market, which will be released on Thursday. The Austrailan pair (AUD/USD) has broken through the 0.70 level and is trading at 0.7020 at the time of writing Read next: Un Secretary General Antonio Guterres Encouraged The Transition To Green Energy At The World Economic Forum In Davos, The Chinese Economy May Surprise You Positively| FXMAG.COM GBP/USD The British pound received support this morning after mixed inflation data. UK headline inflation fell as expected to 10.5%. UK consumer price inflation fell to a three-month low of 10.5% in December but remains close to 40-year highs. The core CPI reading, which excludes food and energy from the calculations, underscores the tense labor market conditions seen in yesterday's UK employment data, while the recent fall in energy prices has contributed to the decline in the headline figures. The BoE has raised interest rates nine times since December 2021 to try to bring down inflation, with markets currently evaluating an 82% chance of a 50 bp rate hike at its next meeting, scheduled for February 2. GBP/USD holds its gains above 1.2300 again, undisturbed by mixed UK CPI data amid fresh US dollar weakness. Today's UK employment data becomes more important for GBP/USD traders given the recent comments from Bank of England (BoE) governor Andrew Bailey, as well as the worsening conditions of the UK labor strikes. EUR/USD The EUR is one of the weakest contenders against the US Dollar, with EUR/USD pulling back sharply after testing the 1.0870 level. The rest of this week is quite sunny on the economic calendar, which tends to support existing trends. The EUR/USD pair fell sharply mid-session in the US despite significant US dollar weakness. The euro fell after market talks suggesting that representatives of the European Central Bank (ECB) are considering slowing down the pace of monetary policy tightening. Rumors suggest that CEO Christine Lagarde and company will decide to raise interest rates by 50 basis points in February. The comments of the European Central Bank's chief economist Philip Lane also influenced the euro, who said that in order to bring interest rates back to their target levels and bring inflation back to the desired level, it will be necessary to stop the tightening of monetary policy by the central bank. At the World Economic Forum EU officials have announced their intention to accelerate the energy transition with a series of fiscal measures that support technological innovation in the green energy space. The support is expected to include a state aid mobilization as well as a sovereignty fund to stop companies relocating to the US. Source: finance.yahoo.com, investing.com, dailyfx.com

The Bank of Japan refuted market speculation about additional policy changes by stepping up efforts to defend its stimulus package to sustain the economy, which caused the Japanese yen to fall precipitously versus the US dollar. Bond yields were also impacted, and they dramatically decreased. Yield of 10-year bonds  The council of Governor Haruhiko Kuroda kept the target yield of 10-year bonds under its curve control program at around 0% and the negative interest rate at -0.1% today, according to the most recent statistics. The central bank also declared that it would keep up its massive bond purchases and, if necessary, increase them. Furthermore, the Central Bank increased the amount of loans available to commercial banks to encourage them to buy more government debt to justify its ultra-easy policy. This was another way the regulator showed its commitment to regulating the yield curve in the near future. Officials continue to doubt that inflation will stay over 2% The Bank of Japan's revised predictions also revealed that officials continue to doubt that inflation will stay over 2% on a sustained basis in the years to come, justifying additional stimulus even after Kuroda steps down in April. Experts claim that the statement's earlier-than-anticipated release revealed a consensus among the Bank of Japan Board of Directors. There were hopes that the Japanese regulator would budge in response to the political stance taken by the Federal Reserve System, the European Central Bank, and the Bank of England. However, this did not happen.  USD/JPY pair's technical picture The yield on benchmark 10-year bonds decreased by more than 10 basis points to below 0.4% after the rulings were released, as I mentioned above, while the yen dropped by more than 2% to 131.25 per dollar. Regarding the USD/JPY pair's technical picture, the nearest resistance level is 132.20. If this range is broken, the trading instrument, which is now at 136.50, will rise much higher, and the pressure on the dollar will resume. If the support level of 127 is tested again and broken, we can anticipate a further decline in the dollar to a level around 122.40, where the demand for the yen will diminish once more, causing a small upward move in the pair. Let me remind you that there is a growing expectation that the Bank of Japan will take more explicit action to normalize policy. Many economists began discussing rising interest rates this year after the regulator unexpectedly increased its target range of 10-year yields to 0.5% last month, a move that three-quarters of those surveyed saw as a move toward normalizing policy. However, based on the direction the Japanese regulator is currently heading, such modifications shouldn't be anticipated. Read next: Un Secretary General Antonio Guterres Encouraged The Transition To Green Energy At The World Economic Forum In Davos, The Chinese Economy May Surprise You Positively| FXMAG.COM Kuroda's extensive program Kuroda's extensive program of ultra-soft policy has come under the heaviest criticism numerous times, but the regulator has persisted in purchasing bonds each time to affect their profitability and thereby boost the economy. At first, Kuroda argued that the action taken last month was intended to enhance market functionality. Although the yield limit was raised to 0.5% in December, this did not affect liquidity, and the Kuroda-noted yield curve distortion has subsequently gotten worse. Even before the governor's tenure ends, more steps will be taken, according to some experts.   Relevance up to 09:00 2023-01-19 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/332616

The Japanese yen has fallen sharply on Wednesday. In the European session, USD/JPY is trading at 129.38, up 0.96%. Earlier in the day, the yen fell as low as 131.58 but has pared some of today’s losses. BOJ maintains policy After a quiet start to the week,  the Japanese yen is showing strong volatility today. This follows the Bank of Japan’s policy meeting, where policy makers defied market expectations and made no changes to rate and yield curve control (YCC) settings. The markets had been on alert since the BoJ widened the band on 10-year JGBs in December, and there was speculation that the BoJ widen the band or even ditch its yield curve control altogether at today’s meeting. The central bank’s decision to stay on the sidelines sent the yen sliding as much as 2.6% before it recovered. The BoJ forecasts for GDP and inflation didn’t show much change and were overshadowed by the BOJ’s non-move. The GDP forecast was downgraded from 2.0% to 1.9% for FY22 and 1.9% to 1.7% for FY23. The inflation outlook didn’t change much either  – the FY22 forecast was raised from 2.9% to 3.0% and the FY23 remained unchanged at 1.6%. The weak Japanese economy means that risks to growth are tilted to the downside and the BoJ is unlikely to make any policy tweaks to its ultra-loose policy before the new BOJ Governor takes over in April. Japanese government bond yields have fallen sharply in response to the BOJ decision to keep YCC in place, retreating from the 0.50% cap and falling as low as 0.36%. The cap had been under attack in recent days, forcing the BOJ to spend trillions of yen to defend it. I would not be surprised to see yields move higher in the short term due to speculators again testing the BoJ resolve to defend the cap. Read next:Un Secretary General Antonio Guterres Encouraged The Transition To Green Energy At The World Economic Forum In Davos, The Chinese Economy May Surprise You Positively| FXMAG.COM USD/JPY Technical USD/JPY has pushed above resistance at 1.2940 and 131.33. The next resistance line is 133.28 128.40 and 127.71 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Equity markets are marginally higher in Europe, with the Nikkei outperforming in Asia on the back of a much weaker yen. BoJ stands firm The Bank of Japan has decided to stand its ground against market forces that have forced it to purchase huge amounts of JGBs in order to defend its yield curve control upper band. Despite mounting speculation that it could be prepared to further tweak the tool or abandon it altogether, the central bank has stubbornly dug in its heals and seemingly prepared itself for another onslaught in the bond markets. The surprise decision last month to widen the threshold in which it will allow the 10-year yield to trade has further fueled speculation that it’s planning to phase out YCC, so rather than ease the pressure on the central bank as it hoped, it has intensified. In standings its ground today, it’s effectively invited the backlash and the yen has been hammered as a result. Inflation eases but still far too high UK inflation eased slightly in December, the second month in which it has fallen, indicating that it has peaked and barring another surge in energy prices, it could now steadily decline. That will come as a relief to households and businesses suffering the cost-of-living squeeze although, with the headline CPI still above 10%, there’s still obviously a long way to go. The Bank of England now finds itself in the uncomfortable position of needing to keep raising interest rates as inflation is still more than five times its target. Even core inflation is above 6% and we haven’t really seen much progress on that front. Markets are pricing in another 1% of rate hikes in the coming months but if inflation remains stubbornly high, they may have to do more. Especially if the economy shows the kind of surprising resilience that it appeared to in the fourth quarter. Read next:The Japanese Yen (JPY) Weakened, The Aussie Pair Is Trading Above 0.70$| FXMAG.COM Steadies after huge surge It’s been a phenomenal week for bitcoin, up around 20% and looking in a far healthier position. The lack of further contagion in the aftermath of the FTX collapse and the surge in risk-appetite has seen a flurry of support for cryptos which have had a rough few months to put it lightly. Well, they’ve made up for lost time and bitcoin is now steadying above $21,000. Whether it can significantly build on this rebound is another thing but the fact that it’s trading back in the pre-FTX range will come as a huge relief to the industry that will have feared further plunges or negative headlines. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  The deteriorating US retail sales and industrial production data hurt risk sentiment, and US equity markets tumbled despite lower yields. The US dollar was choppy after BOJ’s pushback on market speculation and the announcement to keep policy unchanged, but hotter core CPI in UK supported the sterling. Weaker Australia employment data sent AUDUSD lower to test 0.6900. Crude oil prices plummeted on deteriorating economic outlook and a weaker API inventory build. Focus turns to earnings today with Proctor & Gamble and Netflix due to report.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) reversed and fell over 1% on recession fears U.S. equities opened higher initially as bond yields tumbled on a dovish Bank of Japan and much weaker than expected prints on U.S. retail sales, industrial production, and producer prices. Comments from the Fed’s Bullard in a Wall Street Journal interview about his preference of keeping the pace of rate hike at 50bps at the February FOMC triggered a reversal around mid-day and saw U.S. stocks plunge in the New York afternoon session. The weak economic data and the risk of the Fed overdoing it in rate hikes troubled equity investors. At the close of Wednesday, Nasdaq 100 fell 1.3% and S&P 500 slipped 1.6%. All 11 sectors of the S&P 500 declined, with the consumer staples sector falling the most to finish the session 2.7% lower. In the Fed’s Beige Book released on Wednesday, U.S. retailers said they were having difficulties in passing through costs increases to consumers. On individual stocks, PNC Financial Services (PNC:xnys) fell 6% on a larger-than-expected credit losses provision. Moderna (MRNA:xnas) gained 3.3% following release of positive trial results for a RSV virus vaccine. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) surged on dovish BoJ and weak economic data; the 10-year yield slid to 3.37% Treasuries surged in price and yields collapsed on dovish outcomes from the Bank of Japan’s monetary policy meeting. The BoJ doubled down on monetary easing with an adjustment to its Funds-Supplying Operations against Pooled Collateral which enables it to lend cheaply to banks up to 10 years in maturity from only up to two years previously. Apparently, the BoJ aims at bringing down the elevated swap rates closer to the yields of JGBs. Treasury yields took a further dive in New York morning hours following the release of larger-than-expected declines in retail sales and industrial production as well as a bigger-than-expected 0.5% month-on-month fall in the Producer Price Index in December. The hawkish comments from Fed’s Bullard about keeping the February hike at 50bps did not have much of an impact on Treasuries despite being picked up as a reason to fade the rally in equities by traders. The result from the USD12 billion 20-year Treasury bond auction was strong. Treasury yields finished the Wednesday session with the 2-year 12bps richer at 4.08% and the 10-year 18bps richer at 3.37%, bringing the 2-10 curve more invested to -71bps. Hong Kong’s Hang Seng (HIF3) ticked up and China’s CSI300 (03188:xhkg) traded sideways Hang Seng Index ticked up by 0.5% and CSI300 edged down by 0.2%. Online and mobile gaming names led in both the Hong Kong and mainland bourses. China released 88 new licenses of online/mobile games, including one title from Tencent (00700:xhkg), up 1.7%. and one title from NetEase (09999:xhkg), up 6.5%. Trading in other internet names, however, was mixed. Auto dealers were led lower by an 8.3% decline in Zhongseng (00881:xhkg). EV makers traded weakly, XPeng (09868”:xhkg) down 2.9%. In A-shares, food and beverage, beauty care, and construction materials led the decline while online gaming, computing, media, communication, and non-ferrous metal gained. Northbound net buying was over RMB4 billion, bringing the net buying in January to over RMB90 billion. FX: Choppy dollar after BOJ ECB’s Villeroy dismissed dovish ECB talks and says Lagarde guidance still valid, bumping up EUR higher but the gains were reversed later and EURUSD ended below 1.0800 again. EURGBP meanwhile testing a break below 0.8740 to near 1-month lows as UK core CPI came in hotter-than-expected. AUD and NZD were divergent with AUDNZD falling from highs of 1.0873 to lows of 1.0783. AUDUSD was slightly lower on weaker-than-expected employment data which saw unemployment rate rising to 3.5% while overall employment fell 14.6k compared to expectations of +25k, while last month’s employment gains were revised lower to 58.3k. NZDUSD however saw little reaction to reports of PM Arden’s resignation. USDJPY back below 129 after the BOJ-related volatility yesterday. Crude oil (CLG3 & LCOH3) tumbled on sluggish US data and weak API build Crude oil prices rose to fresh highs earlier on Wednesday before sliding in the NY hours. US data flow turned out to be grim with both retail sales and industrial production disappointing, sending recession concerns soaring. The International Energy Agency was also circumspect. It said the market faces immediate headwinds, with supply exceeding demand by about 1mb/d in Q1. Meanwhile, API reported that US crude stockpiles rose 7.6mn barrels for last week. WTI futures retreated from highs of $82+ to $79, while Brent was back below $85/barrel from highs of ~$88.  Read next: The Japanese Yen (JPY) Weakened, The Aussie Pair Is Trading Above 0.70$| FXMAG.COM What to consider? BOJ maintains policy unchanged, launches new tool to support bond market The Bank of Japan left its policy levers unchanged at the January meeting, defying heavy market speculation of another tweak after the surprise in December. The announcement saw the yen plunge by over 2%, as the central bank said it would continue large-scale purchases of government bonds and increase it on a flexible basis as needed. The central bank, in a new measure to maintain yield control policy, also extended a loan offer to banks for funds of up to 10 years against collateral for both fixed- and variable-rate loans. Meanwhile, the BOJ still sees inflation getting back to sub-2% range this year. Core CPI estimate for FY2022 was only slightly raised to 3.0% for 2.9% previously, while the FY2023 estimate of 1.6% was maintained. In the press conference, BoJ Governor Kuroda said that the sustainable inflation goal is not yet in sight, suggesting low odds that he will declare victory on bringing back inflation before his exit in April. Bad economic news is now bad news for the markets US PPI fell 0.5% M/M in December, a deeper fall than the expected 0.1% decline, while the prior was downwardly revised to +0.2%; PPI Y/Y rose 6.2%, a big fall from the prior (downwardly revised) +7.3%, beneath the expected +6.8%. While slowing inflation continues to be a positive for the markets, concerns around slowing economic growth have started to bite as well. December US retail sales fell 1.1% M/M, deeper than the consensus 0.8% decline with a sizable downward revision for the prior to -1.0% from -0.6%. Industrial production fell 0.7% M/M in December, deeper than the consensus -0.1%, with the prior downwardly revised to -0.6% from -0.2%. Manufacturing output also declined by a larger 1.3%, deeper than expected -0.3% and the prior revised to -1.1% from -0.6%. Fed speakers continue to be mixed, with the non-voters staying hawkish Fed’s Bullard (non-voter) said his dot plot forecast for 2023 is just above the Fed's median of 5.1% at 5.25-5.50% and that Fed policy is not quite in restrictive territory, reiterating it needs to be over 5% at least. Bullard added the Fed should move as rapidly as it can to get over 5% and then react to data, noting his preference is for a 50bps hike at the next meeting (against the consensus 25bps). Loretta Mester (non-voter) said further rate hikes are still needed to decisively crush inflation and we are not at 5% yet, nor above it, which she thinks is going to be needed given her economic projections. She believes the Fed's key rate should rise a "little bit" above the 5.00-5.25% range that the Fed median implies. Harker (voter) said Fed needs to get FFR above 5%, but its good to approach the terminal rate slowly. Dallas President Lorie Logan (voter) spoke later as well, and also hinted at a slower pace of rate hikes. She said she wants a 25bp rate hike, not 50, at the February 1 FOMC meeting. She said if slower rate hike pace eases financial conditions, then the Fed can offset that by gradually raising rates to a higher level than previously expected. UK CPI softens for a second straight month UK Dec. CPI out this morning and slightly hotter than expectations as the headline rose +0.4% MoM and +10.5% year-on-year vs. +0.3%/+10.5% expected, respectively while the core CPI level rose +6.3% YoY vs. +6.2% expected and +6.3% in November. Sterling traded slightly firmer after the data. P&G and Netflix report earnings today On the earnings front, results from Procter & Gamble (PG:xnys) and Netflix (NFLX:xnas) will shed some light on global consumer strength. P&G reports Q4 earnings on Thursday before the market opens with analysts expecting revenue growth of -1.1% y/y and EPS of $1.59 down 4% y/y suggesting that volumes are being hit by inflation and that analysts expect P&G to see their operating margin decline q/q. The potential upside for P&G on its outlook is the reopening of China. Netflix reports Q4 earnings on Thursday after the market close with analysts expecting revenue growth of 1.7% y/y as streaming services are still facing headwinds post the pandemic. EPS is expected at $0.51 down 67% y/y. The things to focus on for investors are user growth, updates on its advertising business, and user engagement figures relative to recent content launches.   For a 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: Sluggish US economic data; P&G and Netflix earnings ahead - 19 January 2023 | Saxo Group (home.saxo)

Yesterday saw another broadly positive session for European markets, with the FTSE100 once again underperforming, after UK inflation data showed itself to be much stickier than was anticipated, putting upward pressure on the pound in the process.   US markets initially started the day on the front foot until a double punch of weak data saw yields slide sharply on both the short and long end, prompting concerns that US economic activity was being impacted by the lagging effects of multiple rate hikes.   This concern about the economic outlook, along with announcements from the likes of Amazon and Microsoft about job losses, saw US markets roll over after European markets had closed, closing sharply lower, as once again the S&P500 failed above the 4,000 level.   Yesterday's weakness came as a result of concerns about the health of the US consumer. After a strong performance throughout most of 2022, consumer spending appears to have run out of steam with November and December retail sales declining 1% and 1.1% respectively. US PPI for December also saw a lower-than-expected rise of 6.2%, a sharp drop from the 7.4% seen in November.   The Fed Beige Book added little to the picture when it came to how the US economy is doing, apart from an acknowledgement that price pressures are starting to slow, however St. Louis Fed President James Bullard added to the uncertainty by insisting that the Fed needed to get rates above 5% sooner rather than later. This view conflicts with the prevailing market narrative of a 25bps hike next month, as concerns rise that the Fed could well be hiking into a potential recession.   These economic concerns also translated into crude oil prices which having hit their highest levels since the beginning of December early on the day, promptly reversed course to close the day sharply lower.   One thing in the favour of the US economy in the face of disappointing economic reports is a resilient labour market, with today's weekly jobless claims expected to see a modest rise from 205k to 214k.   We also have housing starts and building permits data for December, with the recent cold weather not expected to offer much hope of a respite here.   Last night's weaker US close looks set to translate into a lower European open.   The US dollar had a mixed day slipping to a marginal 8 month low against the euro before recovering, while against the Japanese yen we saw a 400-point range, after the Bank of Japan pushed back on market expectations of further measures to tweak its monetary policy settings around yield curve control.   Governor Kuroda went on to say that a further widening of the YCC band wasn't needed yet, as he looked to finesse the central banks messaging around its next policy move. The BoJ's biggest problem is that yesterday's events only delay the inevitable, with national CPI for December expected to reach a 42 year high of 4% later today.   With the Fed closer to the end of its rate hiking cycle, and the Bank of Japan yet to start its tightening regime, the line of least resistance for USD/JPY is likely to be a move towards 120 and possibly lower in the coming weeks.   EUR/USD – made a marginal new high of 1.0887 yesterday, before sliding back again, as the market struggles for direction. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110.   GBP/USD – ran out of steam just shy of the December peaks at 1.2440. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.   EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a move below last week's low at 0.8770/80, with the risk we could see a move towards the 0.8720 area, and 50- and 100-day SMA. The next support below 0.8720 targets 0.8680.   USD/JPY – the failure to hold onto the gains above 130.00 yesterday suggests the prospect of further weakness and a move towards the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Below 126.50 targets the 120.60 area.   FTSE100 is expected to open 38 points lower at 7,792   DAX is expected to open 60 points lower at 15,121   CAC40 is expected to open 30 points lower at 7,081   Email: marketcomment@cmcmarkets.com   Follow CMC Markets on Twitter: @cmcmarkets   Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discussed the Bank of Japan decision, UK inflation, and US retail sales. 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.

GBP/JPY is approaching 160.00 as investors are still confused about forward Bank of Japan’s policy stance. Bank of England might discover a meaningful downtrend in inflation from the late spring amid tight monetary policy. Bank of Japan could look for an exit from the expansionary policy as inflation is stably rising. GBP/JPY might display a power-pack action after the release of the United Kingdom Retail Sales data. GBP/JPY has extended its recovery move above the critical resistance of 159.00 in the early European session. The cross is marching towards the round-level resistance of 160.00 ahead of the United Kingdom Retail Sales data. On Thursday, the asset rebounded from 157.70 after the Bank of Japan (BOJ) maintained the status quo by keeping the interest rates and yields target unchanged. Bank of Japan (BoJ) Governor Haruhiko Kuroda kept the interest rate at -0.10% and the 10-year Japanese Government Bonds (JGBs) around 0% steady, commented that there is “no need to further expand the bond target band.” He further added that Japan’s economy is still on the path towards recovery from the pandemic and the BoJ is aiming to achieve a 2% inflation target sustainably, stably in tandem with wage growth. BOE’s Bailey sees a sheer declining inflation trend in the late Spring Policymakers at the Bank of England (BOE) have put severe efforts for decelerating the pace of the Consumer Price Index (CPI) by accelerated interest rates. December’s CPI report has shown a consecutive decline in the inflation trend for the first time since the Covid-19 pandemic period, led by declining energy prices. The United Kingdom has been one of the laggards in slowing down the pace of inflation. On Thursday, Bank of England Governor Andrew Bailey cited “He expects that inflation will fall quite rapidly this year, probably starting in the late spring. While commenting on the terminal rate, the Bank of England Governor sees the interest rate peak near the market expectations at 4.5%. The Bank of England Governor is seeing a shallow recession than the historic ones. Earlier, Bank of England policymakers cited rising wages as responsible for escalating inflation. Bargaining power has been shifted in the favor of job-seekers due to a shortage of labor. Investors await United Kingdom Retail Sales for fresh cues For further guidance, investors will keep an eye on the United Kingdom Retail Sales data, which is scheduled for Friday. As per the projections, the annual Retail Sales (Dec) data could contract by 4.1% vs. a contraction of 5.9% reported in the prior same period. However, the monthly economic data is expected to expand by 0.5% against the contraction of 0.4%. A recovery in the retail demand on a monthly basis could be the outcome of rising employment bills due to employees’ bargaining power, which is leaving more funds in the palms of households for disposal. A better-than-projected retail demand could spurt the forward inflation expectations, which could accelerate hawkish Bank of England bets. Mixed Japan’s inflation fails to provide any boost to the Japanese Yen Bank of Japan’s unchanged monetary policy-inspired gains in GBP/JPY faded later as investors still believe that the central bank will look for an exit from its decade-long ultra-loose monetary policy. A rising trend in inflation and the administration’s effort to increase wages could end the expansionary monetary policy ahead. However, the release of the National CPI indicates that investors should wait further before reaching to a conclusion. Japan’s National headline CPI has landed at 4.0%, lower than the consensus of 4.4% but higher than the former release of 3.8%. While the core inflation that excludes oil and food prices has soared to 3.0% higher than the expectations of 2.9% and the prior release of 2.8%. National CPI that excludes fresh food has remained in line with the estimates at 4.0%. GBP/JPY technical outlook The recovery move from GBP/JPY around the upward-sloping trendline of the Ascending Triangle chart pattern plotted from January 13 low at 155.65 has pushed it above the 20-period Exponential Moving Average (EMA) at 159.22. There is no denying the fact that the short-term trend is bullish now.  The horizontal resistance of the volatility contraction chart pattern is placed from January 9 high at 160.92. Meanwhile, the Relative Strength Index (RSI) (14) has scaled above 60.00, which indicates that the upside momentum is active now. Broadly, the cross might find barricades after reaching the horizontal resistance mentioned above.

Summary:  The US equity markets ended lower again on Thursday as strong US jobless claims data underpinned, despite Fed speakers largely supporting the case of a downshift in February. Meanwhile, ECB speakers surprised hawkish, supporting EURUSD, and the post-BOJ strength in Japanese yen also sustained. Mixed earnings results with P&G down but Netflix rising despite missing EPS estimates as subscriber numbers grew. Gold returned to gains after three days of pullback, and crude oil prices also edged higher on China optimism.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slid on concerns about earnings Nasdaq 100 moved down by 1% and S&P500 slid 0.8% in a relatively quiet day. Energy and communication services bucked the decline and managed to each gain around 1%. Microsoft added to its previous day’s decline, falling 1.7% on Thursday. Consumer product giant, Procter & Gamble (PG:xnys) dropped 2.7% on a small earnings miss but disappointing organic sales growth due to a weaker-than-expected volume trend. Netflix (NFLX:xnas) jumped 6.9% in the extended hours after reporting a 7.7 million subscriber increase in Q4. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) consolidated on hawkish ECB comments and a strong Philly Fed survey Treasuries erased their gains in Asian hours as yields followed German bunds higher in London hours on pushbacks from ECB’s Lagarde and Knot to speculation on a downshift of ECB rate hikes from 50bps to 25bps. Yields, especially in the short-end of the curve, climbed further following a smaller-than-expected 190K rise in initial jobless claims and an increase of the Philly Fed Business Outlook Index by 4.8 points to -8.9, better than the consensus estimate of -11.0. The 6-month ahead conditions sub-index improved nearly 6 points to 4.9. The Fed’s Vice Chair Brainard said she was supportive of slowing the rate hike to 25bps at the February FOMC while reiterated “the need for further rate increases, likely to just above 5 percent”. According to Nick Timiraos at the Wall Street Journal, Brainard raised the possibility that the Fed might not need to see as much evidence of a slowdown in labor markets to be confident of inflation improving. The USD17 billion TIPS auction went very strong with bid-to-cover at 2.79, well above the average of 2.25. As the federal government reached its debt limit, Treasury Secretary Yellen wrote a letter to Congress about measures that the Treasury Department is taking to keep meeting obligations until at least early June to allow time for Congress to work on raising the debt limit. Yields on the 2-year rose 4bps to 4.13% and those on the 10-year climbed 2bps to 3.39%, bringing the 2-10-year curve 2bps more inverted at -74. Hong Kong’s Hang Seng (HIF3) unchanged; China’s CSI300 (03188:xhkg) higher Hang Seng Index opened lower on Thursday but managed to pare losses and finished the day nearly unchanged. Techtronic (00669:xhkg), falling 5.4% on analyst downgrades, was the biggest loser with the Hang Seng Index. Chinese developer stocks and consumer names outperformed while China internet stocks, except Tencent, dragged. Country Garden (02007:xhkg) gained 4.9% and Longfor (00960:xhkg) climbed 3.5%. Leading sportswear name, Li Ning (02331:xhkg) rose 3.9%. BYD (01211:xhkg) rose 2.3% while other EV markers edged down. The speculation that a new “Strong Nation Transportation” ride-hailing app is backed by the government to compete with the incumbent platform companies, though later clarified being not the case, weighed on internet stocks, seeing Meituan (03690:xhkg) down 2.1% and Alibaba (09988:xhkg) down 1.7%. Chinese social platform, Kuashou (01024:xhkg) plunged nearly 6% after a co-founder sold shares. The Hang Seng TECH Index slid 1.7%. Overseas buying into A-shares through Stock Connect continued for 12 days in a row with a net buying of RMB9 billion on Thursday, bringing the net buying in January so far to over RMB100 billion. On Thursday, semiconductors, computing, ride-hailing, electronics, pharmaceuticals, brokerage, and defence stocks outperformed. CSI100 gained 0.6%. FX: Dollar slightly lower as Yen and Euro continue to gain The USD was slightly lower on Thursday as the ECB hawkishness continued to outpace that of the Fed and the post-BOJ recovery in the Japanese yen continued. USDJPY traded at sub-129 levels after a trip higher to 131.50 on the BOJ-day. EURUSD has returned above 1.0800 amid ECB member Knot and President Lagarde staying hawkish (read below). NZD and AUD were the underperformers. NZDUSD slid below 0.6400 before a slight recovery as news of NZ PM Ardern’s resignation weighed. AUDNZD’s drop below 1.0800 was also reversed. Crude oil (CLG3 & LCOH3) rebounds Crude oil prices gained as China optimism continued to reign. Reports that China’s covid caseload has peaked further boosted optimism that demand will start to recover more sustainably. Markets shrugged off rising inventories in the US. Commercial stockpiles rose 8,408kbbls last week, according to EIA data. Global demand expectations also got a boost as US jobless claims data supported the view that the labor market is still tight. WTI futures touched $81/barrel again after a drop towards $78 while Brent was back above $86. Gold (XAUUSD) climbed higher after three days of decline Gold continues to show resilience and found fresh bids on Thursday after three days of pullback. Support at $1900 continued to hold, and the yellow metal rose back above $1930 as US yields remained near new cycle lows despite some gains last night. However, demand from ETFs is yet to pick up with expectations that inflation will eventually come back to Fed’s target levels. Some correction may also be seen as Gold’s demand eases after China’s Lunar New Year festival, but the long-term view holds that 2023 will be friendlier towards investment metals, as last year’s headwinds – most notably dollar and yield strength – begin to reverse. For investors, what’s the big picture in markets right now with bond yields down 94bps and gold up nearly 20%? Despite bond yields rising on Thursday, to 3.4% the US 10-year Treasury yield broke below key support two days ago. As our head of technical analysis points out the closely watch yield could drop to 3.22%. As you may recall, our view at Saxo has been that peak hawkishness came in Q4 2022, which supports the retreat in bond yields since November last year. Bond yields are now down 94 basis points from their October peak. At the same time, the gold price rose 19% during the same period, given it typically tends to have an inverse relationship to bond yields, in particular real yields. If we see the Fed pauses later in the year, as Ole points out on yesterday’s podcast, the gold price could rally further in 2023.  Read next: Elon Musk Is Facing Trial In Fraud Trial Over 2018 Tweets| FXMAG.COM What to consider? More Fed members, including Brainard, hinting at a 25bps rate hike Lael Brainard (voter) said the recent downshift in the pace of rate hikes allows the Fed to assess more data as it moves policy to a "sufficiently restrictive" level, noting we are now in "restrictive" territory and are probing for a sufficiently restrictive level. She didn’t clearly confirm a 25bps rate hike for February, but hinted at that saying Fed downshifted the rate hike pace in December to absorb more data, and that logic is applicable today. Another voter Williams is speaking in the Asian morning hours, and signalling that the Fed has more work to do but labor demand far exceeds supply. Non-voter Collins reaffirmed her view that rates need to rise to likely just above 5%, and then the Fed needs to hold rates there for some time, also saying that it is appropriate to slow the pace of hikes particularly with risks now more two-sided. US initial jobless claims a good reminder that labor market is still tight While the focus somewhat shifted towards growth concerns yesterday after the disappointment from US retail sales and industrial production data. US jobless claims unexpectedly fell last week by 15k to 190k vs. expected 214k. Pre-covid monthly average was 345k per week while the 5Yr trend was 245k. So the data is still strong and a good reminder that inflation may continue to stay much higher than expected levels. The Philly Fed regional manufacturing index was also released yesterday, and it wasn’t as bad as the Empire State manufacturing survey stressing our view that survey results can be volatile. That index came in at -8.9 which was better than the -11.0 expected and marginally better than the -13.9 last month. Hawkish ECB speakers pushback against reports of slowing rate hikes ECB's Knot said that market developments of late are not entirely welcome and that the ECB won't stop after a single 50bps hike, planning to hike by 50bps multiple times. Despite a softer CPI print lately, Knot said that there are no signs of underlying inflation pressures abating, and said that the ECB will be in "tightening mode" until at least mid-year. ECB President Lagarde was also on the wires, saying economic news has become much more positive as the contraction in Eurozone 2023 GDP may be smaller than previously expected, so the ECB will stay the course with rate hikes. It's the demography, stupid! Earlier this week, we have learnt that China reached its demographic peak with 10-year ahead of projections. This will serve a as wake-up call for other countries, certainly. The world population growth is now below 1 % for the first time since the first half of the 20th century. About 61 countries in the world are expected to see their population decrease by at least 1% by 2050 (the population of Japan has been decreasing since 2010 while that of Italy since 2014, for instance). Expect massive consequences for the labor market. In Germany, about 500,000 people will leave the labor market each year between 2025 and 2035. This is massive! We are entering into a world of human capital shortage. Japan’s December CPI touches 4%, eyes on BOJ nominations due in February Japan’s December CPI came in at 4.0% YoY from 3.8% YoY previously, with core CPI also at 4.0% YoY while the core-core measure was a notch softer-then-expectations but still above the 2% target, coming in at 3.0% YoY. Despite the Bank of Japan’s pushback on expectations to tweak policy this week, speculations are likely to continue as inflation breadth is spreading. A contender to succeed Bank of Japan Governor Kuroda, Takatoshi Ito, said that the BOJ's next step may be to widen 10y band, could raise it to 0.75% or 1.00% by mid-year, likely won't tweak yield curve control at least until April, and may abandon negative rates this year depending on inflation and wage developments. Procter & Gamble disappointed on weaker organic growth and volume trend Procter & Gamble, the consumer product giant, reported FYQ2 2023 EPS of USD1.59, slightly below the USD1.60 street estimate. The bigger disappointment came from weaker organic growth as a result of a softer than expected volume trend. The management raise sales outlook for FY23 sales outlook but had its FY23 EPS outlook at the low end of its initial range. Netflix reported a gain of 7.7 million subscribers in Q4 Netflix reported Q4 2022 EPS at USD0.12 below market expectations. However, share prices jumped on a better-than-expected gain of 7.7 million subscribers in Q4. Guidance for Q1 2023 revenue at USD8.17 billion was stronger than market expectations.     For a 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: US jobs data confirms labor market strength; ECB’s surprise hawkishness – 20 January 2023 | Saxo Group (home.saxo)

The Japanese yen has edged lower on Monday. In the European session, USD/JPY is trading at 130.15, up 0.45%. The yen slipped 1.3% against the dollar last week, falling as low as 131.57 before recovering. Inflation heads higher Core CPI jumped 4.0% y/y in December, its highest level since 1981. This matched the forecast and followed a 3.7% gain in November. The usual suspects were at play, as food and energy prices rose sharply. Energy prices climbed 15.2%, while food prices were up 7.4%, the fastest pace since 1977. Core CPI has exceeded the BoJ’s 2 percent inflation target for nine straight months, as the central bank’s argument that inflation is transitory has become increasingly hard to defend.  The BoJ is projecting that inflation will peak at 3% in March, but it’s unclear why inflation will start to fall, barring a complete turnaround in energy and food prices. With wage growth lagging behind inflation, the cost of living is squeezing consumers, who are likely to cut back on consumption which will hamper economic growth. We’ll get another look at inflation on Tuesday, with the release of the central bank’s preferred inflation gauge, BoJ Core CPI. The index rose steadily in 2022, from just 0.8% in January to 2.9% in November. The consensus for December is unchanged but a reading of 3.0% or higher will put pressure on the BoJ to tighten policy, which would be bullish for the yen. The BoJ surprised the markets last week when it maintained policy settings at its monthly meeting. The non-move may have been primarily aimed as an ambush on speculators who bought yen in anticipation of the BOJ tightening policy. Still, the markets are expecting a shift in the BoJ’s ultra-loose policy, although it could occur after the new governor takes over in April. What is clear is that the BoJ will continue to command the attention of traders. The BoJ’s next meeting is on March 8th.   USD/JPY Technical There is resistance at 130.67 and 131.69 129.46 and 128.41 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

GBP/JPY retreats from a nearly four-week high touched on Monday, though lacks follow-through. A combination of factors revives demand for the safe-haven JPY and exerts pressure on the cross. Expectations that elevated UK CPI might force the BoE to continue raising rates helps limit losses. The GBP/JPY cross comes under some selling pressure on Tuesday and erodes a part of the overnight gains to a nearly four-week high. The cross remains depressed around the 161.25-161.30 area through the early European session and for now, seems to have snapped a six-day winning streak. A combination of factors assists the Japanese Yen to regain some positive traction and stall its recent corrective decline, which, in turn, is seen weighing on the GBP/JPY cross. Despite the Bank of Japan's decision last week to leave its policy settings unchanged, investors seem convinced that a shirt in stance is inevitable amid stubbornly high inflation. The bets were lifted after the latest CPI report from Japan showed that consumer inflation rose to a 41-year high level of 4% in December. Apart from this, worries about a deeper global economic downturn further underpin the JPY's relative safe-haven status against its British counterpart. Read next: The Japanese Yen Fell And USD/JPY Reached Level Of 130, The EUR/USD Pair Lost Its 1.09 Level And Agian Is Around 1.0880 | FXMAG.COM The downside for the GBP/JPY cross, meanwhile, seems limited amid speculations that elevated consumer inflation will maintain pressure on the Bank of England (BoE) to continue raising interest rates. In fact, the UK Office for National Statistics reported last week that the core CPI in the UK stayed at 6.3% in December or more than three times the BoE's 2% target. Furthermore, the emergence of fresh selling around the US Dollar benefits the British Pound, which might hold back traders from placing aggressive bearish bets. This, in turn, warrants some caution before positioning for an extension of the intraday depreciating move. Market participants now look forward to the release of the flash UK PMI prints for January for some impetus. Apart from this, the broader risk sentiment will influence the safe-haven JPY and contribute to producing short-term trading opportunities around the GBP/JPY cross. Bulls, meanwhile, are likely to wait for some follow-through buying beyond the 161.75-161.80 area, above which spot prices could aim to test the late December swing high, around the 162.30-162.35 region. The momentum could get extended further towards the 163.00 mark en route to the 100-day SMA, which coincides with the 164.00 horizontal support breakpoint near the 164.00 level.

For a long time, the Bank of Japan has been at war with financial markets, but in January decided to conclude a truce with them. Keeping the overnight rate at -0.1% and the range of the targeted yield of 10-year bonds at +/-0.5%, the BoJ offered banks a new system of lending not at a fixed, but at a floating rate secured by securities. The volume of bids at the first auction amounted to £3.13 trillion, three times the amount offered. Commercial institutions will invest the money received, including in bonds, which will stabilize the situation both in the Japanese debt market and in the USDJPY pair. Everyone needs rest. After sharp movements that first led the yen to fall to a 30-year bottom against the U.S. dollar, and then to its strengthening by 17%, the Japanese currency requires rest. A truce is the best way to ensure it, but it was not without a change in the external background here, either. Rising U.S. Treasury bond yields have allowed the USDJPY bulls to raise their heads. The prevailing market optimism about China and Europe's resilience in the face of the energy crisis suggests that the United States will be able to avoid a recession. This reduces the demand for such a reliable asset as American debt obligations and contributes to the growth of interest rates on them. It's quite possible that institutional investors, who took their net positions on the yen into positive territory for the first time since June 2021, will have to moderate their ardor. At least in the short term. Dynamics of USDJPY and speculative positions on the yen As history shows, inflation can sharply slow down to 2% only in the event of a downturn in the U.S. economy. This was the case in the 1970s, when the Fed's aggressive monetary tightening under Paul Volcker pushed the U.S. into recession. This was the case during the global economic crisis of 2008. Now the situation looks different. The U.S. labor market remains strong as a bull, and the improvement in the economies of China and the eurozone raises global risk appetite and weakens financial conditions. Risks of a rebound in inflation are increasing, and the odds of a U.S. GDP contraction are shrinking. Not surprisingly, Treasury yields are rising, contributing to USDJPY pair consolidation. Read next:South African Petrochemical Company Sasol Is Moving Away From Fossil Fuels, Germany Again Refused To Send Tanks To Ukraine| FXMAG.COM Undoubtedly, the downward trend remains in force as, sooner or later, the Bank of Japan will have to give up control of the yield curve and raise rates. All the more so given the acceleration in consumer prices in Japan to 4%, the highest mark in 41 years, and accelerating wages. Nevertheless, any asset needs a break on a long hike, so USDJPY consolidation is just what the doctor ordered. Technically, there is a steady downward trend on the daily chart of the pair, but it is too early to speak about its recovery without quotes falling below the fair value of 128.5. The rebound from the 128–128.5 convergence area can be used for buying. Unsuccessful EMA tests near 131.8 and 133.3 can be used to sell the USDJPY.   Relevance up to 11:00 2023-01-29 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/333107

According to the former executive director in charge of monetary policy during the epidemic, the US dollar is aggressively losing ground against the Japanese yen. However, the Bank of Japan is likely to gradually end emergency measures to stabilize the yield curve once the new governor assumes office in April of this year. This is because the emergency measures will likely last for several months. Former director Eiji Maeda stated in an interview that "it is likely that the Bank of Japan will take steps within the first six months after the election of a new governor." Despite this, the regulator "is likely to continue to maintain a soft monetary policy to keep bond yields low" even if the YCC is finished and the negative interest rate resumes a positive trajectory. A chance that pricing pressure could develop  As Japan transitions away from an economy where inflation has been near zero for a considerable amount of time, according to Maeda, a former senior economist at the Bank of Japan, the country is on track to end persistent deflation. Additionally, it presents the Bank of Japan with a chance to stop using aggressive stimulus measures. "The economy is beginning to experience moderate inflation, which lessens the urgency for taking quick action. There is a chance that pricing pressure could develop in the vicinity of 1% to 1.5%," added Maeda. Haruhiko Kuroda Let me recollect that the Bank of Japan governor, Haruhiko Kuroda, spoke out against a vigorous market assault on the Bank of Japan's incentive scheme exactly one week ago. After the Central Bank's unexpected move to boost the target rate on 10-year notes to 0.5% in December last year, speculation about a potential policy change started to emerge. However, as the majority of experts point out until Kuroda steps down on April 8, more adjustments are unlikely. Read next: The Aussie Pair Is Gaining Strong Positive Traction Agian, USD/JPY Drop Below 130.00| FXMAG.COM Maeda Maeda added that a major factor in the December decision was the yen's excessive volatility. In addition to increased foreign currency rate volatility and a decline in market liquidity, YCC has "major side consequences," according to Maeda. He asserts that the bank won't abruptly end its easy policy. Instead, it's more likely that the phase-out will be followed by an increase in bond purchases and an adequate flow of cash to the financial markets. Options are quite likely, including a further 25 basis point widening of the yield range, which would mark the beginning of the end for YCC. During its subsequent policy normalization step, the Bank of Japan "may announce the phase-out of the YCC and pledge to maintain the bond yield ceiling at 0.75%," according to Maeda. USD/JPY Regarding the USD/JPY's technical picture, it is clear that the dollar is actively losing ground versus the yen. A breach of the support level of 126.35 might put more pressure on the trading instrument, which could result in a bigger sell-off between 124 and 121.30. Only after the US dollar has regained control over the resistance level at 131.60 will it be possible to discuss an upward correction and strengthening of the greenback. This could cause a stronger upward move in the area between 134.70 and 138.30, where large dollar sellers have returned to the market. EUR/USD Regarding the technical analysis of EUR/USD, there is still demand for the single currency, and there is a potential that monthly and annual highs will continue to be updated. To do this, the trading instrument must remain above 1.0860, which will cause it to move to the vicinity of 1.0930. You can easily get through this point to reach 1.0970 when an update to 1.1007 is imminent. Only the collapse of support at 1.0860 will put more pressure on the pair and drive EUR/USD to 1.0805, with the possibility of dropping to a minimum of 1.0770 if the trading instrument declines.   Relevance up to 08:00 2023-01-26 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/333213

The USD/JPY pair has been trading in its own "coordinate system", prioritizing fundamental factors. For example, the pair was actively rising at the start of the week, despite the decline in the U.S. dollar index. Traders of USD/JPY ignored the general weakening of the US currency and even updated the local high (131.14). We will discuss the reasons for such behavior below, but first of all we should pay attention to the most important fact: the bulls failed to settle above the resistance level of 131.00 (middle line of the indicator Bollinger Bands on the D1 chart). Bulls found it hard to climb above this level, which speaks about how unstable their position is. The scale is still in favor of the yen, even in that isolated "coordinate system", in which the pair has to trade. Yen at the helm What is the peculiarity of the pair's behavior? For so many years, the yen acted as a follower, while the greenback took the lead. The Bank of Japan's monetary policy with Governor Haruhiko Kuroda, who was appointed to his post in 2013, repeated the same mantra month after month - that the central bank is committed to accommodative policy and, if necessary, ready to further ease monetary policy parameters. Everybody got used to this rhetoric and did not react to it, at least in the context of the USD/JPY pair. Nearly all of the BOJ meetings were of a pass-through nature, so they had little effect on the price values. But everything changed in December, when the BOJ allowed long-term Japanese government bond (JGB) yields to move in a wider range at the end of the last meeting in 2022. This decision was made, firstly, quite unexpectedly, and secondly - ahead of Kuroda's resignation (he will leave his post in April). Therefore, the market interpreted the outcome of the December meeting very unambiguously, coming to the conclusion that the central bank had taken the first step towards the normalization of monetary policy. Since then, the yen has ceased to be a "slave" in the USD/JPY pair: the focus is no longer just on the Federal Reserve's monetary policy prospects, but also on the prospects of a pivot in the Japanese central bank's policy. The BOJ strikes back The BOJ obviously did not expect such a violent reaction from the market and such unambiguous, categorical conclusions. That is why Kuroda said back in late December that the central bank was not going to abandon its ultra-loose monetary policy in the near future. But the market ignored his rhetoric. Earlier this week, the bears had to deal with another blow: the BOJ published the minutes of its December meeting where several Governing Council members stressed that the "the Bank should carefully explain that it needs to continue with monetary easing, that its accommodative policy stance has not been changed,". The bears were then forced to retreat. Bulls took the initiative and hit a new local high on Tuesday, testing the 131.00 level of resistance. But they failed to hold on to their positions: the bears took the initiative as soon as the bullish momentum faded. At the moment, when this article was being written, the pair was already going down to the bottom of the 129th figure, almost 200 points away from the local high (in only 2 days!). The pair is going down not only because the dollar is "moping" (dollar index is moving to the base of the 101st figure again), but the yen is also strengthening its positions due to "its" own fundamental factors. Inflation, inflation, inflation First, inflation in Japan continues to show an uptrend, renewing multi-year records. Overall consumer price inflation accelerated to 4.0% in December. Excluding fresh food and energy, consumer prices climbed 3.0% annually, and the corporate goods price index was up 10.2% y/y. On Friday, January 27, Japan will publish another important inflation indicator, the January Tokyo Consumer Price Index. It is considered a leading indicator for price movements across the country, so certain conclusions can be drawn from the published figures. If it will be in favor of the yen again, the USD/JPY pair may return to the area of 127-128 figures, where it was traded in early January. Traders of the pair are now acting ahead of the consolidated forecasts. Thus, according to most experts, Tokyo's overall CPI will rise to 4.2%: the last time the figure was at that high was in November 1981. The other components of the report (excluding fresh food prices; excluding food and energy prices) should also show an uptrend. Conclusions Judging by the results of the last few days, we can conclude that the yen held its ground and did not let the bulls settle above the resistance level of 131.00. Undoubtedly, the greenback, which is getting weaker all over the market again, has also played its part. But we should also consider that the pair was rising this week while the USD index was falling. Therefore, the pair is bearish also due to the strengthening of the Japanese currency. Further price declines will largely depend on this week's key releases: if US GDP growth data for Q4 and the core PCE index come out in the red, while Tokyo CPI surprises with its greenback, the pressure on the pair will only intensify. The main bearish target is 127.30 (bottom line of the Bollinger Bands indicator on the D1 chart).   Relevance up to 01:00 2023-01-27 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/333277

GBP/JPY bounces off intraday low but stays negative on a day. BoJ Summary of Opinions suggest policymakers are divided considering higher inflation. UK Business Confidence gauge slumps to the lowest levels since 2009. Sluggish markets restrict immediate moves, Tokyo inflation eyed. GBP/JPY picks up bids to extend the latest rebound from the intraday low past 160.00 heading into Thursday’s London open. Even so, the cross-currency pair remains bearish on a day around 160.45 at the latest. The opening of the European and British markets seemed to have allowed the GBP/JPY pair traders to consolidate the daily losses amid sluggish market conditions ahead of the key US data concerning growth and spending. Elsewhere, the Bank of Japan's (BoJ) Summary of Opinions underpins the bearish bias of the GBP/JPY pair as policymakers are divided over the exit of the ultra-easy monetary policy considering the increasing inflation. “The divergence in views highlights the challenge policymakers face in determining whether the recent cost-driven rise in inflation will shift to one backed by robust demand and higher wages - a prerequisite for raising ultra-low interest rates,” said Reuters. On the other hand, fears of economic slowdown in the UK escalate amid downbeat prints of the British business sentiment index shared by Bloomberg. The Institute of Chartered Accountants in England and Wales said Thursday that its latest monitor of business sentiment dropped to an index reading of -23.4, the weakest since 2009. The last survey, published in November, stood at -16.9. Bloomberg also mentioned that the Federation of Small Businesses’ confidence index dropped to -46 points in the final quarter of 2022 from -36 in the third quarter. With this, the sentiment gauge dropped to the lowest level since 2014. It should be noted that the anxiety ahead of the next week’s bumper calendar comprising multiple key central bank meetings and Friday’s Tokyo Consumer Price Index (CPI) for January, expected 4.4% versus 4.0% prior, also weigh on the GBP/JPY prices. Furthermore, the downbeat performance of the Treasury bond yields adds to the bearish catalysts’ list for the quote. Technical analysis Although a two-week-old support line puts a floor under the GBP/JPY prices near 160.00, the recovery remains elusive unless the quote provides a daily closing beyond the 200-Exponential Moving Average (EMA), around 162.20 by the press time

Tokyo CPI expected to rise Inflation has been on the rise in Japan and the trend is expected to continue with the release of Tokyo CPI later today. The headline figure is expected to rise to 4.4% in December, up from 4.0% in November, while the core rate is forecast to climb to 4.2%, up from 4.0%. Earlier this week, BoJ Core CPI, the central bank’s preferred inflation gauge, rose to 3.1%, up from 2.9% prior and above the forecast of 2.9%. BoJ Core CPI has now accelerated for 11 straight months, challenging the BoJ’s stance that inflation is transitory. The BoJ is projecting that inflation will peak at 3% in March, but this forecast seems questionable, given that rising energy and food prices have been driving inflation higher and higher. With wage growth lagging behind inflation, the cost of living is squeezing consumers, who are likely to cut back on consumption which will hurt Japan’s fragile economy. Kanda sends warning to speculators The yen has been relatively quiet over the past two weeks, but Japan’s top “currency diplomat” sent out a warning today. Vice Finance Minister for International Affairs Kanda said that sharp, one-sided moves in the currency markets would not be tolerated. Kanada oversaw the currency intervention in October after the yen had fallen close to 152 to the dollar. The yen has since rebounded and is currently trading close to 130 to the dollar. Kanda’s message is aimed at speculators, but with inflation rising and the BoJ’s ultra-loose policy looking increasingly anachronistic, speculators are likely to continue betting that the BoJ will have to tighten policy and the yen will rise as a result. The IMF had a message of its own for the BoJ, suggesting that the central bank allow more flexibility in 10-year bond yields, which would mean a shift in BoJ policy. It’s a busy day on the economic calendar, with the US releasing GDP and durable goods. GDP is expected to slow to 2.6% in Q4, which would still point to solid growth. Durable Goods is forecast to rebound and gain 2.5% in December, following a soft reading of -2.1% in November. Traders can expect some volatility from the US dollar in the North American session, as the markets have jumped on any soft readings as a signal that the Fed will have to ease up on its aggressive rate policy, and this has sent the US dollar lower. Read next: GBP/USD Pair Is Struggling To Extend Previous Highs, EUR/USD Pair Continued Its Gains| FXMAG.COM USD/JPY Technical There is resistance at 130.36 and 131.69 129.46 and 128.40 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Tokyo inflation data give the JPY an early boost.  Korean business sentiment dips.  Source: shutterstock Macro Outlook Global Markets: China is still out on holiday until next week, so no stock action to report there, though Hong Kong is back and the Hang Seng put in a solid performance yesterday, opening up and making further gains over the session. US stocks also did well, buoyed by stronger than expected GDP data, though as James Knightley’s note on this reveals, there are worrying signs of a slowdown ahead buried under the headline number. US Treasury yields also got a lift from the GDP figure, with 2Y and 10Y bond yields rising 5.8 and 5.3 bp respectively. The 10Y now sits at 3.495%. The EURUSD has pulled back below 1.09, but could just be a temporary departure, as it looks to be back on a rising trend again. Other G-10 currencies are looking reasonably firm. And the JPY has opened stronger this morning after stronger-than-expected Tokyo CPI data. Other Asian FX had a solid day yesterday, led by the Offshore Renminbi, which is at 6.733 today ahead of China’s return to markets next week.    G-7 Macro: As mentioned above, the main news yesterday was the 2.9% annualised GDP QoQ growth from the US in 4Q22. Personal consumption slowed to 2.1% from 2.3%. Gross private investment rose only 1.4%, within which was a 3.7% decline in business equipment investment and a 26.7% fall in residential investment. Durable goods orders for December were also stronger than expected,  though here too, there were some more negative signals beneath a strong headline figure. Today, we get PCE deflator figures for December, though as we have already got the full 4Q deflator figures from the GDP data, there shouldn’t be any real news here. The pre-GDP consensus was for a drop in the core deflator to 4.4%YoY, with a slight pick up in the MoM rate from 0.2% to 0.3%. The University of Michigan consumer sentiment and inflation expectations figures are also due later. Japan: Tokyo CPI for January came out with an upside surprise. Headline inflation accelerated more than expected to 4.4% YoY (4.0% in December and consensus), and core inflation - excluding fresh-food also rose to 4.3% (vs 4.0% in December, 4.2% consensus).  Looking at the details, the surprise mainly came from fresh food prices, which rose 6.4% (vs 4.4% in December) while utilities rose the most by 22.8%. We think that consumer prices are expected to come down slowly from February as the government’s energy subsidy program will start to work. The JPY looks like responding to the growing market expectations for the Bank of Japan’s policy shift due to a higher-than-expected inflation outcome. Based on the minutes of the BoJ meeting in January, the majority of the board was still in favour of keeping the current level of easing policy and monitoring the policy adjustment in December, but at the same time, there is also a growing view that the current policy should be revisited sometime in the future. We still think the policy change is a long way off. The Spring salary negotiations are key to watch as wage growth is a prerequisite for sustainable inflation. South Korea:  The Bank of Korea’s business survey results show that both manufacturing and non-manufacturing have a dim outlook for their businesses. The January outlook index fell to 65 from 68 for manufacturing and 70 from 72 for non-manufacturing. We believe that from now on, manufacturing sentiment will rebound due to China’s reopening, but non-manufacturing sentiment is expected to stagnate for a while as domestic demand conditions continue to deteriorate.  What to look out for: US University of Michigan sentiment Japan Tokyo CPI inflation (27 January) Australia PPI inflation (27 January) US personal spending and University of Michigan sentiment (27 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

USD/JPY retreats towards intraday low, reverses the previous day’s corrective bounce. BoJ extends five-year loans against collateral to financial institutions to defend YCC as JGB rallied after Tokyo inflation. US Dollar traces firmer yields ahead of US Core PCE Price Index for December. USD/JPY prints mild losses around 130.00, after a failed attempt to recover, as the Bank of Japan (BoJ) marks a show of Yield Curve Control (YCC) during early Friday morning in Europe. In doing so, the Japanese central bank extends five-year loans against collateral to financial institutions, from February 01, 2023, to 2028. The BoJ activity could be linked to a jump in the 10-year Japanese government bond (JGB) yield to 0.50% after Tokyo Consumer Price Index (CPI) refreshed a 42-year high of 4.3% for January. It’s worth noting that this is the BoJ’s second attempt in January to defend the YCC policy, which in turn suggests further challenges for the ultra-loose monetary policy of the Japanese central bank. Contrary to the BoJ action, a run-up in the US 10-year Treasury bond yields and the market’s rush towards risk-safety, mainly after Thursday’s upbeat US growth numbers, challenges the USD/JPY bears. On the same line could be the cautious mood ahead of the Federal Reserve's (Fed) favorite inflation number, namely the US Core Personal Consumption Expenditures (PCE) – Price Index for December, expected to remain unchanged at 0.2% MoM. Against this backdrop, the US 10-year Treasury yields extend the previous day’s recovery to 3.52% while the S&P 500 Futures print mild losses. That said, Japan’s Nikkei 225 drops 0.12% on a day as it snaps a five-day uptrend. Looking forward, the US Core PCE data will be crucial for the USD/JPY pair as the Fed is ready to announce another 0.25% rate hike in the next week. It should be noted that the downbeat US inflation precursor could confirm the market’s dovish expectations from the US central bank and may exert more downside pressure on the Yen pair. Also read: US December PCE Inflation Preview: Is there room for further US Dollar weakness? Technical analysis Multiple failures to cross the 21-DMA surrounding 130.00 keeps pushing USD/JPY down even as a fortnight-old support line, close to 128.80 at the latest.

Summary:  U.S. equities gained and Treasuries sold off on stronger-than-expected U.S. data headlines, including a 2.9% growth in Q4 GDP, a decline in the initial claims to 186K, a 5.6% increase in durable goods orders, and a rise in new home sales. The Nasdaq 100 closed above its 200-day moving average for the first time since March last year. Hong Kong came back from the Lunar New Year holiday rising 2.4% on high-frequency data that pointed to a strong recovery in traffic and consumption during the Lunar New Year holiday in mainland China. Today all eyes are on the PCE data as it may set the direction of the next move of equities and bonds.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) rallied on slower but better-than-expected economic growth The major US indices had a choppy day of trade, with the S&P 500 rebounding and ending up 1.1%, and the Nasdaq 100 finishing the session 2% higher. Investors digested slower US economic GDP growth data but better-than-expected from the fourth quarter, as it tends to suggest that the US economy could make a soft landing. Nasdaq 100 closed above its 200-day moving average for the first time since March last year. 10 of the 11 S&P 500 sectors gained with energy, up 3.3%, and consumer discretionary, up 2%, leading the charge higher. Tesla shares charge, investors look past falling auto margins Tesla’s shares jumped 11% on Thursday, extending its rally from its January 6 intra-day low to over 57%, with earnings and revenue beat expectations, while investors looked past automotive gross margins grinding to its lowest figure in five quarters, 25.1%. Also, despite a streak of quarterly sales (deliveries) coming up short of expectations, Musk teased the potential to produce 2 million vehicles this year, and minimise the effects of drastic price cuts to its EVs. Other company news American Airlines Group expects profit this year to exceed estimates following a slow start, as steady demand for air travel keeps an industry recovery going into 2023. Mastercard warned revenue growth would slow even faster than expected this quarter, stoking fears that inflation has put a damper on consumer spending. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rose on stronger-than-expected economic data U.S. Treasures sold off after the stronger-than-expected economic headlines. Real GDP grew at 2.9% annualized in Q4, faster than the 2.6% median forecast, though more than half of the increase came from a rise in inventories. Initial jobless claims fell to 186K instead of rising as in the consensus forecasts. New home sales rose 2.3% sequentially against expectations for a decline. Durable goods orders grew 5.6% M/M while the median forecast expecting for a decline. The 7-year auction had strong demand with a strong bid-to-cover ratio of 2.69 times and was awarded 2bps richer than the market level at the time of the auction. Yields on the 2-year notes settled 6bps higher at 4.18% and the 10-year finished the session cheaper at 3.49%. Hong Kong’s Hang Seng Index surged 2.4% as mobility and consumption picked up in the mainland On the first trading day of returning from the Lunar New Year holiday while the mainland bourses remain closed, Hang Seng Index surged 2.4% and Hang Seng TECH Index jumped 4.3%. According to Xinhua News, the State Council estimates that passenger trips over the whole Lunar New Year peak transportation period are reaching 2.1 billion, almost doubled the number from last year. Separately, data from the Ministry of Transport showed that daily passenger trips between 7 and 25 January averaged nearly 37 million, a 50.8% growth from last year. Tourism consumption data from Ctrip and cinema box offices have also been encouraging. It added to the optimism that the initial Covid outbreak when pandemic containment measures were lifted has not stalled the rebound in mobility and economic activities. Xiaomi (01810:xhkg), surging 12.5%, was the best performer within the benchmark Hang Seng Index, following the leak of an EV blueprint design being considered as an indication of the mobile phone and electronic device maker is on track to launch its first EV in 2024. FX: CAD boosted by higher oil prices; JPY stronger on Tokyo CPI The US dollar was modestly higher on Thursday with upbeat US GDP and claims data supporting the case for a soft landing. Focus now turns to PCE and the earnings season ahead of the Fed meeting next week where the broad consensus is still for a step down to a 25bps rate hike. CAD was the clear outperformer across the G10 board, despite Bank of Canada’s dovish tilt this week as higher oil prices supported. USDCAD now testing a break below 1.33. EURUSD still getting rejected close to YTD highs of 1.0930, but JPY was one of the underperformers as USDJPY traded back above 130 amid somewhat higher US yields but a dip back below 129.70 was seen in early Asia as Tokyo CPI for January came in above expectations. AUDUSD holds higher despite Australian producer prices slowing. US PCE today & RBA decision Tuesday next test Australian producer inflation (as measured by the Producer Price Index), has been trending higher, however today’s data from Q4 suggests producer prices are easing. However we believe that this is not an accurate reflection of reality. Not only is the data quarterly, but raw material prices (oil, electricity, fuel, copper, rent) are trending higher. As such the Australian dollar holds at 0.7127, after rising up 0.2%. The next test for the Aussie dollar will be Friday’s PCE data from the US and Tuesday’s RBA commentary with an expected 0.25% (25bps) hike on the cards. All in all, we believe the AUD is supported higher over the medium term, following a series of hotter than expected CPI prints, while China’s reopening is supporting the AUD with commodity demand rising. Still we continue to watch if the 50 day simple moving average crosses above the 200 day, marking a ‘golden cross’, which could lead to another quick run up. Crude oil (CLG3 & LCOH3) prices jump higher The demand outlook for commodities got another boost on Thursday with upbeat US GDP report for Q4 and a still-low initial claims weekly print highlighting the tight jobs market. Th30e recovering demand outlook in the short run also saw Brent structure flipping to backwardation from contango. Brent futures were up 1.7% to $87.50 but our Head of Commodity Strategy, Ole Hansen, writes that Brent is likely to find resistance at $100 in the short-term, with recession risks offsetting an expected rebound in Chinese demand and supply concerns related to the February 5 introduction of an EU embargo on Russian seaborne sales of fuel products. WTI futures inched back above $81/barrel. Gold (XAUUSD) rejected at 1950 With the upbeat US economic data releases on Thursday, there was increasing conviction that the Fed could still deliver a soft landing vs. a deep recession that some had started to forecast at the end of 2022. This prompted some profit-taking in Gold which closed at a nine-month high and very close to the key resistance of $1950 a day before. Spot prices slumped close to 0.9% to close near $1930, with support seen at $1900 with resistance at $1963, a Fibonacci level. Copper shorter term correction risk Copper prices lift 0.5% to $4.27, and are now up 32% from their lows. The wiring and industry metal outlook remains bright amid the clean energy transition, while mines will need to produce more than needed over the next two years to meet demand. However there is a risk Latin America will ramp up output, which could see prices correct.  Read next: Trump Returns To Social Media, Meta Will Restore The Former President's Account| FXMAG.COM  What to consider? US economic data continues to point to soft landing, eyes on PCE The advance print of US GDP came in at a stronger-than-expected +2.9% YoY (vs. 2.6% YoY exp) for the fourth quarter from 3.2% YoY in Q3. While the strong headline, together with another sub-200k print for the weekly jobless claims, coming in at 186k vs. 205k expected, suggested that the US economy was holding up strongly in the wake of rapid Fed tightening, the details were still patchy. Importantly, personal consumption, key to gauge how the consumers are holding up, climbed at a weaker-than-expected pace of 2.1% YoY. Focus now turns to Fed’s preferred inflation gauge, the PCE data, due to be released today. The disinflation impulse is likely to stretch further, as has been evident from CPI releases lately, likely continuing to build a case for a 25bps rate hike by the Fed next week. IMF urges the Bank of Japan to consider policy flexibility The BOJ should consider increasing flexibility in long-term yields, the IMF said, highlighting that the risks to inflation are tilted to the upside with exceptionally high uncertainty. Options include raising its 10-year yield target, widening the trading band, switching back to a quantity goal for bond buying and aiming at a shorter-maturity yield. Japan needs to see a 3% across-the-board rise in nominal wages to anchor CPI above the BOJ's 2% target, fund Deputy MD Gita Gopinath said. EU considering $100 cap on Russian diesel The European Union is floating a plan to cap the price of Russian diesel at $100 a barrel from February 5 (the same date as the EU will ban almost all imports of refined Russian products). For reference, diesel futures are currently trading at $130/barrel, as they usually trade at a premium to crude. A lower $45 threshold would be set for discounted fuels like fuel oil, but member states will need to unanimously agree to the final figures. The objective remains to keep the Russian flows coming but cut Moscow’s revenues. Japan’s Tokyo CPI beats expectations Tokyo CPI for January came in above expectations, with the headline rising to 4.4% YoY from a revised 3.9% YoY previously and estimate of 4.0% YoY. The core measure rose to 4.3% YoY from 3.9% YoY while the core-core measure was also higher at 3.0% YoY from 2.7% YoY in December. This makes way from another beat in the overall CPI for January as well, and saw USDJPY down by about 50pips in response to 129.70 after a modest rise in the US session as US yields rose. Asia’s inflation surge from Australia to New Zealand to Japan is raising concerns on how China’s reopening could potentially fuel another leg of price pressures globally as commodity prices surge. In Australia, the ASX200(ASXSP200.I) seems supported by China reopening Consider Australia is often considered an investment proxy for China and Aussie exchange-traded funds (ETFs) could draw flows as China's economy reopens from Covid. The Australian equity market is frequently a dividend and commodity play, tilting heavily to financial and materials sectors. Mining company BHP Group expects dividend growth of 17% while the top iron ore miners are expected to ramp up shipments, underpinning higher earnings. Insurers, banks and financials could benefit most from RBA rate hikes with QBE and Westpac most sensitive to rising interest rates, with 60% and 40% profit boosts expected for them this year amid higher earnings on assets. The ASX200 is up 16% from its low and total aggregate earnings growth of over 30% is likely to unpin further growth for the market.   For a 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: Tesla leads; US GDP beats estimates – 27 January 2023 | Saxo Group (home.saxo)

The Japanese yen is in positive territory on Friday. In the European session, USD/JPY is trading at 129.76, down 0.33%. Tokyo CPI hits 4.3% Inflation indicators in Japan continue to head northwards. Tokyo Core CPI rose to 4.3% y/y in January, up from 3.9% in December and ahead of the consensus of 4.2%. This is the highest level in 42 years, but what is more worrying for the Bank of Japan is that the indicator has exceeded the central bank’s target of 2% for the eighth straight month. The increase was broad-based, with food and fuel prices the main contributors to the increase. The Tokyo Core CPI reading follows other inflation indicators which have hit decades-high levels, adding pressure on the BoJ to exit its stimulus programme. The BoJ insists that inflation will peak at 3% in March. but this view seems over-optimistic, given the trend we’re seeing from inflation data. BOJ Governor Kuroda has said he will maintain the Bank’s ultra-loose policy until wages increase, which would indicate that inflation is driven by domestic demand rather than cost-push factors. Kuroda winds up his term in April, and the new Governor could decide to tighten policy, which would boost the yen. US GDP climbed 2.9% y/y in Q4, down from 3.2% in Q3 but still a respectable clip. Will the US be able to avoid a recession? The answer isn’t clear, as the economic data shows a mixed picture. The employment market remains robust and overall growth has been positive. Manufacturing and Services PMIs continue to show that these sectors are contracting and housing has been especially weak, as it lowered Q4 GDP by about 1.3%. Much will depend on the strength of consumer spending, which accounts for some 68% of GDP. Consumer spending rose 2.1% in Q4, down slightly from 2.3% in the third quarter. However, the December release is worrying, as consumer spending declined by 1.1%. If this trend continues, it seems likely that the US economy will tip into a recession. Read next: Another Sector Announced Layoffs, Hasbro Reduced Its Workforce, IBM And SAP Have Joined Technology Companies That Are Reducing Employment| FXMAG.COM USD/JPY Technical 129.46 is a weak support level. The next support line is 128.40 There is resistance at 130.89 and 131.69 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.  

USD/JPY picks up bids to pare intraday losses, up for the third week in a row. Yields remain pressured, stock futures grind higher amid growth optimism, Covid-linked news. BoJ Chief Contestant warn of government meddling to defend JPY. Second-tier US data may entertain traders but FOMC is the key. USD/JPY trims daily loss around 130.30 during early Tuesday morning in Europe as mixed sentiment in the market joins a pause in the US Treasury bond yields. Adding to the Yen pair traders’ confusion are the fresh fears of government meddling to defend the Japanese currency. While firmer Japan data recently fuelled fears of the Bank of Japan’s (BOJ) exit from ultra-easy monetary policy, backed by a suggestion from the key policymakers, fears of government’s defense of Japanese Yen (JPY) probe the pair traders. “Hirohide Yamaguchi, among the top candidates to become the next Bank of Japan (BOJ) governor, warned about the danger of signing a joint policy document with the government when he was deputy governor in 2012, minutes of that meeting showed on Tuesday,” per Reuters. Elsewhere, the International Monetary Fund (IMF) recently raised its global growth estimates while also saying that the emerging markets' growth slowdown bottomed out in 2022. The global lender also stated that estimates come with the backdrop of a slight increase in the 2023 global growth outlook helped by "surprisingly resilient" demand in the United States and Europe, an easing of energy costs and the reopening of China's economy after Beijing abandoned its strict COVID-19 restrictions. It’s worth mentioning that the IMF’s fears over inflation seem to tame the optimism afterward. On the same line, receding fears of the COVID-19, after the US White House statement suggesting removal of virus-led activity restrictions, also propel the risk barometer USD/JPY pair. However, stronger Japan data underpin the hawkish bias from the BoJ and weigh on the quote. Against this backdrop, the US 10-year Treasury yields struggle to extend a three-day uptrend near 3.54% while the US Dollar Index (DXY) retreats to 102.20 at the latest. Further, the S&P 500 Futures remain mildly offered and so do stocks in the Asia-Pacific region. Looking forward, the US fourth-quarter (Q4) Employment Cost Index (ECI) and the Conference Board’s Consumer Confidence gauge for January will be eyed for immediate directions. As per the market consensus, the US Consumer sentiment gauge may improve but a likely softer print of the US ECI, to 1.1% from 1.2%, could strengthen the dovish bias surrounding Fed and can recall the USD/JPY bears. Technical analysis A daily closing beyond the 21-DMA hurdle, currently around 130.40, becomes necessary to keep USD/JPY buyers on the table.

USD/JPY prints three-day losing streak despite recent bounce off weekly low. BoJ’s Wakatabe appears determined to tame inflation, praises YCC move. US 10-year Treasury bond yields dribble around two-week low. Second-tier US data, other central bank announcements can please Yen bears before Friday’s US NFP USD/JPY pares intraday losses around 128.60 during the three-day downtrend as the market slips into consolidation mode ahead of the second round of central bank dossier amid early Thursday. The Yen pair dropped to its lowest levels in two weeks earlier in the day while extending the Federal Reserve (Fed) induced losses amid downbeat Treasury bond yields. That said, the US 10-year Treasury yields slumped the most in two weeks while testing the lowest levels in a fortnight the previous day after the US Federal Reserve (Fed) announced its dovish hike of 0.25%. The US central bank unveiled receding fears of inflation and Chairman Jerome Powell showed readiness for cutting the rates if inflation drops faster, which in turn drowned the US Dollar and yields. The same propelled the risk-on mood and favored Wall Street bulls. On the other hand, hawkish comments from Bank of Japan (BoJ) officials also favored the GBP/JPY bears. That said, Bank of Japan's Deputy Governor Masazumi Wakatabe has said the BoJ will continue to conduct monetary policy to achieve 2% inflation accompanied by wage growth. The Japanese central bank has recently conducted multiple bond market moves to defend the Yields Curve Control (YCC) policy. BoJ’s Wakatabe was recently heard praising the YCC move of the BoJ. It should be noted, however, that the comments from BoJ’s Wakatabe also ruled out the market’s fears of any immediate move, which in turn allowed USD/JPY to lick the Fed-inflicted wounds. Amid these plays, the S&P 500 Futures print mild gains while Japan’s Nikkei 225 follows the suit as traders await another round of central bank announcements, this time from the European Central Bank (ECB) and the Bank of England (BoE). In addition to the central bank news, US Factory Orders for December, expected 2.3% versus -1.8% prior, and the US Preliminary Nonfarm Productivity for the fourth quarter (Q4), expected 2.4% versus 0.8% prior. Above all, Friday’s US jobs report for January will be crucial to follow for clear directions. Technical analysis The successful downside break of the 13-day-old ascending trend line, around 129.40 by the press time, directs USD/JPY bears towards the previous monthly low of near 127.20.

With central bank decisions out of the way, it's all about the US jobs report out tonight.   Source: shutterstock Macro outlook Global Markets: Thursday marked another very solid day for US equities. The NASDAQ, which had risen by 2% on Wednesday, piled on another 3.25% on Thursday as further thoughts of a Fed pause/pivot gained ground. The S&P500 rose 1.47%. Chinese stocks didn’t fare so well, with the Hang Seng Index and CSI 300 both dropping. Most of the action in bond markets yesterday was outside the US Treasury market, which didn’t move much. But European bond markets saw steep falls in yields as both the ECB and Bank of England hiked policy rates by 50bp. 10Y Bund yields  dropped 21.3bp, while Gilt yields fell a staggering 30bp. There were similar-sized falls in Italian and Greek bond yields. Markets seem to be taking the view that policy rate hikes are nearing an endpoint across the whole of the G-10.  All of this has undone some of the EUR’s recent sparkle, and it has dropped back below 1.10 to 1.0923 as of writing, taking the G-10 currencies, AUD and GBP with it. The JPY seems to have weathered this latest retreat better than the other  G-10 currencies and is at 128.71. There were gains for most of the Asian currencies yesterday, led by the PHP, KRW and TWD. The INR and THB missed out on the appreciation, losing a little ground to the USD. Today, we will probably see Asian FX dropping back after the G-10 moves overnight.   G-7 Macro: Here are some links to our economists’ thoughts on the European Central bank meeting and the Bank of England Meeting. The short story on both seems to be that the ECB is trying to get us to believe that they will hike a further 50bp in March with possible hikes beyond that, but in reality, seem to be wondering if the data will compel them to do that. A bewildering mixture of pre-commitment and data dependency which leaves many analysts scratching their heads. The Bank of England is a lot clearer, with hints that they may now be done. Today, we have the January non-farm payrolls release in the US, and after the weak ADP survey earlier this week, there must be some speculation that we see a surprise undershoot of the consensus 190,000 job gain view. Anything is possible with payrolls, and over a longer time frame, we would not discount the explanatory power of the ADP survey. But as a month-on-month predictor, we’d rather flip a coin, to be honest. Hourly earnings (currently 4.6%YoY) and the unemployment rate (3.5% right now) will be as interesting as the payrolls figure itself, given the Fed’s recent preoccupation with the labour market. But then markets do not seem to be paying much attention to what the Fed is interested in right now, and probably rightly so.  The service sector ISM that is also released later today will be of mainly academic interest following the payrolls number. China: According to the Financial Times, US Secretary of State, Antony Blinken, will meet China's Xi Jinping on 5 and 6 Feb. Before that, China is trying to convince Japan and the Netherlands to relax their ban on exports of semiconductor equipment. We do not expect these talks to succeed, so U.S.-China relations may continue to deteriorate. This is a new risk in the supply chain for some industries, as China could respond by halting exports of solar panel technology. There could be more tit-for-tat retaliation between the US and China for the remainder of 2023. This is not good news for global macro. While the impact may not be apparent at this early stage, repeated retaliation could weigh on long-term global growth. The Caixin Services PMI should rise above 50 in January, but this is no longer “news” and therefore should not substantially impact the market. Singapore: December retail sales will be reported today.  Market consensus points to a 5.2%YoY increase, a moderation from the 6.2%YoY gain in the previous month.  We’ve noted a gradual slowdown in retail sales which was reflected in a similar downturn in general economic activity.  Higher prices appear to be taking their toll on spending although department store sales have held up well, possibly supported by tourist arrivals.  Expect more of the same in early 2023 as high prices and the implementation of the goods and services tax increase kicked in this January.  Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend, The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM What to look out for: US jobs report Japan Jibun PMI services (3 February) China Caixin PMI services (3 February) Singapore retail sales (3 February) US non-farm payrolls and ISM services (3 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Fed and Bank of England are closing in on the end of their respective tightening cycles, while the ECB still has more work to do. Greater potential for an inflation pullback in the US suggests the Fed will be much earlier to cut rates than its European counterparts. Bank of Japan tightening is likely to be a gradual process In this article Federal Reserve European Central Bank Bank of England Bank of Japan   ECB President, Christine Lagarde with Croatia's Economy Minister at the World Economic Forum last month Federal Reserve After the most aggressive series of policy rate increases seen in more than 40 years, unsurprisingly, the US economy is now experiencing slower growth. Markets are now pricing recession, but Federal Reserve officials are concerned that lower Treasury yields and a softer dollar have loosened financial conditions, thereby undermining the Fed’s policy stance. They continue to warn that “unacceptably high” inflation means the economy needs to experience a “sustained period of below trend growth” for them to be confident price pressures will fade. Hence the latest 25bp hike with a further 25bp expected in March. However, job loss announcements are becoming more prevalent, and weakening price intentions, falling car prices and a clear topping out in housing rents offer encouragement that inflation will fall sharply. This should open the door to significant interest rate cuts from late in the third quarter of this year, with the Fed funds target rate potentially falling back to 2.5% next year. European Central Bank It took the ECB a while, but it seems to have got the hang of it: hiking interest rates. And as long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. The increasing probability that a recession will be avoided in the first half of the year also gives companies more pricing power, showing that selling price expectations remain elevated. The celebrated fiscal stimulus, which has eased recession fears, is an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation. These are two factors that could extend inflationary pressures in the eurozone, albeit at a lower level than we see at the moment. As a consequence, we expect the ECB not only to continue hiking into late spring but also to keep interest rates high for longer than markets have currently pencilled in. Bank of England The Bank of England has given its strongest hint yet that the tightening cycle is nearing an end - and perhaps even that February's 50bp hike was the last. In practice we're probably not quite there yet. UK headline CPI may have peaked, but the same can’t yet be said for wage growth or service-sector inflation. We therefore expect the BoE to pivot back to a 25bp rate hike in March but that's likely to be it. However unlike the Fed, it’s unlikely that the BoE will begin cutting rates later this year. The Bank's Chief Economist, Huw Pill, recently noted that the UK has the worst bits of the US inflation story (structural labour shortages) and the eurozone (energy crisis), arguing that core inflation could stay stickier as a result. That’s a line we’re likely to hear a lot of over the coming months and suggests a rate cut is unlikely for at least a year. Bank of Japan The Bank of Japan attracted the attention of market participants around the world after it surprised with an unexpected adjustment in the yield curve control policy in December. Governor Kuroda reiterated at the January meeting that the economy still needs easy monetary policy, and the BoJ’s sustainable inflation target of 2% has yet to be achieved. We think that it is highly unlikely that Kuroda will make another move in March, just before his retirement in early April. Indeed, markets are paying more attention to who will be the next governor, hoping the new leader may change the BoJ’s policy stance. We agree, but “Shunto”, the spring wage negotiations, will be key to watch. If wage growth is not strong enough to offset recent inflation, it will take longer than expected to normalise policy. We predict that the BoJ will keep its negative policy rate and yield curve control policy until the end of 2023 for now. TagsCentral banks 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

Market expectations for a policy change by the Bank of Japan will continue to grow, but it won't move as fast as many in the market might hope In this article Will a change in leadership lead to a change in policy? Wage increases are essential to escape the vicious cycle of deflation BoJ watch   Kuroda Haruhiko, Governor of the Bank of Japan, is getting ready to step down Will a change in leadership lead to a change in policy? The Bank of Japan's Governor, Haruhiko Kuroda, will step down on 8 April after serving 10 years at the Japanese central bank. Kuroda is credited as being the main advocate of Japan's super-easy monetary policy stance. And his looming retirement means that market expectations are growing over whether the next governor will shift the BoJ's policy stance.  His successor nominee will be presented to Parliament on 10 February, but a couple of names are already circulating, notably those of the current deputy governor or his predecessor. Based on their past remarks, it's expected they would both reduce the extent of accommodation, although there is a 'hawk-dove' division as far as the policy spectrum's concerned. So, the pace and extent of any changes will surely vary, but even small modifications can shock the market, as was demonstrated after the December policy tweak. Consequently, a conservative policy transition is likely to be pursued. We also think that the next governor is likely to continue to focus on prices, as the current above-4% inflation rate is not considered sustainable and is expected to fall below 2% in the coming quarters. That's why we believe the spring wage negotiations, known as Shunto, are the key variable to watch.  Wage increases are essential to escape the vicious cycle of deflation As we mentioned in our research note "Why is Japan's inflation so low?", there are structural problems which have led to Japanese consumers' wage and wealth growth stagnating. Core CPI inflation, excluding fresh food, is expected to exceed 4% in January. But this is driven mainly by supply-side pressures and will be transitory. Therefore, from the BoJ's perspective, there is still concern about deflation. This is why the spring salary negotiation is important. Without wage growth, it is going to be very difficult to achieve a sustainable inflation target of 2%. The government has offered incentives to companies for wage increases, but in our view, wage growth will rise more slowly than the 3% sought by the BoJ. Base salaries may pick up, reflecting high inflation, but this may be largely offset by a reduction in bonuses and incentives as corporate earnings are likely to be squeezed. The latest labour market reports suggest that wage pressures remain relatively weak. However, if wages do rise by around 3%, then the pace of policy adjustment by the BoJ is expected to accelerate.  10-year JGB runs just below the BoJ's target band CEIC BoJ watch We think it will be difficult for Kuroda to try any policy changes at the March meeting just before he steps down. A lack of upward wage pressure, along with slowing inflation, may also prevent the new governor from taking immediate action in April. We think he will likely adjust the forward guidance and call for a policy review with the Ministry of Finance. This will give the BoJ more flexibility in policymaking.  As we argued in our outlook report, there could well be a re-examination of the inflation target – from the current "at the earliest possible time" to making the 2% target a "long-term goal". Thereafter, we think the BoJ will lift the mid-point target for the 10Y Japanese government bond from 0% to 0.25% in early 2024, followed by raising its short-term policy rate from -0.1% to 0.0% in the second quarter of 2024. If wage growth is stronger than we expect and inflation stays above 2% until the third quarter of this year, then the timing could be brought forward to the end of this year. TagsWage growth Japanese inflation Bank of Japan 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

Payrolls shock and balloon pop to dominate today's trading Source: shutterstock Macro outlook Global Markets: Once again, US non-farm payrolls caught markets off guard, with a surprisingly strong headline figure which drove up US bond yields and caused the USD to strengthen. 2Y US Treasury yields rose 18.4bp to 4.289%, while 10Y yields rose 13.2bp to 3.525%. EURUSD dropped back below 1.08, and the USD also rallied against other G-10 currencies. The AUD is back below 70 cents at 0.6925. Cable has fallen all the way back to 1.0250 and the JPY shot back above 132, though has since settled back to 131.67 this morning. Part of that JPY move may have been on speculation about BoJ Governor Kuroda's successor, as BoJ incumbent and continuity candidate, Masayoshi Amamiya was rumoured to have been approached for the job. Finance Minister, Shunichi Suzuki later said he hadn't heard anything about the nomination. Most Asian currencies have weakened against the USD. Many of them will fall sharply in early Asian trading as they take onboard the G-10 movements. USDCNH is back up to 6.8219 with the balloon incident not helping China's currency (see more below).  US stocks didn’t like the implications of a stronger labour market either, as it hurts the Fed pause/pivot story. The S&P500 dropped 1.04% on Friday, while the NASDAQ was down 1.59%. The Hang Seng and CSI 300 were also both down on Friday. G-7 Macro:  For the full gory details of the US labour report, please refer to James Knightley’s note. The headline numbers are a 517,000 rise in employment, a fall in the unemployment rate to 3.4% from 3.5%, but a moderation in hourly wage inflation to 4.4%YoY from 4.8%. James has gone on to dig deeper into the detail of the report, which reveals that almost all of the employment gains were part-time, and much may be attributable to warmer than usual weather in January, lifting outside work which would normally be very limited at that time of year. The weather has since turned very cold, which suggests that we may see some reversal of the apparent strength in the labour market next month. Though who really knows with this data? There is no data out of the US today. In the rest of the G-7, German factory orders data for December are the main release. A continuation of double-digit year-on-year declines is expected. China: The Chinese balloon shot down by the US has hardened President Xi's stance on relations with the US, which was inevitable as he needs to demonstrate strong foreign policy to China’s citizens. The implication is an intensified tech war. Both sides will likely impose more export bans on technology in different industries. This is a new threat to supply chain disruption, although the risk of logistical disruption from Covid restrictions has now disappeared. This new risk is more of a long-term risk than an imminent one. Nonetheless, the balloon event is bad for the yuan today. Indonesia:  4Q22 GDP is set for release today.  The market consensus points to a 4.9%YoY gain, good enough to take 2022 full-year growth to 5.3%.  Indonesia’s export and manufacturing sector managed to post solid growth in 2022 in large part due to the global commodity price surge.  This area of support faded towards the end of lat year and the economy will need to rely on other sectors like domestic consumption to carry growth momentum on into this year.        What to look out for: Fed speakers and China inflation Indonesia GDP (6 February) Thailand CPI inflation (6February) Australia RBA meeting and trade balance (7 February) Philippines CPI inflation (7 February) Taiwan trade balance (7February) US trade balance (7 February) South Korea BoPcurrent account (8 February) India RBI policy meeting (8 February) US mortgage MBA applications (8 February) Fed’s Powell, Williams, Cook and Barr speak (8 February) Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Fed’s Kashkari and Waller speak (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February)   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Nasdaq 100 plunged 1.8% and S&P 500 shed 1% in a hectic session weighed on by earnings disappointments and higher bond yields following the smashing January non-farm payrolls and the lowest unemployment rate since 1969. Yields on the 2-year Treasury surged 18bps and those on the 10-year climbed over 10bps. USD strength is back in focus, also aided by reports of Bank of Japan’s Deputy Governor Amamiya (who is seen as dovish) being tipped to be the front-runner for the top job at the BOJ.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) suffered from the double whammy of earnings disappointments and a surge in bond yields Index futures traded south on Friday during Asian hours as Apple (AAPL:xnas), Alphabet (GOOGL:xnas), and Amazon (AMZN:xnas) reported disappointing results. The losses widened when New York came in following the staggeringly hot job data. The benchmark indices managed to pare all losses through New York mid-day but failed to hold onto gains towards the close. Nasdaq 100 and S&P 500 slid back down to finish the choppy Friday session 1.8% and 1% lower respectively. The sell-off in the afternoon was broad-based, seeing all 11 sectors within the S&P500 falling, led by weaknesses in consumer discretionary, communication services, utilities, and real estate. Apple recovered from an early loss to settle at 2.4% higher while Alphabet lost 2.8% and Amazon tumbled 8.5%. Nordstrom soared 24.8% following a report of activist investor Ryan Cohen having built a stake in the fashion retailer. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jumped across the front end, paring rate cut expectations Following the strong job data and a much better-than-expected ISM Services print, yields across the front end from the 2-year to 5-year Treasuries jumped around 18bps, bringing the 2-year to 4.29% and the 5-year to 3.66%. SOFR futures fully priced back a 25bp rate hike for the March FOMC and shed the rate cuts priced in for the 2nd half of 2023 to 45.5bps from 56bps. In addition to the hot 517K headline for the January payrolls, non-farm payrolls were revised up by 51K on average from July through December 2022. The Household Survey showed employment growth of 894K in January, bringing the unemployment rate down to 3.4%, the lowest since 1969. While the deceleration in average hourly earnings growth to 0.3% M/M and 4.4% Y/Y, supports the Fed’s disinflation narrative and the likelihood of a pause after one more hike in March, the job data poured cold water on the market’s expectations of rate cuts this year. The reaction in the longer end was relatively less volatile. Yields on the 10-year rose 10bps and those on the 30-year finished the session 7bps cheaper. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) in consolidation mood The Hang Seng Index declined 1.4% on Friday, extending the weekly loss to 4.5%. HSBC (00005:xhkg) slid 3% and Ping An Insurance (02318:xhkg) plunged 4.1%. Baidu (09888:xhkg), falling 4.6%, pulled back and pared some of its strong recent gains. Chinese real estate names declined, led by Country Garden Services (06098:xhkg) down 7.25%, while local Hong Kong developers gained following Hong Kong scrapped Covid-test requirements for mainland visitors. China internet and EV names were notable laggards. Southbound money was net outflow every day, for a total net outflow of USD 2.2 billion over the week. CSI300 was down nearly 1% on Friday with real estate, solar, electric equipment, non-ferrous metals, and construction materials leading the fall. Friday was the first time that there was a daily net outflow in Northbound money via Stock Connect since January 3 this year. Over the week, CSI300 inched down 1% and northbound inflows into A-shares amounted to USD 5.1 billion in total. On Friday, economic data were better than expected but they took a backseat to the risk-off sentiment and exhaustion after the Hang Seng Index advanced 10.4% and CSI300 climbed 7.4% in January. Mainland China’s Caixin Service PMI returned to the expansion territory at 52.9, well above the consensus of 51.0 and 48.0 in December 2022. Hong Kong’s PMI bounced to 51.2 in January from 49.6 in December and retail sales grew 1.1% in January while the street consensus and the prior month were expecting a decline. FX: All eyes on JPY again; dollar bid on jobs, geopolitics and BOJ new governor chatter The Japanese yen weakened on Friday after the US jobs report, along with the upside surprise in ISM services, brought the US 10yr yields up over 13bps and 2yr up 18bps. The weakness in the yen was further aggravated this morning in Asia after reports of BOJ deputy governor Amamiya being approached to be the new chief (read below). USD traders will have their eyes on Chair Powell’s speech and a host of other Fed speakers due in the week to assess if last week’s dovish stance is maintained even after the strong jobs and ISM services reports. NZDUSD testing support at 0.6300 after being the weakest on the G10 board on Friday, and AUDUSD testing 0.6900. GBPUSD broke below 1.2100 after being rejected at 1.2400 last week, and the GDP report this week could cause jitters as expectations of a delayed recession have kicked in. EURUSD below 1.0800 while USDCAD tests 1.3400. Crude oil (CLG3 & LCOH3) prices weighed down by risk-off tone A strong US jobs report on Friday sparked a risk-off tone after prospects of rate cuts this year continued to gain traction following the Fed meeting last week. This was exacerbated by concerns of rising inventories and weaker than expected demand in China. EU’s caps on Russian oil products kicked in over the weekend; 100/bbl for premium products, such as diesel, and USD 45/bbl for cheaper products, including fuel oil. Russian Energy Minister stated that there is no reason to sharply reduce output of Russian petroleum products because of the EU embargo, so little disruption to supplies can be expected. But OPEC’s supply cuts still keeps the market tight. WTI futures were slightly higher at $73.50 after slipping from $78 on Friday; while Brent found support at $80 for now. Commodities; metals head south; breakfast commodities charge The most strength is coming in breakfast plate commodities; orange juice, coffee, sugar, and soybeans, with prices mostly being supported by limited supply following the hurricanes last year. While wheat and lean hogs are lower. In metals, we’re seeing price weakness in commodities that have been benefiting from Chinese demand picking up. Iron ore, copper, and aluminium appear to be facing selling pressure, with investors and traders taking profits, awaiting more evidence of a pickup in activity in China. The higher US dollar is also acting as a catalyst to take profits. That said, longer term fundamentals in metal commodities supports higher prices over the longer term. Gold is also seeing a sharp pullback from its fresh cycle highs after the US dollar picked up strength (following that very strong US jobs report). That said, gold ETFs like GLD, have seen increased buying throughout the year. Click here for Ole Hansen’s commodity report. Gold (XAUUSD) broke below $1900 Gold broke back below USD1,900/oz as the prospect of monetary loosening shrank following the strong jobs data. Further strength in the US dollar could continue to weigh on the yellow metal, but rising US-China tensions could provide a leg of support to the safe haven metal. With $1872 support also broken, traders could be watching the next support level at $1845. Read next: Elon Musk Was Found Not Guilty In The Tweets Case| FXMAG.COM What to consider? US January jobs data to question the peak rates narrative   A shocking +517k gain in the US nonfarm payrolls on Friday vs. expectations of +188k, along with a net revision of +71k to the prior two months’ data, continued to suggest that labor market in the US remains far too tight despite abundant news of layoffs in January. Other aspects of the report were also robust. Unemployment rate saw a surprise fall again to 3.4% from 3.5% (exp. 3.6%), the lowest since 1969. Average hourly wage growth was unchanged at the 0.3% M/M pace, while the Y/Y fell to 4.4%, still less than the expected 4.3%, and the prior was upwardly revised to 4.8% from 4.6%. With market focusing on data more that what Fed Chair Powell said last week, this is likely to send some jitters as it questions the peak rates narrative for the Fed and took the 10year Treasury yields over 10bps higher on Friday. Goldilocks US ISM services report for January After the jobs report, ISM services also surprised on the upside on Friday. The index rose to 55.2 for January (vs. expected 50.4) from 49.2, in what was the biggest monthly gain since June 2020. Business activity accelerated to 60.4 (prev. 53.5, exp. 54.5). Employment lifted back into expansionary territory at 50.0 (prev. 49.4), and new orders surged higher to 60.4 (prev. 45.2). Moreover, the inflationary gauge of prices paid dipped a notch to 67.8 from 68.1, but still remained elevated by historical standards. Caixin China PMI in expansion, the first time since September 2022 Caixin China PMI Services came in at 52.9 in January, 4.9 points higher than the December reading beating the median forecast of 51.0. It was back to the expansion territory for the first time since September last year. The output and new orders sub-indices were back into the expansion territory for the first time in five months. The new export orders subindex rose to the highest level since April 2021 and was back in the expansion territory. The employment sub-index, however, stayed in the contraction territory for the third month in a row. Reports of Amamiya being approached to be the next BOJ Governor Japan’s Nikkei reported that the government has approached Bank of Japan Deputy Gov. Masayoshi Amamiya as a possible successor to central bank chief Haruhiko Kuroda. The week was supposed to bring possible BOJ chief nominations, as the nominees list has to be presented to parliament on February 10. However, FM Suzuki refused to confirm Amamiya’s nomination. Amamiya has helped Kuroda since 2013 on monetary policies, and is considered the most dovish among the contenders, which is thrashing hopes that BOJ policy normalization could progress under the new chief. US-China tensions heightened over the Chinese surveillance balloon incident The Chinese surveillance balloon floating over the U.S. soil for multiple days was finally brought down by an American fighter jet on Saturday. Both sides exchanged accusations over the incident. Before that, the U.S. Secretary of State Anthony Blinken announced on Friday that he was postponing his trip to China. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Hot U.S. jobs data; New BOJ governor chatter – 6 February 2023 | Saxo Group (home.saxo)

Three threads are influencing market sentiment at the start of this week. First, Friday's very strong US jobs data, which now puts more pressure on Powell to sound less relaxed on lower rates. Second, the setback in US-China diplomatic relations, and possible negative impact on sentiment. Third, speculation on the next BoJ governor. USD may find support Reports suggest Masayoshi Amamiya has been approached to become the next Bank of Japan governor USD: Upside risks this week Three key themes are highly influencing the market mood at the start of this week: 1) Friday’s very strong US jobs data; 2) US-China tensions over the Chinese air balloon; 3) reports about the next Bank of Japan (BoJ) governor. The January jobs report in the US on Friday smashed expectations, showing a half-million increase in employment and the jobless rate falling to 3.4%. As highlighted by our US economist here, such a strong print surprisingly – but clearly – signals employers are still willing to hire despite multi-month falls in industrial production, residential construction output and disappointing consumer spending. One silver lining is that the wage growth slowed from a revised 4.8% to 4.4% year-on-year, a signal that firms are able to hire without offering meaningfully higher salaries despite the very tight labour supply. Still, this is clearly an inflationary jobs market on paper, and a 25bp hike by the Fed looks highly likely now. Fed Chair Jerome Powell in last week’s post-FOMC press conference outlined a potential “goldilocks” scenario where inflation declines without a material rise in unemployment. We’ll see how much confidence he has in this scenario tomorrow as he speaks at the Economic Club of Washington. A rate protest after the post-FOMC market reaction may signal the Fed is not as relaxed as it may have sounded last week about loosening financial conditions. More Fedspeak is scheduled for the rest of the week. The data calendar is rather quiet in the US this week, which leaves geopolitical themes more space to drive market sentiment. Hopes of an improvement in US-China relations have plummeted after the US shot down a Chinese air balloon which they claim contained spy equipment. China has reiterated it was a civilian aircraft that had strayed off course and reached US airspace, and has threatened retaliation. This looks like a major setback in what may have been an important bullish driver for global risk sentiment in 2023, as Beijing’s relationships with the West appeared on track for some relaxation at the same time as China’s reopening of the economy was happening. A rebound to the 6.85-6.90 area in USD/CNY could signal markets are effectively moving to discount more negative trade implications for China, which would buck the recent bullish trend on Chinese sentiment. Finally, USD/JPY briefly traded above 132.00 in early Asian trading after reports that Bank of Japan deputy governor Masayoshi Amamiya was approached by the government to become the next BoJ governor. He was largely seen as leaning on the dovish side and more likely to favour a continuation of Haruhiko Kuroda’s loose policy rather than deploying those structural changes to the yield curve control markets have been speculating on. It is too early to draw conclusions on this, and both data and market dynamics may have a bigger say on potential BoJ policy changes than the new governor: for now, however, markets may be more reluctant to add bearish Japanese government bond (JGB) positions, and USD/JPY could find some support.   All in all, these three themes appear to be pointing primarily at upside risks for the dollar this week. We think DXY could consolidate around the 103.00 mark until new first-tier data in the US are released next week and could reignite the re-rating of US growth and Fed rate expectations. Francesco Pesole EUR: ECB hangover effect This is also set to be a much quieter week in the eurozone. The big rally in EZ bonds after ECB President Christine Lagarde failed in her rate protest last week is another signal that the ECB has lost its grip on the rate market, and this is not great news for the euro. As discussed in our latest EUR/USD note, this could mean that another large EUR/USD may need to wait until the second quarter, when US short-term rates look more likely to drop and markets may gradually align with a “higher-for-longer” narrative by the ECB. Comments by ECB officials are the most interesting risk events to follow in the eurozone this week. We’ll hear from Robert Holtzmann this morning and from François Villeroy, Isabel Schnabel, Klaas Knot and Luis de Guindos over the next few days. Given the ongoing correction and soft momentum in EUR/USD, support around 1.0730-1.0750 in the pair would already be a welcome development for EUR bulls. Remember that the euro is highly exposed to a worsening in Chinese sentiment. We think that any rebound may lose steam around the 1.0870-1.0900 area. Elsewhere in Europe, the Riksbank will announce policy on Thursday. We expect a 50bp rate hike as inflation remains high and wage negotiations should boost wage growth, but the recent deterioration in the economic outlook and housing market instability warns against much more tightening beyond this point. EUR/SEK still faces upside risks this week, even though we remain bearish on the pair in the medium term. Francesco Pesole GBP: Growth data in focus this week Growth data is the highlight of this week’s UK calendar. Our economist expects the British economy to have narrowly avoided a technical recession in the fourth quarter. Still, a 1Q23-2Q23 recession is more than possible, although that could be milder than previously expected thanks to lower energy prices. Today, we’ll hear from Bank of England’s Catherine Mann and Huw Pill, who may start to address the market’s perception that last week’s 50bp hike was a dovish one, and that the BoE is very likely close to the peak in rates. Governor Andrew Bailey will testify before Parliament later this week. So, growth data and BoE speakers will be the two domestic inputs for the pound this week, although global risk sentiment, geopolitical developments and a supported dollar may work against any positive domestic news. Cable may heavily test 1.2000 soon. Francesco Pesole CEE: Inflation numbers as opportunity to reassess dovish expectations This week, we start with hard data from the economy in the CEE region. Today, we will see industrial production in the Czech Republic, which we estimate accelerated slightly in December. Tomorrow, we will see the same figure in Hungary, but there we expect a decline in the annual growth rate. The National Bank of Poland will meet on Wednesday and the National Bank of Romania on Thursday. In both cases, we expect rates to remain unchanged, in line with market expectations. Thus, the main focus this week will be on the inflation prints published on Friday. In Hungary, we expect inflation to increase from 24.5% to 25.5% YoY in January, above market expectations. In the Czech Republic, we forecast an increase from 15.8% to 17.6% YoY, also above market expectations. Also on Friday, the Czech National Bank will release the minutes from last week's meeting and the full new forecast, including the alternative scenario, which is currently the board's preferred path. In the FX market, generally good conditions persist for the CEE region, however, we may see a delayed negative reaction to Friday's downward slide in EUR/USD, especially in the case of the Hungarian forint and the Czech koruna at the start of the week. Nevertheless, we expect a rather quieter week. Friday should be more interesting as we expect inflation numbers to provide an opportunity for the market to reassess current dovish expectations, which should support the falling interest rate differential and support FX. Overall, however, we expect more of a stabilisation around current levels. We see a range of 23.80-24.00 EUR/CZK for the koruna, 388-390 EUR/HUF for the forint and 4.68-4.70 EUR/PLN for the zloty. Frantisek Taborsky Read this article on THINK TagsFX Dollar Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

A focus on Bank of Japan (BoJ) succession and prospective policy changes could see renewed JPY strength, according to economists at HSBC. Improving current account balance should also be helping “A move lower in USD/JPY over the coming few weeks will mostly rely on the outlook for BoJ policy change, but other more medium-term forces (such as improving current account balance) should also be helping in the background.”  “BoJ Governor Kuroda’s term ends on 8 April but the process of identifying his successor is likely to become more prominent in February. This will keep the narrative of potential policy change front and center in the coming weeks even if that change may have to wait for a number of months.” “With the JPY still undervalued (based on its real effective exchange rate) and residents underhedged, we think the ingredients are in place for a renewed move lower in USD/JPY.”

Very strong US jobs data released last Friday hit the Federal Reserve (Fed) doves, sent equities lower, the US yields and the US dollar higher.And the latest US jobs data will likely support the US dollar bulls this week, as we don’t have much on the economic calendar that could temper Friday’s monstrously strong NFP read, and remind us that the US economy is still slowing. Japan Plus, the fresh selling pressure on the Japanese yen will likely give an extra hand to the Fed hawks, on weekend news that the potential new Bank of Japan (BoJ) Governor, Masayoshi Amamiya will be dovish. In the light of the latest macroeconomic developments, a revision to medium term outlook is necessary. Forex • The dollar-yen’s latest jump above the 130 mark could be sustainable in the short to medium run.• The EURUSD traders may be happy to call it a good trade and retreat to the sidelines. • Cable could sink into bearish consolidation zone. Adani Elsewhere, the Adani selloff enters the third week, and things go from bad to worse as in increasing number of banks don’t accept Adani holdings as collateral anymore. US vs China The Chinese spy balloon that was flying over some strategic points in the US renewed tensions between US and China, and that could throw a floor under the gold’s selloff. Curde Oil And US crude is back into last year’s bearish trend, with however risks of tight supply, and Chinese reopening hanging in the air. Read next: The US Judge Denied The FTC's Request, Giving The Meta An Important Victory| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:31 That monstrously strong US jobs data shakes market dynamics 2:39 Next thing to watch! 3:48 Equities dive 5:33 USDJPY to extend gains above 130 6:59 EURUSD to pause rally 8:30 GBPUSD to slip below 1.20 9:43 XAU boosted by US-China’s ballooned tensions 10:14 US crude slips into last year’s bearish trend Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #US #NFP #wages #jobs #data #Fed #FOMC #inflation #expectations #Powell #USD #EUR #GBP #JPY #XAU #US #China #spy #balloon #Adani #selloff #crude #oil #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

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

Summary:  2023 could be a tough year for currencies but EUR and JPY may have some upside. Q4 saw a massive retreat in the US dollar as the market ignored the Fed’s pounding on the table on the need to keep the policy rate ‘higher for longer’, profoundly inverting the US yield curve. Meanwhile, the ECB played catch-up with its tightening cycle, the JPY bounced back with a vengeance on the Bank of Japan arriving to the tightening party just before central banks elsewhere are trying to shut it down, and the Chinese renminbi came back from the brink as well on a disorienting policy about-face. 2023 is likely to prove a rough ride for currencies if the USD bear market fails to continue in a straight line, but EUR and JPY may outperform. As 2023 gets under way we see the market expressing increasing confidence in a disinflationary outcome for the US. Despite the Fed’s persistent ‘higher for longer’ narrative and the FOMC having placed the median dot plot Fed Funds rate forecast above 5 percent for this year at its December 2022 meeting, the market is happy to continue to mark Fed expectations lower by the end of this year. In the early weeks of this year, the market has priced in accelerating rate cuts for 2024 after recent data points have shown significantly weaker ‘soft’ data, including a weak ISM Services survey for December, but also as several inflation data points have come in softer than expected. Emboldening traders to price an easier Fed beyond the hump of perhaps two more 25 basis point hikes over the next couple of quarters is that annualised inflation from the last several months, minus the notoriously lagging and heaviest component of the official CPI data series, the owner’s equivalent rent, is practically back within the Fed’s target range of 2 per cent. As our The Models are Broken theme for this outlook argues, however, we find it highly unlikely that the disinflationary backdrop can persist for long in an under-invested world that is scrambling to transform itself away from fragile, globalised supply chains, to upgrade and green its energy system, and to arm itself for new national security imperatives. Thus, any nominal growth slowdown will prove shallow and growth will re-accelerate on the bounce-back in demand for commodities as China comes back online. In the meantime, the USD may occasionally rally hard if the market has to second guess its expected path for the Fed next year, and if that adjustment sees new bear market lows in risky assets, particularly US stocks. The ingredients for a sustained USD sell-off would include the Fed providing liquidity and a global rebound in risk sentiment, with the latter as important as the former. In the past two cycles, the big USD sell-offs have come only on the Fed providing massive liquidity after some sort of global crunch. But this Fed is still tightening! So how has the USD weakened in Q4 and into early Q1? That has largely been down to falling yields as the market prices the Fed to roll over but easily as importantly, also due to other factors that have helped offset the Fed’s tightening, including a US Treasury that continues to aggressively draw down its account at the Fed, adding liquidity to the system, and banks shifting of reserves and the drawdown in usage of the Fed’s reverse repo facility that can act as a king of ‘stored QE’. The latter is unpredictable, but the US Treasury contribution to liquidity will rapidly run dry in coming months and will then actually drive a liquidity headwind when it rebuilds its account, sooner or later, after the latest ridiculous spectacle of Congress clearing the debt-ceiling issue sometime in Q1.  In the meantime, a slowdown in corporate profits and recession fears could bring a comeback in the USD as a safe haven at times in the first half of this year, even if it falls short of the cycle peak. Further out the curve, far beyond the purview of Q1, when inflation reaccelerates beyond a possible short-term growth scare and the current misleading comedown in inflation, the USD may finally turn significantly lower on the Fed having to provide liquidity to ensure an orderly treasury market, even without significantly cutting rates or cutting them at all. Think QE with no ZIRP – a new paradigm that breaks the old model. Rounding out the G3: win-win for the JPY. EUR steady. The JPY looks the win-win setup for Q1 and possibly into early Q2, even after its significant repricing higher versus the USD from the incredible extension higher in USDJPY to above 150 late last year. December saw a surprise tweak in Bank of Japan (BoJ) policy after Japan drew down a significant chunk of its reserve to defend its yield-curve-control band. While Governor Kuroda failed to follow this up with a further shift in January, the overall sense that Japan is set to exit its extreme monetary policy experiment of the last 10 years continues, with Kuroda set. The ‘win-win’ setup is that the JPY can rise on the anticipation that the BoJ is set to normalise policy at a time when other central banks are easing off the pedal and even if it entirely fails to shift, yield spreads could continue to come crashing down on uglier-than-expected outcomes for the global economy earlier this year, the traditional source of JPY strength. The ideal ingredients near term for further JPY strength are both tepid to lower yields this quarter and a growth scare that further aggravates risk sentiment. A vicious rally in energy prices sooner rather than somewhere in late Q2 or later would challenge the recent JPY rally, unless the BoJ front-loads its shift away from the Kuroda era. Source: Bloomberg and Saxo Graphic: A recap of the chart of G3 currencies (USD, EUR & JPY) from the Q4 outlook. Then, we noted that for the USD and JPY "the jaws are widening perilously!". Well since then, they widened even more before finally beginning to snap back the other way, if somewhat tentatively. Note how modest the JPY comeback has been so far. For the rest of 2023, we would look for the two currencies to continue converging, with the EUR a bit more sedate middle ground, if still firm relative to the US dollar and elsewhere.   For the EUR, we have an ECB that found the rate-tightening religion late in the game at its December meeting and is signalling further strong tightening from here, emboldened by a collapse in natural gas and energy prices on a mild winter (even if these prices are above historic ranges). The fiscal outlook is more robust for Europe than almost anywhere else, and the anticipation of a return of Chinese demand could keep downturn risks very shallow. Long term energy and power issues are a concern for the long term, but supplies concerns are not an issue through this winter. Solidly positive bond yields in Europe, even if real yields remain quite negative, could help to keep a domestic investor focus. The EUR may prove a relatively steady ship in rough seas this year. Sterling would benefit most, meanwhile, from a very soft landing elsewhere and steady global markets. Not sure that is what we will get, and sterling risks getting painted with the same balance sheet challenges noted for the ‘G10 smalls’ below, although it is tricky to understand sterling risks when the currency is already heavily discounted, even after the Truss trauma of last fall. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM The G10 smalls: balance sheet recessions offsetting eventual commodity strength. The G10 smalls are all small open economies, where housing markets largely got a free ride, or only suffered a bad blip, during the 2008-09 global financial crisis. The G10 smalls suffered horrendous volatility back then, some from over-exuberant carry trading (AUD, NZD and NOK) while others enjoyed pro-cyclical strength on the commodity angle (CAD and SEK), or both, with the exception of SEK. Forced to gut interest rates in a competitive devaluation move post-GFC, housing markets were set on fire in these economies and were super-charged yet again during the pandemic response of 2020-21. Now, with a steep rise in longer lending rates like these economies haven’t seen in decades, housing markets are set for a further massive correction, one that is already under way. Real estate is a notoriously illiquid asset and absorbing the impact of the rate rises in the back will take time. But there will be rolling and tremendous impact on both construction sector activity as well as private balance sheets and likely on consumer sentiment more broadly in these economies, especially for those housing markets highly vulnerable to floating rate mortgages, including Australia, Sweden and Canada. While our longer term commodity outlook is very constructive to say the least and will provide some offsetting strength in the next growth cycle for the commodity have-alls like Australia and Canada, the bloated leverage in the private sectors in all of these smaller economies could significantly offset their upside potential. The risks in Sweden could get downright systemic and require significant intervention. This could already be behind the SEK’s notable weakness in late Q4 and into early Q1.  China and EM: Much has already been priced for the CNY after its powerful comeback from the brink on the huge policy pivot described in Redmond’s outlook for China in Q1. The coming quarter may prove less remarkable in fx terms as investors have already front-run a good deal and China will want to prevent excessive CNY strength on wanting to keep its exports competitive, even as it moves up the value chain. The rest of the EM may be in for a bumpier ride early this year on the global growth scare after very strong performance since late last year as the market pummelled the USD and rates fell, offering strong performance for EM bonds in local currency terms. But value shopping for commodity-leveraged FX in the coming quarter is worth consideration (BRL, IDR, ZAR and others). Source: Latecomers to tightening party, EUR and JPY, may prove safest harbours in the first half. | Saxo Group (home.saxo)

Summary:  The S&P 500 index toyed with pivotal support yesterday around 4,100 without breaking down through it as the market absorbs the fresh surge in treasury yields in the wake of Friday’s strong US jobs report. The US dollar remains well bid, although the JPY came in stronger overnight on hotter than expected wage growth data, while a far more hawkish than expected RBA boosted the Aussie. Fed Chair Powell will sit for an interview late today. Copper and gold meanwhile have seen no follow-through selling following Friday's breakdown. What is our trading focus? Equities (US500.I and USNAS100.I): Short-term strength is still intact S&P 500 futures continued to roll over from their weak Friday performance with the 4,100 level almost coming into play, but instead of extending downside momentum the index futures turned around from the lows. This morning S&P 500 futures are trading around the 4,130 level, and if they can close above yesterday’s close it will signal the short-term strength in equities, and if not the 4,100 level is in play again opening the range from the 4,000 level. The VIX Index is well behaved these days and the US 10-year yield is already retreating a bit from the recent surge suggesting a quiet day ahead. FX: USD firm, but Japan’s wage data boosts JPY, RBA hawkishness powers AUD overnight The US dollar remained firm on Fed member Bostic’s comments on a potentially higher peak in the Fed Funds rate supported the US dollar overnight. Market pricing has seen an upward revision to terminal rate to 5-5.25% and Treasury yields continued to surge higher. The Japanese yen, being the most yield sensitive, was weak yesterday on the double-whammy of higher US yields and chatter of a dovish new Governor at the Bank of Japan, but the JPY rose overnight on December wage data showing the strongest rise in wage growth in 25 years.  AUDUSD pushed well below 0.6900 but then bounced hard on a far more “hawkish” (less dovish) RBA than expected – see below. EURUSD is stil mired below 1.0750 this morning and GBPUSD avoided a move below 1.2000 as BOE’s Mann noted that the next step in the Bank Rate is still more likely to be another hike than a cut or hold. Crude oil (CLH3 & LCOJ3) supported by supply concerns and Saudi price hike Crude oil trades higher for a second day following last week's long-liquidation-driven slump. The turnaround was given further support after Turkey halted around 1m b/d of flows from Northern Iraq to the Ceyhan export terminal following a major earthquake in the region. In addition, Saudi Aramco instead of a cut increased its official selling price for its flagship Arab Light grade to Asia in March, suggesting confidence in the demand outlook. Focus turning to the US where the EIA will publish its monthly Short-term Energy Outlook and later the API its weekly inventory report. Weeks of bigger-than-expected inventory rises in the US has been one of the reasons, together with a slow pickup in demand from China, have been the main reasons why speculators were forced to exit recently established longs. The Brent prompt spread meanwhile has risen to 33 cents, signalling increased tightness. Brent support at $79 and resistance at $84.30. Gold (XAUUSD) sees no follow-through selling ahead of Powell comments Gold’s long overdue correction which accelerated on Friday below support-turned-resistance at $1900, did not see any follow-through selling on Monday despite continued dollar and yield strength. The yellow metal remains up 16% from the November low and even a further drop to $1829 would still be categorised as a weak correction within a strong uptrend. So far, it has managed to find support around $1860 as the market awaits comments from Fed chair Powell today at the Economic Club of Washington. Atlanta Fed’s Bostic - a non-voting member this year - meanwhile said the FOMC may have to raise rates by more than expected, thereby supporting the hawkish narrative the bank is trying to convey. Copper awaiting Chinese demand recovery Copper led the base metals sector lower as the impact of the strong US jobs report last week lingered. Spot copper currently trades at a discount in China as stockpiles have continued to rise while a price measuring demand for imports has dropped to a nine-month low. However, while the market awaits the expected pickup in China, supply disruptions in Peru have so far prevented the price from challenging key support in the $3.95 to $4 area. Aluminum briefly spiked after the reports suggesting the US was preparing to slap a 200% tariff on Russian aluminum imports. Russia is the world’s second largest producer of the metal and traditionally has accounted for 10% of US imports. However, imports fell to virtually zero in October last year. As a result, the tariff is expected to have limited impact on supply. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jumped further to reprice the Fed’s rate path Treasuries extended the post-job report sell-off, seeing yields on the 2-year soaring 18bps to 4.47% and those on the 10-year rising 12bps to 3.64% before easing back slightly. Peak Fed rate expectations for this summer reached as high as 5.15% yesterday, a new high. Hawkish comments from the Fed’s Bostic, ECB officials, and Bank of England officials added additional pressure to the market which was already in motion to decline in price and rise in yields. Atlanta Fed President Bostic (voter 2024) said the strong job report would probably mean that the Fed have to raise rates more than he had projected. Earlier in the day, the weakness in Treasuries started from spill over selling pressure on U.K gilts on hawkish comments from Catherine Mann, external member of the BOE’s Monetary Policy Committee and Huw Phill, chief economist of the BOE, suggest more rate hikes. ECB Governing Council member Robert Holzmann added to the hawkish pushback from central banks, saying “the risk of over-tightening seems dwarfed by the risk of doing too little”. For today, all eyes are on Powell’s scheduled interview. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM What is going on? Japan’s wage growth strongest in 25 years The December wage growth data released overnight blew past estimates, posting a 4.8% gain versus expectations of a rise of 2.5%. This was the strongest rise in wages since 1997 and could allow the Bank of Japan to move more rapidly toward some semblance of normalization after soon outgoing Governor Kuroda long touted wage growth as the key to reviving sustained inflation in the Japanese economy. Nationwide strike in France today After a successful demonstration all over France on 19 January, trade unions are calling for new nationwide strike today against the government’s plan to push back the minimum retirement age to 64 and to accelerate a previous reform, called the Touraine reform, which provides for the extension of the required contribution period to 43 years by 2035. Before Covid, the government also tried to implement a pension reform which caused a massive wave of demonstrations across the countries – there was basically almost no public transport in main cities for weeks. This is still uncertain how long the strike will last. But the trade unions are planning to keep fighting as long as needed. Expect a blockage in several sectors (refineries, metro, rail transport, education). Now, we don’t think the strike will have a noticeable negative impact on GDP growth this quarter. We are confident France will avoid a recession this year – with a GDP growth forecast around 0.6-0.7%. This is not high, but it is better than in many other eurozone countries. RBA hikes by 25 bps to 3.35% as expected, guiding for further hikes in the “months ahead” The RBA forecasts slowing spending and economic growth, with unemployment set to rise even as it acknowledged inflation picking up more than expected. Australian 2-year yields jumped 13 basis points from the prior day’s close as the decision was read as hawkish and the peak policy rate this year was revised sharply higher to 3.90% by mid-summer. Still, the RBA sees price rises falling from 6.9% in underlying terms, to 4.75% this year, before ending near the top of its 2-3% target by mid-2025. It sees the jobless rate rising from 3.5% to 3.75% by year-end, and rising to 4.5% by mid-2025, reflecting the lag effect of tightening on corporations. All in all, with the services sector already in contraction, the RBA sees GDP slowing to around 1.5% this and next year as it sees household spending pulling back amid tightening financial conditions, with the post-pandemic spending rush easing. BP misses on Q4 earnings; increases CAPEX in FY23 The European oil and gas major missed on Q4 earnings but remains confident about the near-term future increasing dividends by 10% and planning a further share buyback of $2.75bn. BP is also saying it will grow investments into the energy transition. BP is targeting $16-18bn in capital expenditures for FY23 which is a significant increase from the $12bn in FY22. Nintendo outlook misses Switch estimates The Japanese game console developer announced total Switch unit outlook of 18mn missing estimates of 19mn, but the outlook still reflects a strong underlying growth in the game console. The FY net income outlook is JPY 480bn vs est. JPY 500bn. Hawkish remarks from Fed’s Bostic; Chair Powell due to speak today Atlanta Fed president Bostic (non-voter) spoke on Bloomberg, noting that jobs data from Friday raises the possibility of a higher peak rate, and his base case is still for two more hikes. Bostic also said the Fed could consider moving back to a 50bps hike if it needed to. Chair Powell will be speaking in Washington on Tuesday (1am SGT on Wednesday for Asia), followed by Barr, Williams, Cook, Kashkari, Waller and Harker over the course of the week. What are we watching next? Swedish Riksbank the next G10 in the spotlight Thursday after krona’s recent weakness The Riksbank will meet this Thursday and is expected to hike 50 basis points to bring its policy rate to 3.00%, but is then expected to guide for a more cautious approach of smaller hikes or even a pause on further tightening after the new Riksbank governor Erik Thedeen recently spoke on high inflation and rising interest rates testing the resilience of the Swedish financial system. Yesterday, EURSEK posted its highest level since the heart of the financial crisis back in 2009, making the Riksbank’s task of bringing down inflation a difficult one due to krona weakness, but 2-year EU-Sweden yield spreads have risen to their highest in years on the anticipation that the Riksbank is set to take a relatively more cautious path from here. The Riksbank may add active quantitative tightening (selling holdings rather than merely allowing maturing assets to roll off) to its policy arsenal on Thursday. It looks to be key test for the new Governor and the Swedish krona. Earnings to watch Today’s US earnings focus is Fortinet which is expected to continue its high growth in the cyber security industry with revenue growth expected at 34% y/y and EBITDA margin expected to expand. With higher interest rates there is also a lot of focus on the private equity industry and thus KKR’s outlook is a must watch for understanding the dynamics in risk capital. Tuesday: Carlsberg, BNP Paribas, Siemens Energy, SoftBank Group, Nintendo, BP, Linde, Vertex Pharmaceuticals, KKR & Co, Fortinet, DuPont, Illumina, Enphase Energy Wednesday: A.P. Moller – Maersk, Vestas Wind Systems, TotalEnergies, Societe Generale, Deutsche Boerse, Adyen, Equinor, Yara International, Walt Disney, CVS Health, Uber Technologies Thursday: KBC Group, Brookfield, Thomson Reuters, L’Oreal, Vinci, Credit Agricole, Siemens, Toyota Motor, NTT, Honda Motor, AstraZeneca, Unilever, British American Tobacco, ArcelorMittal, DNB Bank, Volvo Car, Zurich Insurance Group, Credit Suisse, AbbVie, PepsiCo, Philip Morris, PayPal, Cloudflare Friday: Enbridge, Constellation Software Economic calendar highlights for today (times GMT) 0810 – ECB's Klaas Knot to speak0900 – UK Bank of England’s Ramsden to speak1000 – ECB's Villeroy to speak1015 – UK Bank of England’s Pill to speak1330 – Canada Dec. International Merchandise Trade1330 – US Dec. Trade Balance1700 – ECB’s Schnabel to Speak1700 – US Fed Chair Powell interview1700 – EIA's Short-term Energy Outlook (STEO)1730 – Canada Bank of Canada Governor Macklem to speak2000 – US Dec. Consumer Credit2130 – API's Weekly Crude and Fuel Stock Report     Source: Financial Markets Today: Quick Take – February 7, 2023 | Saxo Group (home.saxo)

Often companies have to deal with numerous deprivation. The decision in favor of the company is not only satisfactory but also beneficial for its image. This time the image of BMW did not suffer. In this article: Electrification is enough to reduce greenhouse gas emissions The court's decision is favorable to BMW Bank of Japan Electrification is enough to reduce greenhouse gas emissions Green energy is becoming an increasingly important topic. Many experts believe that this year will be crucial for projects aimed at reducing greenhouse gas emissions. Innovations are also appearing in the real estate market. BlocPower is a Brooklyn-based start-up that has greened over 1,200 buildings in New York City and has similar projects in twenty other cities. In a four-story apartment building in Brooklyn, New York, a very small company implements a very important idea: to electrify every building in the United States by renting the necessary equipment to the owners to carry out the changes. The company reports that it has reduced energy costs in buildings by 30% to 50% and reduced greenhouse gas emissions by 40% to 70% in current projects. According to BlocPower, electrification is enough to reduce gas emissions. The start-up has set itself the goal of electrifying as many buildings as possible in the states. This Brooklyn-based start-up aims to electrify every building in America. @DianaOlick has the story. https://t.co/dYnqsH1KXW pic.twitter.com/0NPEclaD1E — CNBC (@CNBC) February 7, 2023 Read next: United Airlines May Be Fined For Allegedly Missing Safety Checks| FXMAG.COM The court's decision is favorable to BMW Countries must now tighten their carbon targets to protect the rights of future generations. Combustion cars are common, and in developed countries you need at least two cars per family, they are also one of the major emitters of greenhouse gases. Environmentally-friendly organizations try to fight against non-elecological activities of companies, which often end up in court. One such case is the case against BMW. A case against BMW in which the NGO Deutsche Umwelthilfe called on the carmaker to tighten its carbon emission reduction targets has been settled in favor of BMW. Plaintiffs' argument that the impact of BMW's emissions on their freedoms could theoretically be legitimate, but there was not yet enough evidence that the carmaker violated their rights. BMW welcomed the ruling, stating in a statement. The heads of Greenpeace in Germany, climate activist Clara Mayer and landowner Ulf-Alhoff Cramer also filed lawsuits against Volkswagen, which are still pending, with judgments in all cases expected later this month. BMW emissions challenge unfounded, Munich court rules https://t.co/gMBnN3eT13 pic.twitter.com/YRseUahCos — Reuters Business (@ReutersBiz) February 7, 2023 Bank of Japan Virtually all banks are fighting high inflation by raising rates, all except Bank Japan, which continues its ultra-loose monetary policy. For a long time, the Japanese economy remained stagnant and faced deflation. The Bank of Japan set the key interest rate at -0.1% in January 2016 to address short-term yields. Then in September 2016, they introduced YCC, setting JGB's 10-year target at 0%. The mood on the market changed significantly after the December BJ meeting. December arrived and the BOJ surprised the markets by raising the cap on the 10-year government bond yield from 0.25% to 0.5%. The BOJ explained that this was a technical adjustment to take into account the functionality of the market. However, market participants saw this as potentially just the first step towards liquidating YCC. Market participants are asking themselves whether this will change, whether with the appearance of the new governor of BJ there will be a change of direction in the country's monterner policy. This is quite widely discussed and there is no clear answer. A key part of Japan’s monetary policy–known as yield curve control–is under growing market scrutiny, according to Ryoya Wakamatsu, our yen rates market strategist. Here's why it could change. 👇 https://t.co/R5FSxq0JJS — Goldman Sachs (@GoldmanSachs) February 6, 2023

GBP/JPY clings to mild losses following UK data dump. Preliminary readings of UK Q4 GDP matches 0.0% market forecasts. Yield curve inversion renews recession woes but BoJ talks defend pair buyers. Concerns surrounding the next BoJ leadership, economic slowdown fears are the key to follow for fresh impulse. GBP/JPY stays sidelined near 159.30-20, paying little heed to the UK’s fourth quarter (Q4) Gross Domestic Product (GDP) during early Friday. In doing so, the cross-currency pair portrays the market’s indecision amid mixed signals and cautious mood ahead of the key US inflation precursors. That said, the first readings of the UK Q4 GDP match forecasts on QoQ and YoY figures while declining more for December month. However, the improvement in Industrial Production and Manufacturing Production seemed to have probed the pair buyers. Also read: Breaking: UK Preliminary GDP stagnates in Q4 2022, as expected Earlier in the day, various Bank of Japan (BoJ) officials tried pushing back the hawkish expectations for the Japanese central bank and put a floor under the GBP/JPY price. Recently, Bank of Japan (BoJ) Deputy Governor Masayoshi Amamiya said that (It is) appropriate to maintain the current ultra-loose monetary policy. Before that, BoJ Governor Haruhiko Kuroda said, “The benefits of easing outweigh the costs of side effects.” On the contrary, a pullback in the Treasury bond yields after renewing the recession fears seems to weigh on the GBP/JPY price. That said, the widest negative difference between the US 10-year and 2-year Treasury bond yields since 1980 amplified the recession woes the previous day. The yield curve inversion remains around the same level as both these key bond yields stay depressed near 3.66% and 4.48% respectively by the press time. Read next: USD/JPY Is Below 131.00 Again, The Aussie Is Close To 0.70$| FXMAG.COM Looking forward, the cautious mood ahead of the next BoJ leadership announcements, up for publishing on Monday, could restrict the GBP/JPY moves. However, the fears of recession and a retreat in yield may weigh on the prices amid downbeat UK concerns, including Brexit and workers’ strikes. Technical analysis A daily closing beyond the previous resistance line from January 27, now support around 158.70, keeps the GBP/JPY buyers directed towards the 50-DMA hurdle surrounding 161.20.    

Summary:  Today we look at the US market turning lower again yesterday and closing down through an important level that was providing resistance on the way, setting up the technical situation of a risk of downside capitulation. Higher US yields weighed and the US dollar rallied yesterday, although the big news in FX was a watershed Swedish Riksbank meeting that blasted the Swedish krona higher. Breaking this morning was the unanticipated news of the nominee for BoJ Governor, which sparked JPY volatility. We also delve into the disastrous news from Adidas this morning, the earnings calendar this week, commodity developments, the latest on natural gas and the week ahead macro calendar. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. 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. Read next: Twitter Co-Founder Jack Dorsey Comments New Twitter's Owner| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source; Podcast: Risk off, BoJ Governor nominee, Adidas dump, SEK soars | Saxo Group (home.saxo)

The new governor will likely lead the Bank of Japan to a gradual change in its policy stance The Bank of Japan in Tokyo Ueda is expected to shift the BoJ's policy gradually Local wires reported that Prime Minister Fumio Kishida has picked Kazuo Ueda as the next BoJ governor. He is a professor and a former BoJ board member (1995-2005). The news surprised the market as he would bring a bit more of a hawkish tilt to monetary policy than the top contender, Masayoshi Amamiya. Local media also reported that Amamiya refused to take the post.  We believe that the initial market moves - yen and rates up and stocks down - could prove to be temporary. We don't think he is expected to immediately change the BoJ's policy stance based on his previous remarks; he has warned against raising rates too early but has also argued that an exit strategy from the current ultra-easing framework is needed at some point in the future. Therefore, we believe that the market will soon pay attention to incoming data - wage growth and inflation.  The nomination of the two deputy governors is also worth watching as it will form the top leadership of the BoJ. Uchida, one of two nominees, has worked very closely with Amamiya to design a monetary easing programme with the yield curve control policy. Thus, the characteristics of the board remain dovish.  Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM Foreign bonds may have liked the certainty of Amamiya becoming governor, but this does not mean they will jump to hawkish conclusions with Ueda. That said, the appointment comes at a difficult juncture for financial markets as the US disinflationary trend comes into question. The BoJ and Japanese markets will be hoping for a soft US CPI print next week or upward pressure on yields globally will likely resume, including in Japan. Read this article on THINK TagsMonetary Policy Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

It has been a busy day for the Japanese yen, which jumped as much as 1.1% today before paring most of those gains. In the European session, USD/JPY is trading at 131.04, down 0.37%. Report says BoJ has chosen next governor The Japanese yen posted sharp gains after a Nikkei report that Kazua Ueda would be selected as the Bank of Japan’s next governor. Ueda is a former member of BoJ’s policy board and will replace Haruhiko Kuroda in early April. The yen’s gains, although only lasting a short time, indicate that Ueda is expected to take a more hawkish stance than Kuroda, who was the architect of an ultra-loose monetary policy that has largely remained in place even while other major banks have been hiking rates to tackle inflation. The question of who will become the next BoJ Governor has resulted in volatility for the yen. Earlier this week, a report that Deputy Governor Masayoshi Amamiya had been approached for the position sent the yen lower for a brief time, as Amamiya is considered a dove. Amamiya declined the offer and if the latest report is accurate, things should get very interesting under the helm of the hawkish Ueda. US unemployment claims rose for the first time in six weeks, from 183,000 to 196 thousand, which was above the consensus of 190,000. Still, this marked a fourth week of claims below the 200,000 level. The four-week moving average, which smooths out much of the week-to-week volatility, actually edged lower to 189,250. This is an indication that the labour market remains tight, despite reports of mass layoffs by Amazon, Facebook and other large companies.   USD/JPY Technical USD/JPY tested support at 130.71 earlier. The next support line is 129.12 There is resistance at 132.23 and 133.27 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Next week’s data calendar features inflation readings from India, labour data from Australia, Japan’s latest GDP report and rate decisions from China, Indonesia, and the Philippines In this article India’s inflation number to set the tone for RBI rate decision Unemployment rate key for future RBA policy GDP data from Japan Weak jobs data expected from Korea China to gauge economic reopening before adjusting policy stance Indonesia to see rise in trade surplus Regional central banks look to tighten policy further   Shutterstock India’s inflation number to set the tone for RBI rate decision India's January inflation will probably move higher (6.2%) after the 5.7% year-on-year reading in December. But what will be watched more closely after the latest hawkish central bank statement from the governor, will be the core CPI inflation measure. Any indication that this has moved below 6% could be significant for the Reserve Bank of India's policy, though we think despite a small decline, the ex-food and beverages inflation rate will remain just above 6% YoY. Unemployment rate key for future RBA policy January employment data for Australia will add to the balance of knowledge surrounding future Reserve Bank policy. However, it will have to show a further marked deterioration, following last month’s part-time driven decline in employment and rise in unemployment rate, to offset the RBA’s new-found hawkishness.   After last month’s decline in part-time work, we will probably see that part of the survey moderate, combined with perhaps a smaller increase in full time jobs of about 10K to deliver a total employment change of 15-20,000. If that is broadly right, we may see the unemployment rate edge up to 3.6% - still very low by historical standards. GDP data from Japan Japan’s fourth quarter GDP data will be the highlight of next week. We expect the economy to recover from the previous quarter’s contraction, led mostly by private consumption and investment. The reopening and government travel subsidy programmes should lead to a great improvement in hospitality-related activities. However, due to high inflation, the rebound will likely be limited to 0.6% (quarter-on-quarter, seasonally adjusted).   Meanwhile, core machinery orders are likely to shrink again in December amidst weak global demand conditions. Japan’s export growth is also expected to drop in January as the early trade data has suggested. We believe that Japan’s decision to join the US’s tech export ban to China will probably have a negative impact on Japan’s exports. Weak jobs data expected from Korea Korea’s unemployment rate is expected to continue to rise to 3.6% in January (3.3% previously) on the back of a slowing economy. There have been several news reports on job losses, mostly from the IT and finance sectors. This could also be due to severe weather in January, where agricultural and construction-related employment has been negatively impacted. China to gauge economic reopening before adjusting policy stance The People's Bank of China will announce the 1Y Medium Term Lending Facility (MLF) interest rate next Wednesday. We expect no change to policy as the economy has started to recover. The central bank should take time to observe the pace of recovery and determine if there is a genuine need for further cuts to the policy rate and Required Reserve Ratio. Meanwhile, new home sales should show a stable month-on-month change as we have seen a slight price pick up in the tier one cities like Beijing, Shanghai, Guangzhou, and Shenzhen while home prices of lower tier cities were still sluggish. Indonesia to see rise in trade surplus Recent trends within Indonesia’s trade sector should extend into another month. Exports will likely remain in expansion while imports are expected to contract. This will result in the trade balance remaining in surplus of roughly $4.2Bn. The projected trade surplus however will be lower than the highs recorded in 2022 with the current account possibly slipping back into deficit territory.  Regional central banks look to tighten policy further Bank Indonesia (BI) is scheduled to hold its second policy meeting for the year. BI Governor Perry Warjiyo has hinted that this current rate hike cycle could come to an end if inflation were to slow and the Federal Reserve were to turn more dovish. BI could still opt to hike by 25bp next week given renewed hawkish signals from the Fed while also ensuring core inflation heads much lower before pausing.  The Bangko Sentral ng Pilipinas (BSP) will also meet next week to discuss policy. After the blowout January inflation report, we believe that the central bank has no choice but to hike policy rates to combat above-target inflation. Governor Felipe Medalla has previously hinted at a potential shift in tone, but surging price pressures will likely mean that he doubles down on the hawkish rhetoric by hiking rates 50bp. Key events in Asia next week Refinitiv, ING TagsEmerging Markets Asia week ahead Asia Pacific Asia Markets Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  U.S. stock markets finished Friday mixed with a small gain in the S&P and weakness in the Nasdaq 100 weighed by higher bond yields. Hang Seng Index and CSI300 Index declined as investors waited for fresh evidence of a recovery in the Chinese economy. Growth in outstanding loans in China picked up to 11.3% YoY in January as banks had been encouraged to lend. The nomination of Kazuo Ueda as the next Bank of Japan governor was a surprise to the market. Crude oil prices surged on Friday after Russia announced a production cut.   What’s happening in markets? US equities (US500.I and USNAS100.I) may be on wobble town this week, with CPI out Tuesday S&P 500 edged up 0.2% in a lackluster session while the tech-heavy Nasdaq 100 slid 0.6% on higher bond yields. Energy was the best-performing sector on Friday, rising nearly 4% as crude oil rose more than 2% on the Russian production cut. Markets seem defensive coming into this week after a 1.1% decline in the S&P last week - worried firstly, the Fed can keep rates higher for longer, triggered by the hot employment report the week before followed by hawkish Fed speaker comments last week. This week, the focus will be on the CPI data on Tuesday. In individual stocks, Lyft (LYFT:xnas) tumbled 36.5% after the ride-hailing company guided Q1 EBITDA at USD5 to USD15 million, far below the consensus of USD83.6 million, noting price cuts to keep customers against completion from Uber (UBER:xnys). Paypal (PYPL:xnas) rose 3% on Q4 results and earnings guidance beating analyst estimates. Spotify (SPOT:xnys) gained 3.5% following activist investment company ValueAct Capital Management took a stake in the music-streaming company. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) bear steepened The long end of the curve led the sell-off in Treasuries, with yields on the 10-year jumping 7bps to 3.73% and those on the 2-year climbed 4bps to 4.52%. The University of Michigan consumer sentiment index came at 66.4, above the 65.0 expected and the highest level in 11 months. One-year inflation expectations edged up to 4.2% from 4.0% while the 5-10-year inflation expectations remained unchanged at 2.9% Y/Y. Traders were cautious ahead of the CPI report on Tuesday and the upcoming supply from a 20-year auction this Wednesday. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) declined for the second week Hang Seng Index dropped 2% on Friday to finish the week with a second weekly loss in a row. Technology stocks, consumer discretionary, and healthcare names led the decline. Hang Seng Tech Index tumbled 4.6%. Baidu (09888:xhkg), plunging 7.4%, was the biggest loser within the Hang Seng Index. JD.Com (09618:xhkg) dropped 6.3% despite the e-commerce giant announcing plans to launch its ChatJD and jump on the ChatGPT-like AI-generated content bandwagon. Sportswear stocks were laggards. Shenzhou ( 02313:xhkg ), Anta ( 02020:xhkg ), and Li Ning (02331:xhkg) slid between 4% and 5.6%. Shares of EV makers tumbled, XPeng (09868:xhkg) down 7.9%, Li Auto (02015:xhkg) down 7.6%, Nio (09866:xhkg) down 6.6%. SMIC declined 4.3% after the chipmaker warned of a gloomy 2023 and guided full-year revenue down 10%-13%. Standard Chartered Bank (02888:xhkg) rose 4.2% in Hong Kong trading but its London-listed shares fell 5% after First Abu Dhabi Bank said it is not evaluating an offer. In A-shares, CSI300 slid 0.6% on Friday and was down 0.8% for the week. Solar, lithium, coal mining, non-ferrous metal, auto, and semiconductors were laggards. Investors are waiting for more evidence of a recovery in the Chinese economy. The stronger-than-expected growth in corporate loans in China was released after the market close. Australian equites (ASXSP200.I) could also wobble street, if employment data is hotter than expected and commodities pair back with a higher US dollar This week investors and traders will be focused firstly – Australian employment data out for January, due on Thursday, expected to show employment rose by 20,000 from the prior drop, with the unemployment rate expected to remain unchanged at 3.5%. Also importantly, consider the Aussie share market, may be potentially vulnerable for a pair back as the Australian 10 year bond yield has moved up aggressive to 3.81%- its highest level since January. The reason for this, is that the market is expecting the RBA to make ~78.6bps of hikes before pausing in August. So this means unprofitable tech companies and those businesses that don’t pay a dividend yield are vulnerable. FX: SEK reverses gains, CAD boosted by strong jobs and oil The US dollar continued to gain amid renewed risk aversion on Friday, but gains were somewhat capped by gains in CAD as oil prices soared after the Russian supply cuts and Canadian jobs report smashed consensus expectations ten times over. USDCAD reversed from 1.3450+ levels to 1.3350. Meanwhile, USDJPY ended the week nearly unchanged and may be looking at further volatility with higher yields, rising oil prices and the new BOJ Governor. Meanwhile, SEK reversed from the highs after a hawkish surprise from the Riksbank last week. EURSEK back above 11.15 and EURUSD down to 1.0670 from 1.087 levels last week. Crude oil (CLH3 & LCOJ3) moves higher on Russian supply falling Oil prices jumped higher on Friday, closing the week with over 8% gains, as Russia said it would lower production in response to western sanctions (read below). The OPEC+ alliance, which Russia is key member, signalled they won’t be increasing output to fill in for the reductions, signalling a tight market may be ahead. WTI rose to $80/barrel and Brent touched close to $87, although some profit taking emerged in early Asian hours on Monday. Oil prices still continue to trade within a range that has prevailed since November. Meanwhile, other supply returned to the market with Tanker loadings of Azeri crude docking at Turkey's Ceyhan terminal. Gold (XAUUSD) has its eyes on US CPI this week Gold continues to consolidate near $1860, despite pressure from rising US yields. This week’s US CPI release continues to be on watch to assess if the disinflationary narrative can continue even with a new methodology of calculating. A rhetoric shift in global central banks has been seen last week with more hawkish surprises, and the CPI will be the latest test if that narrative can continue to build. Gold however still getting support from rising US-China tensions. Further weakness carries the risk of an extension towards $1828, the 38.2% retracement of the run up from early November.  Read next: UK Economy Suggest That Inflation Will Drop| FXMAG.COM What to consider? Bank of Japan picks a dark horse for Governor post Japan PM Kishida in a shocking announcement on Friday nominated a dark horse candidate Kazuo Ueda as the next governor for the Bank of Japan after Kuroda steps down in April. BOJ executive director (in charge of monetary policy) Shinichi Uchida and former Financial Services Agency commissioner Ryozo Himino were also nominated as deputy governors. Ueda is an academic and a former member of the BOJ policy board, and digging his prior speeches has revealed that he has more of a neutral stance, compared to the dovish Amamiya who was reportedly offered the role but rejected it. His appointment suggests we could see some tweaks in BOJ’s ultra-easy monetary policy, but expecting an outright removal of yield curve control policy appears aggressive now. Fed’s Harker highlights higher-for-longer rates Philly Fed President Patrick Harker (voter) said the likelihood of the Fed being able to control inflation without triggering a recession is growing, but stressed that the key rate must get above 5% and stay there to ensure price pressures ease. He also hinted at a “couple” more 25-bps rate hikes being in the pipeline, but said that how far the Fed will need to go above 5% will be determined by the data. He also talked about rate cuts, but dismissed the possibility in 2023. Focus turns to Michelle Bowman who speaks at a banking conference today. Russia’s production cut to further tighten the oil market On Friday, Russia announced a unilateral cut in its March crude oil output by 500,000 barrels a day, apparently without consulting with its OPEC+ partners first. Since the introduction of EU and G7 sanctions on crude oil from December and fuel products from early February, Russia has increasingly been forced to cut its selling price as its client base continued to dwindle. If oil prices continue to charge higher, OPEC may need to fill the gap by ramping up production, especially in light of an expected pickup in Chinese demand this year. China’s CPI rose to 2.1% in January China’s CPI rose to +2.1% Y/Y in January from 1.8% in December, in line with expectations. The increase was largely due to the fact that the Lunar New Year fell into January this year while it was in February last year and a larger than expected 6.2% Y/Y food price inflation in January versus 4.8% in December. Excluding food and energy, core CPI came in at 1.0% Y/Y, edging up from 0.7% in December. In January, services inflation picked up to 0.8% M/M but was still benign on a year-on-year basis, coming at 1.0% Y/Y in January, rising moderately from 0.6% Y/Y. Producer price deflation deepened, with PPI falling 0.8% Y/Y, versus -0.5% Y/Y expected and -0.7% Y/Y in December. The larger decline in CPI was driven by falling crude oil and coal prices. Growth of outstanding RMB loans in China accelerated to 11.3% Y/Y New aggregate financing increased to RMB5,980 billion from RMB1,306 billion (revised down from RMB1,310 billion) in December, above RMB5,400 forecasted in Bloomberg’s survey. However, due to a high base last year, the growth in total outstanding aggregate financing slowed to 9.4% Y/Y in January from 9.6% in December. The strength in credit expansion came from a larger-than-expected increase in new RMB loans to RMB4,900 billion versus RMB4,200 billion expected and RMB1,400 billion in December, as regulators instructed banks to provide more credits to support key industries and the economy. RMB4,680 billion of these new loans were extended to the corporate sector while only RMB257 billion went to households. The RMB257 new loans to households were much below the RMB843 billion a year ago. The growth in M2 accelerated to 12.6% Y/Y in January from 11.8% in December, above the 11.7% expected. Geopolitical tensions rising U.S. officials said an “unidentified object” has been shot down by its military over Lake Huron. This is the third time in as many days, after earlier downings in Alaska and Canada, and it is the fourth this month to be shot down over North America by a US missile. As debris from these is being evaluated, now the Chinese government says it has spotted a mystery object over waters near northern port city Qingdao and it is preparing to shoot it down. Singapore’s DBS Bank announces special dividend Singapore’s largest bank DBS Group (D05:xses) reported Q4 earnings this morning, with net income up 69% at S$ 2.34bn vs. estimate of S$2.17bn. Higher interest rates continued to boost its income and more than offset other declines due to volatility in financial markets. The board has declared a final dividend of 42 cents a share for the fourth quarter, up from 36 cents a year ago, and a special dividend of 50 cents a share. This brings the total payout for the full year to $2 a share. Other banks including Oversea-Chinese Banking Corp (O39:xses) and United Overseas Bank (U11:xses) are due to report results next week.   For a global look at markets – tune into our Podcast.   Source: Market Insights Today: New BOJ chief; Russian crude production cut; Strong loan growth in China – 13 February 2023 | Saxo Group (home.saxo)

Summary:  WATCH video or read text. US inflation volatility risk picks up amid uncertain of the new methodology. Fed speakers and retail sales also key. Japanese yen may have trouble finding direction. UK data is key for the next BOE meeting. Oil markets look wobbly with Russia’s cut, monthly oil reports from OPEC and EIA due. Eyes on lithium companies with Ford and CATL to build a mega battery plant, while Albemarle reports results. 60 S&P500 companies report quarterly earnings this week, across most sectors, while some of the ASX200’s biggest companies declare full year results. US inflation volatility risks with uncertain impact of new methodology, Fed speakers and retail sales also key While investors firmly believe inflation is on a downward trajectory, month-on-month variations still remain on watch. More importantly, this month brings a change in methodology, which adds further uncertainty to the release. If we take the last few month’s revisions for core CPI into account based on the new methodology, there is reason to believe that the new weights could mean an upward push to inflation. Average core CPI for the last three months of 2022 has gone up from 3.1% to 4.3% with the new seasonal factors released by the BLS. Moreover, milder weather in January compared to December, as well as an upward swing in jobs, could mean demand pressures picked up further traction. Bloomberg consensus expects headline CPI to soften to 6.2% YoY from 6.5% YoY in December, while the MoM picks up to 0.5% from a revised +0.1% previously. Retail sales is also expected to pick up momentum again in January amid sustained consumer strength. This will be an important input for market watchers that continue to weigh up the recession vs. soft landing scenarios. Several Fed officials are due to make appearances during the week and will be key to watch after central bank rhetoric took a hawkish shift again last week. New York Fed President John Williams, St. Louis Fed head James Bullard, Philadelphia Fed President Patrick Harker and Cleveland Fed head Loretta Mester will be on the wires this week. Japanese yen may have trouble finding direction this week Japan PM Kishida in a shocking announcement on Friday nominated a dark horse candidate Kazuo Ueda as the next governor for the Bank of Japan after Kuroda steps down in April. BOJ executive director (in charge of monetary policy) Shinichi Uchida and former Financial Services Agency commissioner Ryozo Himino were also nominated as deputy governors. Ueda is an academic and a former member of the BOJ policy board, and digging his prior speeches has revealed that he has more of a neutral stance, compared to the dovish Amamiya who was reportedly offered the role but rejected it. In July 2022, Ueda wrote an article for the Nikkei entitled "Japan, Avoid Hasty Tightening", but in August 2022, he also questioned if the Fed was too late to raise rates. His appointment suggests we could see some tweaks in BOJ’s ultra-easy monetary policy, but expecting an outright removal of yield curve control policy appears aggressive now. Other reasons to expect potential volatility in the Japanese yen include the surge in global yields again and US CPI due in the week, along with a sharp increase in oil prices after Russia’s decision to announce a cut in production by a half million barrels per day. Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM UK data key for next Bank of England meeting The Bank of England hinted at the February meeting that the 50bps rate hike may have been their last. This week’s inflation, jobs and retail sales data will however be key to determine if another hike may be seen in March. Labor data is out on Tuesday, and expected to continue to show a tight labor market. January CPI comes out on Wednesday, and it is expected to remain in double digits. Bloomberg consensus expects headline CPI to only cool marginally to 10.3% YoY from 10.5% YoY in December. Finally, retail sales data on Friday is expected to show that consumer spending remains under pressure. But with the GDP data out last week showing a likely delay in the start of recession, the BOE may have room to look past the weakening economic momentum for now and keep its focus on price pressures. However, market pricing already suggests a near certain case for another 25bps rate hike in March, so scope for GBP appreciation remains minimal. Oil market wobbly with Russia’s cut, monthly oil reports from OPEC and EIA due In its latest move to use energy as a weapon in the war, Russia announced a unilateral cut in its March crude oil output by 500,000 barrels a day on Friday, apparently without consulting with its OPEC+ partners first. Since the introduction of EU and G7 sanctions on crude oil from December and fuel products from early February, Russia has increasingly been forced to cut its selling price, given its client base continues to dwindle. And now Russia plans to limit its discount on Urals oil to Brent at $34 a barrel in April, $31 in May, $28 in June and $25 in July. That said, some oil supply returned to the market with Tanker loadings of Azeri crude docking at Turkey's Ceyhan terminal. All in all, if oil prices continue to move higher, OPEC may need to fill the gap by ramping up production, especially in light of the expected pickup in Chinese demand this year. So far, OPEC+ are signalling that they won’t boost production to offset Russia’s supply shortages. Monthly reports from EIA and OPEC are due in the week ahead, and will likely keep the energy markets bumpy. As mentioned in the Quarterly Outlook, we expect Brent Oil to remain around the $80 levels this quarter and move to the $90s in the second quarter, and beyond.   Lithium companies on watch with the battery market heating up. Ford and CATL building a battery plant Lithium imports to China and USA are surging this year, ahead of car makers ramping up production with some of the IEA countries planning to end the sale of fuel engines in seven years. The world's biggest lithium company Albemarle reports earnings this week - and will be a lithium proxy to watch - for what we may expect from lithium companies this year. In other news, Ford and CATL are reportedly planning to build a $3.5 billion mega battery plant in Michigan, across 1,900 acres - and employ 2,500 workers. Meaning, they will need to buy industrial metals to produce batteries. This narrative illustrates demand is likely to continue to grow, while supply remains limited. This supports Saxo’s bullish view on battery metals; copper, aluminium and lithium. Click the link, for a look at stocks to watch this week across these sectors. Alternatively refer to Saxo's Equity baskets under Research, Stocks.  Big stakes this week for earnings with 60 S&P500 companies reporting and ASX reporting season ramping up So far, this quarterly US earnings season, 346 S&P500 (US500.I) companies reported results and average earnings growth for the quarter is down 2.3%. Although quarterly earnings growth is in the red again, it’s slightly better than expected. That’s one of the major themes again this US earnings season - margin/profit squeezes are continuing, while the most earnings growth is continuing to come from the Energy sector  - which is benefiting from rising free cash flow growth. Meanwhile, for the first time since covid, we’ve seen the biggest earnings declines in Materials – with mining companies reporting falling earnings amid production slipping amid weather issues. That said, Australian commodity companies are reporting that production has started to turn around in the industry, with mining employment improving. For companies to watch this week who are reporting quarterly or full year earnings  - see our calendar below. Highlights include results from Glencore (GLEN:xlon) that will provide insights about global commodity markets. Sales trends and management’s comments on the business outlook from Coco-Cola (KO:xnys), Kraft Heinz (KNC:xnas) will inform investors about the state of consumers and margin trends in consumer staples. Australian equites (ASXSP200.I) could wobble, if employment data is hotter than expected and commodities pair back with a higher US dollar This week investors and traders will be focused firstly – on Australian employment data out for January, due on Thursday, expected to show employment improved, with 20,000 jobs gained last month, which will market a recovery from the prior drop - while the unemployment rate is expected to remain unchanged at 3.5%. Also importantly, consider the Aussie share market may be potentially vulnerable of pairing back - as the Australian 10 year bond yield has moved up aggressively to 3.81%- its highest level since January. This is because the market is still playing defensive - following hawkish RBA comments and the RBA increasing its inflationary forecast. Plus the market expects the RBA to make ~78.6bps of hikes before pausing in August. Meaning, unprofitable tech companies and businesses that don’t pay a dividend yield are vulnerable here. From a technical perspective, it also looks like the ASX200 is running out of steam. Click here for our technical analyst's views    Macro data on watch this week   Monday 13 February Singapore Q4 (F) GDP India Jan CPI Fed’s Bowman speaks Tuesday 14 February Singapore Budget Australia Feb Westpac Consumer Confidence Japan Q4 (P) GDP Australia Jan NAB Business Conditions/Confidence NZ Q1 2yr Inflation Expectations UK Dec Labor Market US Jan CPI Fed’s Barkin, Harker, Logan, Williams speak US Jan NFIB Small Business Optimism Index Wednesday 15 February Australia RBA’s Lowe Senate Hearing China 1yr Medium-Term Lending Facility Rate UK Jan CPI India Jan Trade US Feb Empire State Manufacturing US Jan Retail SalesUS Jan Industrial Production Thursday 16 February Japan Jan Trade Australia Jan Employment US Jan Building Permits/Housing Starts US Weekly Initial Claims US Jan PPI Fed’s Mester, Bullard, Cook speak ECB’s Lane, Panetta and Nagel speak UK BOE’s Huw Pill speaks Friday 17 February Australia RBA’s Lowe Testimony Singapore Jan Non-oil Domestic Exports UK Jan Retail Sales ECB’s Villeroy speaks Fed Bowman, Barkin speak US Jan Leading IndicatorCompany earnings to watch Company earnings to watch Tuesday 14 February Consumer: Coca-Cola Blood therapy and vaccines; CSL Travel: AirBNB, Marriott International Wednesday 15 February  Oil: Devon Energy Iron ore: Fortescue Therapeutics: Biogen Banking: Commonwealth Bank of Australia Consumer: Kraft-Heinz, Shopify Travel: Corporate Travel Thursday 16 February Lithium:Albemarle Aluminium: South32 Copper: South Tech: Cisco Fertilizers: CF Industries Coal: Whitehaven Coal Gold: Newcrest Mining, Evolution Mining Healthcare: Sonic Healthcare Stock exchanges: ASX Nuclear: NRG Energy Electricity: Southern Co, Origin Energy Friday  17 February Luxury spending: Hermes International Auto and EV maker: Mercedes-Benz Agriculture: Deere   Source: Saxo Spotlight: What’s on investors & traders radars this week? New CPI method, Oil to wobble, Lithium on watch, FX & earnings | Saxo Group (home.saxo)

USD/JPY picks up bids to renew intraday high as US Dollar cheers risk-off mood. Hopes of doves to keep the BoJ reins weigh on Yen amid sluggish yields. Upbeat US inflation expectations, hawkish Fed concerns keep buyers hopeful. Japan policymakers verdict on BoJ leader, Japan Q4 GDP and US CPI will be crucial for clear directions. USD/JPY refreshes intraday high around 132.30 during early Monday in Europe. In doing so, the Yen pair reverses the previous week’s losses amid hopes of an easy money policy to prevail for long. Adding strength to the pair’s upside bias is the US Dollar’s demand amid a risk-off mood and also due to the hawkish bias surrounding the Federal Reserve (Fed), not to forget steady yields. Talks surrounding Kazuo Ueda’s appointment as the Bank of Japan (BoJ) Governor backed concerns over the ultra-easy monetary policy and favored the USD/JPY bulls afterward. On the other hand, fears about the mystery objects flying over the US and China underpin the US Dollar’s haven demand and propel the USD/JPY prices. The US shot down nearly four such objects while China prepares to hit one such unidentified object while weighing on the market sentiment and fueling the DXY. That said, the US Dollar Index (DXY), was up 0.20% near 103.80 by the press time. Elsewhere, the mildly hawkish Fed talks join Friday’s strong US Consumer Sentiment and US inflation expectations to offer extra strength to the USD/JPY prices, via US Dollar strength. During the weekend, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and hence challenge the US Dollar buyers. Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM Amid these plays, US stock futures fade the previous day’s corrective bounce while the Treasury bond yields remain sluggish around the multi-day high marked on Friday, which in turn helped the US Dollar Index (DXY) to grind higher after a two-week uptrend. Moving ahead, the preliminary readings of Japan’s fourth quarter (Q4) Gross Domestic Product, up for publishing on Tuesday, will precede the Japanese policymakers’ official selection of the BoJ leaders to direct short-term USD/JPY moves. Following that, the US Consumer Price Index (CPI) for January will be crucial for short-term Yen pair directions. Technical analysis A daily closing beyond the 50-DMA, around 132.20 by the press time, appears necessary for the USD/JPY bulls to keep the reins.

Light data calendar on Monday so focus will be on Tuesday's US inflation report.  Source: shutterstock Macro and markets Global Markets: It was a fairly miserable end to the week for US stocks, though they managed to stabilize a bit after their earlier declines. The S&P 500 even managed a small gain on the day, though the NASDAQ went down 0.61%. Chinese stocks also did poorly on Friday. The CSI 300 dropped 0.59%, and the Hang Seng Index fell 2.01%. The evident deterioration in market sentiment had filtered through to renewed demand for the USD, and EURUSD has returned back below 1.07. Other G-10 currencies have also given up ground to the USD. The JPY has been a bit firmer than most, though did not hang onto gains after the announcement of the new BoJ Governor caused the currency to rally sharply on Friday. 10Y JGB yields ended slightly higher on Friday, at 0.49% after toying with crossing the 0.5% upper target rate. 2Y US Treasury yields rose 3.5bp, and the 10Y yield rose to 3.732%. Other Asian FX was softer against the USD on Friday, with most currencies losing around 0.4-0.5% against the USD. The THB topped that loss, falling 0.95%. G-7 Macro: Macro data was pretty thin on the ground on Friday. A flat 4Q22 GDP result for the UK saves them the embarrassment of having to declare a technical recession. There is nothing much of note on the calendar today either – the usual dribble of Fed speakers.  Tomorrow though, we get US January CPI inflation data, which could be interesting as there are some elements this month that mean the MoM figure could rise quite a bit., including for the core inflation rate. This is well priced-in. Nevertheless, it feels like this release has the scope to provide some decent market reaction and things may be relatively quiet ahead of this.   Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM Japan: There was surprise news on Friday regarding the Bank of Japan. Local newswires reported that Prime Minister Kishida had picked Kazuo Ueda as the new BoJ governor. We think that Ueda, will not be as dovish as Amamiya, the current deputy governor, would have been if picked. But, if we put him in a dove-hawk spectrum, he will still probably lean towards dovish. That means that he is likely to shift monetary policy only gradually and the BoJ's data dependency - inflation and wage growth -  will become more important. Ueda’s hearing is going to be around 24 Feb. The market will likely stay in its current range until he reveals his philosophy on monetary policy on that day. Singapore:  The final estimate for 4Q2022 GDP settled at 2.1%YoY compared to the 2.2% initial estimate - likely due to the downside surprise noted in non-oil domestic exports.  Growth momentum should remain challenged this year as global trade moderates while inflation stays elevated. What to look out for: US inflation report Singapore GDP (13 February) India CPI inflation (13 February) Fed’s Bowman speaks (13 February) Japan GDP and industrial production (14 February) Australia Westpac consumer confidence (14 February) US CPI inflation and NFIB small business optimism (14 February) Fed’s Barkin speaks (14 February) Fed’s Harker and Williams speak (15 February) South Korea unemployment (15 February) India trade balance (15 February) Indonesia trade balance (15 February) US industrial production and retail sales (15 February) Japan trade balance (16 February) Australia unemployment (16 February) Bank Indonesia policy (16 February) Bangko Sentral ng Pilipinas policy (16 February) US initial jobless claims and housing starts (16 February) Fed’s Mester speaks (16 February) Fed’s Bullard and Cook speak (17 February) Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Mester, Barkin and Bowman speak (17 February) Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The dollar-yen pair is showing increased volatility. On Friday, sellers of USD/JPY updated the local low, reaching 129.84, whereas today, buyers are already testing the 132nd figure. Traders cannot determine the vector of price movement, but the pair fluctuates in a wide price range. The nervousness of market participants is quite understandable since tomorrow, February 14, the next Governor of the Bank of Japan will be known. Moreover, key data on the growth of Japanese economy in Q4 will be published on Tuesday. On top of everything else, a crucial inflation report will be released tomorrow in the USA, which will show the dynamics of consumer price index in January. All of these fundamental factors could cause serious price turbulence. Therefore, current price fluctuations of USD/JPY should be treated with great caution. Is Ueda not an ally of the yen? Last week, the Japanese currency strengthened its position throughout the market after Bank of Japan Deputy Governor Masayoshi Amamiya turned down offer to succeed current Governor Haruhiko Kuroda. His candidacy was to be submitted to Parliament for approval on February 10. Amamiya is a supporter of a soft monetary policy, so his decision not to run for the position of the head of the central bank had an impact on USD/JPY: on Friday, the price updated the weekly low, denoting around the 129th figure. Moreover, the Japanese media (Nikkei Asia in particular) announced the name of the new favorite of the election race: according to the insiders, on February 14, the government will nominate Kazuo Ueda, who was a member of the Governing Council of the Bank of Japan. Initially, the market was dominated by the view that he was more hawkish than Kuroda. However, it turned out later on that was not the case. At least in his brief interview to Reuters, Ueda called the Bank of Japan's policy "adequate." In his opinion, Japanese regulator should continue to implement accommodative policy "by making logical decisions and clearly explaining its position." Such comments disappointed sellers of USD/JPY, so it is not surprising that today the pair is already testing the area of the 132nd figure. However, only journalists have "appointed" Ueda so far: government officials have not commented on the information about his candidacy. Moreover, some analysts urge not to make hasty conclusions and treat media reports with great caution. According to them, in the past, the government eventually nominated other candidates amid harsh criticism of the candidate "announced" by journalists or other political reasons. Therefore, the intrigue remains here, which means that the growth in the price of USD/JPY looks unsteady. Note that the last meeting of the Bank of Japan under the leadership of Kuroda will take place on March 10, and the first meeting of the central bank under its new head will be held on April 28. Read next: GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report| FXMAG.COM Important releases on Tuesday Japan's economic growth data for Q4 2022 will be released on February 14. In Q3, Japan's GDP took an unexpected downturn. The drop in the economy was mainly due to higher prices, which had a negative impact on household spending in the country. Also the downward dynamics was due to the weakening of the yen against world currencies. Since fall last year, the yen has appreciated by more than 2,000 points against the dollar. But inflation in Japan still continues to update multi-year records. According to the latest data, the country's overall consumer price index rose to 4.0%, excluding food and energy prices by 3.0%, and corporate goods price index jumped by 10.2%. At the same time, according to the forecasts of most experts, Japanese economy will show growth in the fourth quarter, leaving the negative area (growth by 0.5% is estimated). While the GDP deflator index may jump to 1.1% (the indicator will rise above zero for the first time since 2020). If the above indicators come out at the forecast level, the yen may receive support, as the market will again increase hawkish expectations regarding possible decisions of the Bank of Japan in the second half of the year. Conclusions Tomorrow, the dollar-yen pair will be in a zone of price turbulence. In addition to the Japanese government's personnel decisions and the Japanese GDP growth data, there will be a report on Tuesday on the Consumer Price Index growth in the USA. Such major fundamental factors can trigger a volatility storm, and it is impossible to foresee the price movement vector here. That is why, for the time being, it would be best to maintain a wait-and-see attitude in the USD/JPY pair, as the high-profile events of Tuesday might "redraw" the fundamental picture considerably.   Relevance up to 10:00 2023-02-14 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/334921

The Japanese yen has started the week with sharp losses. In the European session, USD/JPY is trading at 132.54, up 0.86%. Japan’s GDP expected to rebound There are high hopes for the Japanese economy, which is expected to climb by 2% in the fourth quarter, following a 0.8% decline in Q3. Japan reopened to tourists in October, which fueled a recovery in the services sector and this will likely boost GDP. Even so, the economy has headwinds to deal with such as higher inflation and a weaker global economy, which will likely weigh on growth in 2023 Q1. Ueda to take over at BoJ There has been a guessing game over the successor to Haruhiko Kuroda as Governor of the Bank of Japan and press reports about a successor have generated plenty of volatility from the Japanese yen. Last week, a report that Deputy Governor Masayoshi Amamiya had been approached for the position sent the yen briefly lower, as Amamiya is considered a dove. Amamiya declined the offer and in a surprise move, the BoJ has decided to appoint Kazua Ueda. The news initially resulted in yen buying, as the markets viewed the choice as a signal for fresh thinking and a change in policy. This view was quickly dampened by Ueda himself, who said on Friday that current policy settings were appropriate. This has sent the yen sharply lower on Monday. Ueda may be trying to sound diplomatic in order to avoid any waves ahead of his appointment, and it’s very possible he will tighten policy once he’s in charge. In the meantime, the BoJ is expected to maintain its ultra-loose policy, so the yen won’t be getting any help from the BoJ for the time being. Read next: GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report| FXMAG.COM USD/JPY Technical USD/JPY has support at 131.38 and 130.71 There is resistance at 132.96 and 134.18 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.  

Japan's Government will formally nominate Kazuo Ueda today as the new Governor of the BoJ. US inflation data will dominate markets today    Source: shutterstock Macro and Markets outlook Global Markets: Market risk sentiment staged a recovery yesterday ahead of today’s US inflation figures, so it may not last. The S&P 500 rose 1.14%, while the NASDAQ went up 1.48%. Chinese stocks also improved, with the CSI 300 gaining 0.91%, though the Hang Seng index dropped 0.12%. US Treasury yields took a breather yesterday after recent gains. The 2Y yield was unchanged at 4.517%, while the yield on 10Y bonds dropped back by 3bp to 3.70%. This recovery in sentiment and lower yields will have supported the EUR against the USD, and EURUSD has crept back above 1.07 to 1.0724 currently. Other G-10 currencies followed suit. The AUD has risen back to just below 0.697, Cable has pushed higher to 1.2139, though the JPY lost ground yesterday, rising to just below 133 before settling back at around 132.4. Asian FX was mostly weaker against the USD yesterday, though will likely track yesterday’s G-10 moves in early trading. The KRW was the weakest APAC currency yesterday, rising to 1277. G-7 Macro: Today will be totally dominated by the US CPI release, where the scope for market surprises is high. The consensus expectation is for the headline inflation rate to fall to 6.2% YoY from 6.5% on the back of a 0.5% MoM increase in the index. That itself is inconsistent, as a 0.5% increase should result in an inflation rate of 6.3% or 6.4%. So something has gone wrong with the consensus numbers. Then there is the core rate, which is expected to fall to 5.5% from 5.7% on a 0.4% MoM increase. At least those numbers stack up. The small firm NFIB survey is also released today but will be buried behind CPI noise. India:  CPI inflation in India rose to 6.52% YoY in January, up from 5.72% - a much larger increase than the consensus had been expecting. The increase totally vindicates the last RBI rate decision and maintenance of the tightening bias. There was no change in the core measures of inflation, which remain above the RBI’s upper target bound of 6%. Further tightening at forthcoming meetings looks probable until these core measures fall consistently back below 6%.  Japan: 4Q22 GDP data was disappointing. The economy grew by 0.2% QoQ sa, but was weaker than expected (vs -0.3% downgraded 3Q22 and 0.5% market consensus). We believe that the modest recovery will continue this year, but today’s data support the Bank of Japan’s argument that the recovery is still fragile and that easy monetary policy is needed. The incoming new governor will find it difficult to start any normalization. Private consumption (0.5%) led the quarterly growth, but investment (-0.5%) and inventories (-0.5 ppt) partially offset overall growth. We believe that the government’s travel subsidy program supported service activity and private consumption, but weaker external demand led the drop in equipment investment. For external components, exports rose 1.4% while imports fell -0.4%, thus net exports contributed 0.3pp to growth. A stronger yen and weaker commodity prices probably worked in favour of improving net export contributions. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM What to look out for: US inflation report Japan GDP and industrial production (14 February) Australia Westpac consumer confidence (14 February) US CPI inflation and NFIB small business optimism (14 February) Fed’s Barkin speaks (14 February) Fed’s Harker and Williams speak (15 February) South Korea unemployment (15 February) India trade balance (15 February) Indonesia trade balance (15 February) US industrial production and retail sales (15 February) Japan trade balance (16 February) Australia unemployment (16 February) Bank Indonesia policy (16 February) Bangko Sentral ng Pilipinas policy (16 February) US initial jobless claims and housing starts (16 February) Fed’s Mester speaks (16 February) Fed’s Bullard and Cook speak (17 February) Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Mester, Barkin and Bowman speak (17 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

We expect the modest recovery to continue this year, but it is questionable whether it is going to be strong enough for the Bank of Japan to make progress in normalization as rapidly as expected by the market 0.2% 4Q22 GDP (%QoQ sa) Lower than expected Disappointing 4Q22 GDP, but the recovery will continue in the current quarter Today’s data was on the soft side because not only was the quarterly growth rate weaker than the market consensus of 0.5% but the previous quarter’s growth rate was downgraded to -0.3% (vs -0.2% initial estimate). For the domestic demand components, private consumption (0.5%) led the growth. But both residential (-0.1%) and non-residential investment (-0.5%) fell, partially offsetting this. We believe that the government’s travel subsidy program has boosted service sector activity, and the government’s energy subsidy program is also expected to help ease the burden on households to some extent. Consequently, we believe that private consumption will remain the main source of growth in the current quarter, though its momentum may weaken. For investment, higher JGB yields may be a negative factor. But the reopening of China and stronger-than-expected US and EU economies could offset this. That said, monthly data from business surveys and core machinery orders still suggest a bleak outlook for investment this quarter. Taken together, we expect investment to remain weak but rebound meaningfully in 2H23. In the case of inventories, they actually dragged down growth by 0.5pp in 4Q22, but this probably suggests restocking in the quarters ahead.   For the external components, exports rose 1.4% but imports dropped 0.4%, resulting in a contribution to growth from net exports of 0.3pp. A stronger yen and weaker commodity prices worked in favour of improving net export contributions. Also, the sharp increase in foreign tourists was another reason for the improvement. We think that the reopening of borders will likely further support growth in the current quarter along with China’s reopening. In summary, we believe that GDP in the first quarter will accelerate modestly boosted by tourism related service activity and inventory restocklng.  4QGDP growth was mainly driven by external demand components Source: CEIC BoJ watch Today’s weaker-than-expected growth data will give the Bank of Japan more reasons for caution. In particular, soft investment will be a concern. That is why we believe that the incoming new governor will find it difficult to start any normalization very soon and instead, will take time to analyze inflation and wage growth trends first. Eventually, however, we expect the new Governor to undertake a policy review and take a small step towards normalization. GDP forecast : expect a modest recovery throughout the year Source: CEIC, ING estimates Read this article on THINK TagsJapan GDP Bank of Japan Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Today is the U.S. CPI day which may set the near-term directions of the stock, bond, and forex market. Investors are cautious about the additional uncertainties from the impact of the new CPI compilation methodology and seasonality. U.S. equities rallied and bond yields slipped modestly. Oil prices were lower as US announced plans to sell more crude from its strategic reserves. Japanese Yen extends weakness awaiting the official announcement of the nomination of Ueda as the new BOJ governor. Hong Kong’s Hang Seng was dragged by rights offering from Link REIT.   What’s happening in markets? US equities (US500.I and USNAS100.I) rallied as inflation expectations dropped After S&P500 made its biggest weekly drop in 2023 last week, US stocks started the week in positive territory, with the S&P500 gaining 1.1% and Nasdaq 100 advancing 1.6%, supported by the New York Fed Survey of Consumer Expectations that showed expectations for household income expectations falling from 4.6% to 3.3%. That’s the largest one-month drop in the nearly 10-year history of the series. We’ve seen investors cautious ahead of US inflation data being released on Tuesday and that may be hotter than expected, with a new CPI weighting being used. All but energy within the 11 S&P 500 sectors gained on Monday, led by information technology, consumer discretionary, and consumer staple. Microsoft was one of the best performers, up 3% on Monday as analysts were upbeat on the tech giant’s growth potential. Twilio gained 2.1% following the announcement to cut 17% of its workforce. Tesla flashes red signals after a record rally; meaning some of its gains could be unwound Tesla was one of the weakest in mega caps on Monday, while suffering its biggest two-day fall since January, losing 6.1%. Tesla shares have been bouncing off their lows and were up as much as 100% from their January 2023 lows, but now investors are trimming gains and Tesla is trading 93% above its low. The market believes the Fed will pause rate hikes in Q2 which supported buying in Tesla, while the company pledged to roll-ahead with scaling up production targets. Consensus believes in 2023 Tesla’s revenue will grow 28% to a new record, with EBITDA expected to swell 20% also to a new record, with 12.5% EPS growth. But, from a technical perspective, Tesla’s relative strength index (RSI) is showing the stock is now in the overbought territory - that could signal a potential reversal. The last time Tesla was this overbought was in November 2021 amid tech enthusiasm. The long end of US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) was well bid In a quiet and choppy session, yields on the 2-year finished unchanged while yields on the 10-year were 3bps richer. The terminal Fed Fund rate, as being priced in by the market, edged up to 5.23%. Fed Governor Michelle Bowman said the Fed is “still far from achieving price stability” and she expects that “it will be necessary to further tighten monetary policy”.  Traders are cautiously waiting for the much-anticipated CPI report today. Hong Kong’s Hang Seng (HIG3) pared losses and China’s CSI300 (03188:xhkg) gained on consumer stock strength Hang Seng Index slipped 0.1%, as shares of Hong Kong local property developers tumbled across the board dragged by a 12.8% collapse in Link REIT (00823:xhkg). The largest REIT in Hong Kong that operates shopping centers and real estate retail spaces announced a rights offering for HKD19.3 billion at a 30% discount to its previous close. New World Development (00017:xhkg) plunged 6.7%; Henderson Land Development (00012:xhkg) declined 4.8%; Wharf Real Estate (01997:xhkg) lost 2.9%. The benchmark index clawed back most losses as Chinese consumer names rallied, with China Resources Beer (00291:xhkg) up 4.9%, Haidilao (06862:xhkg) up 4.7%, Budweiser Brewing ( 01876:xhkg) up 3%, and Li Ning (02331:xhkg) up 2.4%, China Mengniu (02319:xhkg) up 2.2%. Chinese hotpot restaurant chain, Xiabuxiabu (00520:xhkg) surged 8.6%. In A-shares, CSI300 advanced by 0.9% led by Chinese white liquor, beverage, beauty care, marine equipment, and construction materials. Kweichow Moutai (600519:xssc) gained 2.6%. FX: Yen weakness extends despite yields cooling off, commodity currencies gain Dollar gains cooled off slightly on Monday as traders positioned for US CPI release due today, and risk assets rallied with gains in US yields cooling off after the recent run higher. Michelle Bowman added to the Fed chorus insisting on more rate increases to rein in inflation, saying "we are still far from achieving price stability. But the Japanese yen was still pressured lower, and USDJPY took a look above 132.50 as expectations of BOJ governor candidate Ueda altering the policy stance retreated. Upbeat risk sentiment lifted NZDUSD to 0.6360 from sub-0.63 levels earlier in the day, while AUDUSD drifted towards the key 0.70 level as well but calls for RBA governor Lowe’s resignation may keep the gains in check. GBPUSD back higher to 1.2150 and labor market data is on tap today. EURUSD back above 1.0720. Aussie dollar moves back toward 0.70 with commodities moving up The Aussie moved up 0.7% after the US dollar fell back, while commodity prices rose - also supporting the Aussie dollar. Notably, metal prices have been declining for week but moved up overnight, with Copper up 1%. The next catalyst for the AUDUSD pair will be if business confidence out today, is strong expected - it could trigger more upside. Plus the market would want to see stronger than expected Australian employment data for January- on Thursday, to also support the risk-on rally. But there is a risk, AU jobs data won’t be as strong as expected by the market, given the lag interest rates effects in Australia. 20,000 jobs are forecast to have been added, with steady unemployment rate. The Australian bond market suggest less caution is in the air, with the Australian 10-year bond yield down to 3.74% (highest levels since January). But the major catalyst will be the strength of the USD - that could change direction for the AUDUSD pair. Crude oil (CLH3 & LCOJ3) prices choppy as supply fears ease Crude oil prices started the day trying to move higher as traders assessed the impact of Russia’s supply cuts. However, the importance of Russia’s energy supplies has gone down over the last year as Europe has diversified its energy sources and Russia’s oil and gas has continued to flow around the world at discounts of well over 30%. This helped ease fears of a supply shock, also helped by US planning to sell 26mn barrels of oil from its strategic reserves. WTI prices dropped from over $80/barrel to ~$79 while Brent was below $87. The UAE said markets remain balanced and OPEC+ producers don't need to intervene. Elsewhere, the US shale industry remains reluctant to ramp up drilling activity despite strong cash flows.  Read next: GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report| FXMAG.COM What to consider? Japan’s Q4 GDP comes in below expectations Japan's economy grew an annualised 0.6% in the final three months of 2022, bouncing back from the previous quarter's revised contraction of -1.0% but still coming in below expectations of a 2% gain. The return of inbound tourists offset a slowdown in capital expenditure and exports. With economic momentum still weak, new BoJ governor Ueda will continue to face a challenging task in shifting away from the ultra-loose monetary policy. US CPI on the radar - volatility risks higher with uncertain impact of new methodology While investors firmly believe that inflation is on a downward trajectory, month-on-month variations still remain on watch. More importantly, this month brings a change in methodology, which adds further uncertainty to the release. If we take the last few month’s revisions for core CPI into account based on the new methodology, there is reason to believe that the new weights could mean an upward push to inflation. Average core CPI for the last three months of 2022 has gone up from 3.1% to 4.3% with the new seasonal factors released by the BLS. Fed whisperer Nick Timiraos, a WSJ reporter, is warning of a potential upside surprise in January US CPI data due to seasonality. Moreover, milder weather in January compared to December, as well as an upward swing in jobs, could mean demand pressures picked up further traction. Bloomberg consensus expects headline CPI to soften to 6.2% YoY from 6.5% YoY in December, while the MoM picks up to 0.5% from a revised +0.1% previously. January CPI data will be out today at 2130 SGT. UK labor market data due today The Bank of England hinted at the February meeting that the 50bps rate hike may have been their last. This week’s inflation, jobs and retail sales data will however be key to determine if another hike may be seen in March. Labor data is out on Tuesday, and expected to continue to show a tight labor market. The unemployment rate over the last quarter is likely to remain unchanged at 3.7% as per Bloomberg consensus while the employment gains are expected to pick up to 43k from 27k previously. Wage pressures are also expected to sustain with average weekly earnings up 6.2% YoY in the December quarter from 6.4% before. Singapore’s budget today may look at post-Covid fiscal strategy Singapore’s annual budget will be presented today and measures may be taken to phase out Covid-era stimulus as the economy looks to re-balance spending towards longer-term goals. Still, inflation remains high and the low-income groups will likely continue to get support. Still, long-term focus on green transition and digitization is likely to be a key theme. This could bring companies like Sembcorp and Keppel Corp into favor due to their push to reduce carbon emissions. EV adoption push is also likely, helping ComfortDelGrow due to their increasing fleet of EVs. Lithium giant Albemarle earnings ahead This week, the world's biggest lithium company, Albemarle reports earnings. Given its size and scale - with it selling to most EV makers including - Toyota, Ford, Mercedes, GM, Hyundai, Kia, Nissan, Tesla and Renault – we think Albemarle will be a proxy for what we can expect from lithium companies' earnings. Consensus expects operating profits to have improved and rise to $1.05 billion. EBITDA is expected to grow to $1.22 billion, while net debt is expected to drop, with adjusted EPS forecast to grow to 8.19. Coco-Cola reports today Investors can get more information about the state of U.S. consumers and margin trends in consumer staples from the results and management’s comments on the business outlook from Coco-Cola (KO:xnys) today.   For what is ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.       Source: Market Insights Today: All eyes on US CPI today – 14 February 2023 | Saxo Group (home.saxo)

Market bulls have endless optimism this year, it is amazing. Whether it is funded or not, is yet to be seen. US CPI Inflation could help answer that question today. A few indicators point at a certain uptick in inflation in January figures, and the expectation is that the US headline CPI may have slowed to 6.2% in January, from 6.5% printed a month earlier, on a yearly basis. A sufficiently soft, or ideally a softer-than-expected CPI read today should give an additional boost to the equity bulls while a stronger inflation read could easily bring the Fed hawks back to the marketplace and send equities tumbling. Forex In the FX, the US dollar has seen a crowd of sellers above the 50-DMA. A strong inflation data could finally send the dollar index sustainably above its 50-DMA, while a soft reading will be a good reason to sell the rebound. The EURUSD continues its own struggle around the 50-DMA. In Japan, Kazuo Ueda has been nominated as the next Bank of Japan (BoJ) governor. There are rumours that the new BoJ leader could scrap the YCC policy. The yen was better bid in Tokyo, but the US CPI data is probably what will determine the short-term direction both in EURUSD and the USDJPY. CPI What everyone wants to see is a soft US CPI figure, a softer US dollar, strong equities, improved bonds, and stronger other currencies. What everyone fears however is a figure that’s not convincingly softer. The only sure thing is, the CPI days are known for their high intraday volatility. Watch the full episode to find out more! 0:00 Intro 0:24 Mixed feelings about the market 3:51 All eyes are on the US CPI today! 7:13 FX update 8:39 Balloon update 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. #USD #inflation #data #Fed #expectations #EUR #JPY #XAU #US #China #spy #balloon #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      

GBP/JPY meets with a fresh supply on Wednesday and erodes a part of the overnight gains. The softer UK CPI print eases pressure on the BoE to tighten further and weighs on the GBP. The risk-off mood underpins the safe-haven JPY and also contributes to the intraday decline. The GBP/JPY cross comes under some selling pressure on Wednesday and snaps a two-day winning streak to a fresh YTD peak, around the 162.15-162.20 region touched the previous day. The cross remains depressed through the early European session and hits a fresh daily low, around the 161.15 area, following the release of the UK consumer inflation figures. In fact, the UK Office for National Statistics reported that the headline CPI declined by 0.6% in January, more than the 0.4% fall anticipated. Adding to this, the yearly rate decelerated from 10.5% in December to 10.1% during the reported month, again missing estimates for a reading of 10.3%. Moreover, Core CPI, which excludes seasonally volatile products such as food and energy, came in at 5.8% YoY as compared to the 6.3% previous and 6.2% expected. The data points to signs of easing inflationary pressure and could allow the Bank of England to slow the pace of its policy-tightening, which, in turn, weighs on the British Pound. The Japanese Yen (JPY), on the other hand, is underpinned by speculations that Kazuo Ueda, the Bank of Japan (BoJ) governor candidate, will dismantle the yield curve control. This, along with the risk-off mood, benefits the safe-haven JPY and exerts pressure on the GBP/JPY cross. Read next: GBP/USD Pair Rose Sharply Above $1.22, EUR/USD Pair Also Rose| FXMAG.COM The aforementioned fundamental backdrop favours bearish traders and suggests that the recent move-up witnessed over the past two weeks or so has run out of steam. That said, it will still be prudent to wait for some follow-through selling below the 161.00 mark before confirming the negative outlook and positioning for any further intraday depreciating move.

A new broom sweeps clean. Kazuo Ueda's rise to power at the Bank of Japan was greeted with enthusiasm by fans of the yen. The former board member is considered more "hawkish" than Governor Haruhiko Kuroda or Deputy Governor Masayoshi Amamiya, whom investors predicted for the post. At the same time, whoever leads the BoJ, the regulator's decisions will be dictated by incoming data, which so far does not please the USDJPY bears. Ueda Ueda is notable for his ability to find a compromise. He believes that Japan's weak economy requires monetary stimulus but, at the same time, sympathizes with bankers who complain that low rates reduce their profits. He demonstrates familiarity with the theories that high public debt is not a problem but nods to fiscal "hawks" who fear that the indicator may get out of control. A tough job to do The new governor of the Bank of Japan has a tough job to do. Starting with normalizing monetary policy, including abandoning control of the yield curve, raising the overnight rate, and reducing the overly bloated balance sheet. The slightest error along the way is fraught with serious turmoil in the financial markets. And investors are already showing concern, as reflected in the increased volatility of the yen. Dynamics of the volatility of the yen and the foreign exchange market Kazuo Ueda seems a slippery type. It is premature to expect that a difference in his views from Kuroda's stance, confident that inflation will slow down on its own, will initiate normalization. The new head of the BoJ got a troubled economy, which grew 0.6% in the fourth quarter, against a projection of 2% by Bloomberg experts. Japan's foreign trade deficit reached a record high of £3.5 trillion in January. Export growth slowed sharply to 3.5%, while imports, on the contrary, accelerated to 17.8% amid expensive energy supplies. Dynamics of the trade balance of Japan If the economy continues to show signs of weakness, then Ueda will have no choice but to stimulate it. With the Fed ready to raise the federal funds rate to at least 5.25%, monetary policy divergence is calling USDJPY upward. But the derivatives market gives a 50% chance of three acts of tightening the Fed's monetary policy at 25 bps each: in March, May and June. If all this happens, the U.S. dollar will continue to strengthen. USD/JPY The strength of the U.S. economy also speaks in favor of a continued USDJPY rally. An impressive gain of 517k in January employment was accompanied by the fastest 3% month-on-month increase in retail sales in two years and the first increase in industrial production in three months. Technically, the pullback from fair value triggered a USDJPY correction and gave us a good chance to form longs from the 128–128.5 area. Overcoming the 134.2 pivot level will allow them to build up towards 135.9 and 138.2   Relevance up to 10:00 2023-02-21 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335311

GBP/JPY regains positive traction on Friday and snaps a two-day losing streak. The uncertainty over the BoJ’s policy path weighs on the JPY and lends support. Speculations that the BoE’s rate hiking cycle is nearing the end caps the upside. The GBP/JPY cross attracts some buying near the 160.50 area on Friday and stalls this week's pullback from the YTD peak. The cross sticks to its gains around the 161.00 mark through the early European session and for now, seems to have snapped a two-day losing streak. The Japanese Yen (JPY) weakens across the board amid the uncertainty over the path of monetary policy under new Bank of Japan (BoJ) Governor Kazuo Ueda, which, in turn, lends support to the GBP/JPY cross. Investors have been speculating that Ueda will dismantle the yield curve control easing mechanism. That said, data released this week showed the world’s third-largest economy grew at a slower-than-expected pace in the fourth quarter and making it prudent for the BoJ to stick to its ultra-lose monetary policy stance. That said, any meaningful upside for the GBP/JPY cross seems elusive, at least for the time being, amid expectations that the Bank of England's (BoE) current rate-hiking cycle might be nearing the end. The bets were lifted by softer-than-expected UK consumer inflation figures on Wednesday, which might have eased pressure on the UK central bank to tighten its monetary policy more aggressively. This, to a larger extent, offsets the better-than-expected UK Retail Sales figures for January and might hold back bulls from placing fresh bets. Apart from this, a generally weaker tone around the equity markets - amid looming recession risks - benefits the safe-haven JPY and further contributes to capping the GBP/JPY cross. Hence, it will be prudent to wait for some follow-through buying before positioning for the resumption of the recent positive trend witnessed over the past two weeks or so. Nevertheless, spot prices remain on track to register first weekly gains in the previous three. Technical levels to watch remaining time till the new event being published U.S.: Leading Indicators

The Japanese yen is down sharply on Friday. In the European session, USD/JPY is trading at 134.93, up 0.73%. The yen fell below 135 earlier today for the first time since December 23. Solid US data sends dollar higher The US dollar is broadly higher and has pummelled the yen, climbing 2.6% this week. Strong US numbers have boosted the dollar, as the Fed is likely to remain hawkish with the economy remaining strong. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Consumer inflation ticked lower but was stronger than expected. Is the disinflation process stalled? The economy has proven to be surprisingly resilient to rising interest rates, leading to hopes for a soft landing or even a ‘no landing’. The Fed has been consistent in its message of ‘higher for longer’ with regard to rates, but the markets haven’t really been listening, assuming that the Fed would have to pivot and even cut rates later in the year. The stronger-than-expected releases, from nonfarm payrolls to inflation to retail sales have forced the markets to revise their stance and move closer to the Fed position that the terminal rate will be above 5%. Fed speak remains hawkish Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn’t falling quickly enough. Mester said that she didn’t see inflation falling to 2% until 2025, which points to a long disinflation process. The depreciation of the yen will be raising eyebrows in Tokyo. The Bank of Japan and the Ministry of Finance have often voiced unease when the yen has plunged and this has led to currency interventions in order to prop up the yen. It’s a delicate time for the Bank of Japan, as Kozo Ueda is set to take over as Governor in April. If the yen continues to lose ground, we’re sure to hear warnings from the BoJ and the Ministry of Finance, possibly with threats of intervention. Read next: Wyoming Prohibits Forced Disclosure Of Private Cryptographic Keys By US State Courts, JP Morgan Projections Of FX Market| FXMAG.COM USD/JPY Technical USD/JPY is testing resistance at 134.47. Above, there is resistance at 136.05 There is support at 1.3355 and 1.3296 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Watch our video or read the text below. This week the Fed’s preferred inflation gauge, US PCE will be released, as well as the FOMC minutes - which will shed light on inflation trends and could result in the USD lifting and equities softening. Japan’s January CPI and BOJ Governor Ueda’s parliamentary hearings are on tap. Geopolitical tension keeps Saxo’s Defense basket in focus. The RBNZ’s rate hike trajectory could downshift and signal NZD weakness. Flash PMIs to test the soft-landing narrative. BHP and Rio Tinto’s outlooks may set the course for copper and aluminium companies in 2023. And Allkem and Pilbara Minerals results could follow Albemarle’s bumper numbers. US PCE and FOMC minutes will shed more light on inflation trends   After firmer prints for January CPI and PPI last week causing some market concern, focus now turns to the Fed’s preferred measure of inflation – the PCE – due this week. Bloomberg consensus expects January core PCE at 4.3% YoY (from 4.4% previously) while the MoM may be slightly hotter at 0.4% from 0.3% last month. Consumer spending is likely to have stayed robust, continuing to signal that the path of disinflation may not be linear. FOMC minutes from the Jan 31-Feb 1 meeting will also be out on Wednesday, but may be slightly dated in the wake of hotter inflation data since the meeting. As there was no dot plot at the meeting, it will be key to watch if any members commented on their expectations of terminal rate pricing. With some of the Fed members hinting at a potential 50bps rate hike again, it will be also important to watch if other members, especially those on the voting committee, remain open to that.  Japan’s January CPI and BOJ Governor Ueda’s parliamentary hearings on tap   Japan reports January inflation on Friday, and the pressure on Bank of Japan to tighten policy will continue to build. Consensus expects a further increase in inflationary pressures, with headline rising to 4.3% YoY from 4.0% YoY previously, while the ex-fresh food and energy is likely to head higher to 3.3% YoY from 3.0% YoY in December. Service price pressures are likely to sustain as travel momentum picks up further with China reopening. Tokyo CPI data for the month also accelerated to 4.4% YoY in January from 3.9% previously. The same day, BoJ Governor-nominee Ueda is poised to appear before the lower house for parliamentary hearings. Ueda’s speech will be key in gauging a clear stance from the Governor candidate ahead of incumbent Kuroda’s end-of-term on April 8. Markets are expecting a hawkish shift amid the hot CPI and wage pressures, but Ueda will likely take the time to assess his policy options.  Russia-Ukraine anniversary: Geopolitical tension keeps Saxo’s Defense basket in focus    In Saxo’s equity theme baskets, the Defense basket was one of the top performers last week despite the news of China sanctions on US defence companies like Lockheed Martin and Raytheon due to balloon shooting incident. Geopolitical tensions, and therefore the Defense stocks, will remain in focus again this week as we approach the one-year anniversary of Russian invasion of Ukraine on 24 February. Biden will be visiting NATO ally Poland to talk about the importance of the international community’s resolve, and unity in supporting Ukraine, adding that the next weeks and months are going to be difficult for Ukraine’s forces, and the US is going to continue to stand by them. Meanwhile, China’s top diplomat Wang Yi kicked off his week-long tour through Europe in Paris on Wednesday. The diplomat is expected to travel to Italy, Germany, and Hungary – with a final stop in Russia. There were also some reports suggesting that the US has information that China may be considering supplying arms to Russia. Putin will also be giving a state of the nation address, and focus will be on any risks of further escalation noting that 500k Russian troops have been mobilised.  Flash PMIs to be the next test of the soft landing narrative    This week will bring flash PMIs for February in the Eurozone, UK as well as the US. Sustained strength is likely for the Eurozone PMIs across manufacturing and services after the jump seen in January, but the impact of monetary tightening remains key to watch given the still significant amount of rate hikes being priced in for the ECB. The PMIs for UK are however likely to continue to remain in contractionary territory, suggesting the risk of recession has not gone away. Germany’s Ifo and ZEW surveys for February will also provide a further read on growth at the start of 2023. US PMIs, likewise, are also likely to remain in contraction despite some improvement, but the key in US remains the ISM surveys more than the S&P PMIs.  Downshift in RBNZ’s rate hike trajectory could signal NZD weakness   The Reserve Bank of New Zealand meets on Wednesday, 22 February and consensus expects a return to 50bps rate hikes after a 75bps in November when even the possibility of a 100bps was debated. Economic data has been soft since the last meeting, with 2-year inflation expectations easing and unemployment rate seeing a slight uptick. However, Cyclone Gabrielle has brought fresh risks of inflation pressures in the short-term. Still, risks of further kiwi weakness loom large after NZD has weakened 1.6% against the USD so far this year. If RBNZ signals that the peak for the current rate hike cycle is near, the 38.2% retracement of NZDUSD uptrend from the October low could be challenged.  Commodity giants - BHP (BHP) and Rio Tinto (RIO) results ahead - setting the course for copper and aluminium companies in 2023   BHP and Rio Tinto report this week (Monday 21, Tuesday 22 respectively) and if Fortescue was something to go by with stronger than expected profits - supported by iron ore demand rising 4% than a year earlier - then BHP and Rio could surprise to the upside. The focus will be on their outlooks – with both BHP and Rio expected to give optimistic forecasts for the year amid Chinese demand picking. They may also shed light on wages picking up and further inflationary pressures. Iron ore, and copper and coal giant BHP is expected to declare a full-year gross dividend yield of 14% with earnings (EBITDA) of $40.6 billion in 2022 and free cashflows of $26 billion. Iron ore, aluminium and copper giant Rio is expected to declare a full-year gross dividend yield of about 11%, with earnings (EBITDA) of $27.1 billion in 2022 and free cash flow of $11.2 billion.  Saxo’s preferred commodity exposure is aluminium and copper (and lithium). To track Australia’s largest Resources companies, refer to Saxo's Australian Resources theme Basket.  Lithium companies Allkem (AKE) and Pilbara Minerals (PLS) results ahead – they could follow Albemarle which paved a positive outlook    After the world's biggest lithium company Albemarle gave a stronger than expected sales outlook for 2023 paving a positive course for lithium companies this year; with China’s reopening to provide extra momentum as demand for EV picks up the market will pay close attention to AKE and PLS’s results on Friday. ALB sees net sales growing to $11.3-$12.9 billion, and EBITDA getting as high as $5.1 billion – so given tight supply and rising demand, you may expect positive outlooks from Australian counterparts - Pilbara Minerals and Allkem. Pay attention to their outlook commentary; earnings, cashflows, forward capital expenditure and importantly expectations of lithium pricing - which underpins earnings. To track lithium companies, refer to Saxo’s Lithium equity theme Basket   Macro data on watch this week   Monday 20 February US, Canada Market Holiday China (Mainland) 1Y and 5Y Loan Prime Rate (Feb) Malaysia Trade (Jan) Taiwan Export Orders (Jan) Eurozone Consumer Confidence (Feb, flash) Thailand Customs-Based Trade Data (Jan) Tuesday 21 February Australia Judo Bank Flash PMI, Manufacturing & Services* Japan au Jibun Bank Flash Manufacturing PMI* UK S&P Global/CIPS Flash PMI, Manufacturing & Services* Germany S&P Global Flash PMI, Manufacturing & Services* France S&P Global Flash PMI, Manufacturing & Services* Eurozone S&P Global Flash PMI, Manufacturing & Services* US S&P Global Flash PMI, Manufacturing & Services* Australia RBA Meeting Minutes (Feb) New Zealand PPI (Q4) Germany ZEW Economic Sentiment (Feb) Canada CPI (Jan) Canada Retail Sales (Dec) United States Existing Home Sales (Jan) Wednesday 22 February New Zealand Trade Balance (Jan) Japan Service PPI (Jan) Australia Composite Leading Index (Jan) Australia Wage Price Index (Q4) New Zealand Cash Rate (22 Feb) Germany CPI (Jan, final) Taiwan Jobless Rate (Jan) Germany Ifo Business Climate New (Feb) Germany CPI Prelim MM (Feb) United Kingdom House Prices (Feb) United States FOMC Meeting Minutes (Feb) Thursday 23 February Australia Capital Expenditure (Q4) South Korea Bank of Korea Base Rate (Feb) Singapore Consumer Price Index (Jan) Taiwan Industrial Output (Jan) Eurozone HICP (Jan, final) United States GDP (Q4, 2nd estimate) United States Initial Jobless Claims Thailand Manufacturing Prod YY (Jan) Friday 24 February Japan CPI (Jan) United Kingdom GfK Consumer Confidence (Feb) Singapore Manufacturing Output (Jan) Germany Detailed GDP (Q4) Germany GfK Consumer Sentiment (Mar) United States Personal Income and Consumption (Jan) United States Core PCE Price Index (Jan) United States UoM Sentiment (Feb, final) United States New Home Sales (Jan) Canada Current Account C$ (Q4) Company earnings to watch   Monday Feb 20Williams Cos Tuesday Feb 21Teck Resources, Gapgemini, Engie, HSBC, Walmart, Home Depot, Medtronic, Palo Alto Networks, Singapore Airlines, BHP Group, Alumina, Coles Wednesday Feb 22Rio Tinto, Santos, Oz Minerals, Domino’s Pizza Enterprises, Genmab, Danone, Lloyds Banking Group, Iberdrola, Nvidia, TJX, Stellantis, Baidu, eBay Thursday Feb 23EssilorLuxottica, Deutsche Telekom, Munich Re, Kuaishou Technology, Eni, Anglo American, BAE Systems, Singapore bank UOB, Qantas, Alibaba Friday Feb 24 Block (Square), Lynas Rare Earths, Mineral Resources, Allkem and Pilbara Minerals (in lithium), Singapore bank OCBC, BASF, Monster Beverage Source: Saxo Spotlight: What’s on investors & traders radars this week? From US PCE to services data, to RBNZ hike to BHP, Rio results | Saxo Group (home.saxo)

GBP/JPY holds lower grounds as it pares the biggest daily gains in a week. Firmer UK PMIs bolster hawkish BoE bets but Brexit, wage talks probe buyers. Mixed Japan data, BoJ concerns join a retreat in yields to weigh on prices. GBP/JPY bulls take a breather around 163.30, after rising the most in seven days during early Wednesday. The cross-currency pair’s latest gains could be linked to the upbeat UK data and hawkish concerns surrounding the Bank of England (BoE). However, sluggish yields and the Bank of Japan (BoJ) concerns seem to exert downside pressure on the GBP/JPY prices. Also likely to challenge the pair’s moves are the mixed data from the UK and Japan. Earlier in the day, Reuters Tankan Manufacturing Index for Japan came in as -5.0 for February versus -6.0 in January. On the same line, Tankan Non-Manufacturing Index eased to 17 for the said month versus 20.0 prior. Elsewhere, Brexit woes loom as the Eurosceptic Conservatives challenge UK Prime Minister’s talks with the European Union (EU) over the Northern Ireland (NI) border issue. The leader of Northern Ireland's largest unionist party (Jeffrey Donaldson, leader of the Democratic Unionist Party) said on Tuesday there was still work to be done to find a resolution to a dispute between Britain and the European Union over their post-Brexit trading arrangements with the province, per Reuters. Alternatively, the preliminary readings of the UK S&P Global/CIPS data for February reported that the Manufacturing PMI rose to 49.2 versus 46.8 expected and 47.0 prior while Services PMI jumped to a seven-month high of 53.3 compared to 48.3 market forecasts and 48.7 previous readings. Further, Japan’s wage talks and signals for higher payments to workers in Tokyo seem to underpin the need for hawkish Bank of Japan (BoJ) action even if the latest chatters favor Governor Haruhiko Kuroda’s one last shot at the ultra-easy monetary policy before he retires in April. It should be noted that the expectations of stronger Fed bets and strong US data also underpin the US Treasury bond yields and propel the GBP/JPY prices. Amid these plays, the US 10-year and two-year treasury bond yields seesaw around the three-month highs marked the previous day while S&P 500 Futures print mild gains despite Wall Street’s negative closing. Looking ahead, a light calendar and cautious mood ahead of the Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes may restrict immediate GBP/JPY move. However, the hopes that BoJ Governor Haruhiko Kuroda will play one last shot before his retirement seem to underpin the bullish bias. Technical analysis A downward-sloping resistance line from late October 2022, close to 163.85 by the press time, challenges GBP/JPY buyers amid overbought RSI (14)

Federal Reserve minutes were as expected, but the market is far more inclined now to latch on to hawkish talk given the price action of the last few weeks. It still leaves us with a Fed that's not done with hiking FOMC minutes had a hawkish tint, but so too did Chair Powell on 1 February if listened to carefully Although market rates are a tad higher following the Fed minutes from the 1 February Federal Open Market Committee meeting, there was nothing material in them, at least nothing terribly unexpected. Bloomberg headlines noted that some (non-voting) members would have favoured a 50bp hike, but this was not new news. Bullard made that clear on a prior CNBC interview in fact. The 25bp hike delivered was unanimous, which was also not new news. The only item of note really was that the minutes were expected to be a tad more dovish. Reading through them, they had a clear hawkish tint. This is in stark contrast to the impact market reaction to the FOMC outcome itself, which had headlined with a nod toward a dis-inflationary tendency. Indeed this was mentioned in the minutes, but beyond that the dominant theme was a Fed continuing to fret about inflation, and noting that the labour market remains very tight. The dominant theme was a Fed continuing to fret about inflation, and noting that the labour market remains very tight In terms of liquidity conditions, the Fed noted some easing in the use of the reverse repo facility, and an expectation that that continues through 2023. The Fed noted a likely fall in reserves as we head into the April tax season. They also noted a likely tendency for money market conditions to tighten ahead, which should correlate with falls in the cash going into reverse repo and a rise in relative repo rates. In fact that is a theme to be expected right through 2023. Overall, the market reaction is for higher rates. A lot of this is down to the eyes of the beholder. At the FOMC itself, the market was looking for anything dovish to latch on to. From the minutes, that’s flipped, with the market now fretting over any hawkish hints. They were always there. But given the moves higher in market rates in the past weeks, there is an increased sensitivity to hawkish talk… More bank reserve reduction should compound Fed policy tightening in the coming months Source: Refinitiv, ING EUR rates looking for a fresh push at already lofty highs Bund yields appear to struggle moving higher from here, but as we noted before the levels above 2.50% already appear lofty. Rates retreated from their intra-day highs after some comparatively dovish remarks from Frances Villeroy. He noted that markets had “overreacted a little” with regards to the terminal rate and that the ECB was “in no way” obliged to hike at every meeting between March and September. Markets are already fully pricing in 125bp in ECB hikes, taking the terminal rate to 3.75% In turn though, it still implies that all of those meetings are fair game for hike speculation. And it does not mean that there could not be another push higher. Markets will remain perceptive to any hints that inflation proves more sticky. Cue, today's final eurozone inflation. Even if it should be well flagged, any upward revision to today’s final eurozone inflation for January would neatly fit into the narrative. But markets are already fully pricing in another 125bp in ECB hikes to take the terminal (deposit-)rate to 3.75%. The source of that next push higher in market rates would increasingly have to come from somewhere other than the front end – perhaps more related to a longer-term outlook, technical factors, or from outside the eurozone. Long-end sovereign issuance continues undeterred Supply can be counted on at least for a temporary bearish push in rates is illustrated by yesterday’s more than 4bp steepening in the 10-30y Bund curve. Yesterday Germany mandated a 30Y bond tap, the announcement of which accelerated a resteepening dynamics in Bunds, but not so much in swaps – the 10s30s swap curve which steepend only half as much. European sovereigns and supranational's strong ultra-long presence despite headwinds is an encouraging sign Fair, in current extraordinary times duration will demand more of a concession given still high volatility, the curve inversion and already sufficiently enticing yields at the front end. But when issuers tap into ultra-long funding they usually serve an existing and ongoing demand in the market. As such, European sovereigns' relatively strong ultra-long presence despite the aforementioned headwinds should be seen as an encouraging sign. Issuance data for the first two months in each of the past years shows that this year’s more than 27% share of ultra-long issuance (defined here as 15y maturity bucket and longer) is already above average, and that despite this year's record issuance in the first months.      European government bond and E-name issuance in the first two months of each year Source: Debt agencies, ING Today's events and market view In the eurozone many will look to the final inflation data for January. After German inflation data was not available for the calculation of the initial flash estimate, an upward revision now should be well flagged. Nonetheless, it will generate headlines that fit the current hawkish narrative. In the US the attention falls on the usual initial jobless claims data as a more real-time take on the temperature in the job market. We will also get the second print of fourth quarter 2022 GDP. In supply Germany has mandated a 30y bond tap which shoudl be today's business, The US Treasury will auction 7Y notes. With regards to the next potential drivers of direction rates markets will closely follow the first testimony of the BOJ new incoming governor Ueda and what he has to say on its policy of yield curve control tonight. 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

USD/JPY fades bounce off intraday low, prints mild losses to snap four-day uptrend. Treasury bond yields remain lackluster on Japan holiday. Retreat in US inflation expectations joins mixed geopolitical, Fed headlines to probe momentum traders. USD/JPY retreats to 134.80 as bears appear determined to retake control, after a four-day absence, during early Thursday. Even so, Japan’s holiday and hawkish Fed concerns join geopolitical fears to challenge the downside momentum. As a result, the yen pair prints mild losses during the first downbeat day in five. Starting with the Yen positive headlines, the retreat in the US Treasury bond yields and inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED), seem to exert downside pressure on the USD/JPY price. On the same line are the receding fears of nuclear war as US President Joe Biden thinks that his Russian counterpart isn’t up to using nuclear arms by backing off an international treaty. Furthermore, hawkish concerns surrounding the Bank of Japan (BoJ), due to the nearness to the end of Governor Haruhiko Kuroda’s term, also weigh on the USD/JPY pair. Alternatively, Fed policymakers are all in for further rate lifts, per the latest Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes, which in turn propels the US Dollar demand. Further, the fears surrounding the Ukraine-Russia war are far from over, with the latest edition of the West and China escalating the matter to the worse. Amid these plays, S&P 500 Futures bounced off the monthly low to print mild gains around 4,010 whereas the Treasury bond yields remain sidelined amid off in Japan. That said, the US Dollar Index (DXY) drops 0.20% to 104.35 by the press time. Looking ahead, a lack of major data/events could restrict USD/JPY moves but central bankers’ speeches can entertain the pair traders ahead of Friday’s US Core Personal Consumption Expenditures (PCE) Price Index data, the Fed’s favorite inflation gauge. Also important to watch will be the geopolitical headlines surrounding Russia, China and the US. Technical analysis Wednesday’s Doji candlestick joins overbought RSI on the daily chart to challenge USD/JPY bulls.

Summary:  US equity markets erased their losses overnight, aided by a rise in Nvidia shares boosting chip and tech stocks. Fed’s preferred inflation gauge the PCE is up next and may reaffirm sticky inflation again. The Japanese yen volatility is in focus after softer-than-expected January inflation print, and as policy stance of BOJ nominee Ueda is evaluated from the ongoing parliamentary hearings. Crude oil prices reversed higher but Copper back close to the key $4 area.   What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) had a wild session, but ended higher after bond yields fell from three-month highs US equity markets had a bumpy Thursday, awaiting the Fed’s core inflation gauge –the personal consumption index being released. However, after four days of losses, the S&P500 gained 0.5%, although it’s still down 1.6% Monday to Thursday. The S&P500 managed to move back above 4,000 level after the 10-year US bond yield fell from its fresh high - moving back to December levels of 3.871%. While bullish outlooks supported the market higher as well – with Nvidia shares up 14% on its bullish outlook - with Microsoft and Apple following higher. Despite that, US earnings are still muted YoY - highlighting margin compression- while there is still nervousness in the air- as the FOMC meeting minutes pointed to more tightening on the horizon. While there is also risk if the Fed’s inflation gauge (PCE) rises more than expected, the Fed could gain reason to become more hawkish – and that could see the S&P500 quickly test the 200-day moving average.  Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) had a mixed day; Techtronic tumbled 19%. Hong Kong's Hang Seng Index and China's CSI300 had a mixed day of trading. The Hang Seng Index slid 0.4%, while the CSI300 was flat. Techtronic (00669:xhkg) shares plunged 19% after a forensic research firm accused the power tool maker of inflating profits by capitalizing expenses as assets. Meanwhile, China internet names, tech hardware, and EV stocks rallied, with Bilibili (09626:xhkg) rising 3.6%, NetEase (0999:xhkg) climbing 4.1%; Lenovo (00992:xhkg) surging 5.5%, and Nio (09866:xhkg) up 4%. Baidu (09888:xhkg) fell 0.5%, despite reporting revenues and earnings that beat market expectations and announcing a share buyback program of up to USD5 billion. According to Nikkei Asia, Chinese regulators have told Tencent Holdings and Ant Group not to offer ChatGPT services to the public as the regulators are increasingly concerned about uncensored replies given to users. Australian equities (ASXSP200.I) moved up after three days of declines The Australian share market moved up 0.3%, up slightly above its 50-day moving average today - after a bevy of better than expected company earnings bolstered sentiment. Global pallet business, Brambles shares rose almost 7% to six month highs after upgrading its profit guidance ~7% to 15-18% growth with pallet demand in the US and UK improving. Australia’s biggest lithium company, Pilbara Minerals shares are up 2.6% after reporting record results- a A$1.24 billion net profit and declared its first ever dividend – of A$0.11. Just like Albemarle, Pilbara sees a strong lithium market ahead. Pilbara also upgraded its production guidance for the year – expecting to produce 600,000 to 620,000 dmt of spodumene concentrate – up from its prior guidance of 540,000 to 580,000 dmt. This reflects what we have been seeing this Australian reporting season – mining companies are upgrading their output guidance to keep up with expectations for strong demand, plus they are also seeing improved labour conditions. Block Inc (SQ and SQ2) rallied 7% to $116.44 on the ASX after 4Q net revenue rose more than expected, up 14% to $4.65 billion, beating estimates of $4.57 billion. It comes as Bitcoin revenue rose more than expected, to $1.83 billion vs $1.79 billion expected, while hardware revenue from its Square in store payments rose slightly more than expected. As for the year ahead  - Block sees 2023 adjusted EBITDA of $1.3 billion - which is more than $1.28b est - and its margin growing by at least 1 percentage point. So far this year, Afterpay sales are up 19% and credit quality is holding up- despite higher interest rates. Afterpay's loss rate is expected to stay 1% in Q1 this year - which is a slight improvement of its Afterpay loss rate in 2019 and 2018 of 1.1% and 1.5%.   Broadly the Aussie market has been pressured by Australian bond yields moving to their highest levels since January- 3.87%. That’s a better yield/ return than the broad Australia share market’s 3.5% yield. This shift has pressured the ASX200 down 3.8% from its record highs. But some stocks are still rising, with a cohort of companies benefiting from the reopening of the Chinese economy  - and on expectations of higher earnings ahead. Such stocks are in the travel sector; shares  FX: JPY volatility in focus The Japanese yen started the Asian session stronger after a weaker-than-expected inflation print for January, but the start of BOJ nominee Ueda’s parliamentary hearings brought a reaffirmation of the loose BOJ monetary policy and that saw USDJPY bidding up to 134.80. Yen volatility will remain in focus today and next week, also parking concerns of volatility in the global bond markets, as Bank of Japan’s renewed policy direction remains in focus. Crude oil (CLJ3 & LCOJ3) prices rebound 2% despite higher inventories Crude oil prices rallied on Thursday despite another higher inventory built. US crude stocks built 7.6mn barrels last week, significantly higher than analyst expectations of 2mn. The supply side concerns may have been in focus after Russia announced this week that it will cut exports to the West in March, in addition the previously announced production cuts. However, focus was also on indications of a pickup in gasoline demand along with a decline in US gasoline inventories. Copper prices decline on higher USD and awaiting China activity improvement Copper prices were down 3% amid rising concerns of further rate hikes by central banks after a marginally hawkish FOMC minutes this week. The market is also becoming increasingly impatient with the recovery in demand in China. There has been little meaningful sign that demand is rebounding. Copper prices fell to $4.05/lb bring the $4 support in focus.  Read next: The Euro Fell Below 1.06, The USD/JPY Pair Is Close To 135.00| FXMAG.COM What to consider? US GDP revised a notch lower, jobless claims fell The second estimate of Q4 GDP was released in the US, and was revised lower to 2.7% from the prelim 2.9%. The Core PCE measure, the Fed’s preferred measure of inflation, was revised to 4.3% from 3.9%, suggesting price pressure in Q4 were higher that previously reported. While slower activity and higher inflation components seem to be making the Fed’s task more difficult, labor market still remained strong which suggests that any slowdown in growth will be likely very slow. Weekly initial jobless claims dropped to the lowest in 4 weeks at 192k from the prior 195k. Japan’s January CPI softer than expected, eyes on Ueda’s hearings January inflation print in Japan came in-line with expectations on the headline at 4.3% YoY from the prior 4.0% YoY but was marginally below expectations on the core measures. Ex fresh food and energy was out at 3.2% YoY, above last month’s 3.0% YoY but below the expected 3.3%. Inflation remains above the Bank of Japan’s 2% target, and price pressures are broad-based. Focus now turns to BOJ nominee Kazuo Ueda’s parliamentary hearings in the lower house today as markets ponder over his policy direction. Worrying signal on the inflation front in the Eurozone Yesterday, inflation was confirmed higher than initially reported in the eurozone in January (headline at 8.6% year-over-year and core at 5.3% - this represents a 0.1 percentage point higher). What is even more worrying is that the EZ CPI basket showed the most broad-based price increase on record. 76 % of the basked experienced a month-over-month increase above 0.2 %. This is up from 52 % in December 2022. There is little doubt that the European Central Bank (ECB) will hike interest rates by 50 basis points in March. But we think the ECB is not done anytime soon with the tightening process. The terminal rate is probably closer to 4% than expected by the market consensus. Booking Holdings (BKNG:xnas) reports record 2022 revenue suggesting travel demand surge Booking Holdings reported higher-than-expected revenue for Q4 at $4.05bn (up 36% YoY), beating analyst forecasts of $3.9bn. Adjusted EPS of $24.74 was also above the expected $21.51. Q1 forecast was also upbeat, suggesting resilient travel demand despite inflation pressures. Booking Holdings is a part of our Asia Pacific Tourism equity theme basket which we launched in anticipation of the recovery in Chinese outbound travel demand. Alibaba (09988:xhkg/BABA:xnas) beats earnings estimates on cost cutting Alibaba reported better-than-expected results for its fourth quarter. Adjusted EPS of 19.26 yuan (on revenue of 247.76bn yuan) was above consensus of 16.63 reflecting deep cost cutting measures. EBITA grew 16% Y/Y on cost cuts and smaller losses from Taocaicai. The cloud computing revenue was only up 3.3% while the core Chinese commerce business slid 1%. The eCommerce giant’s ADRs closed down 2.9% from the level of Hong Kong closing amid management comments on the need to increase investments to stay competitive in the year ahead. OCBC (O39:xses) reports Q4 net income miss Oversea-China Banking Corp. reported an increase of 34% in net profits in the fourth quarter to S$ 1.31bn which fell short of estimates of S$ 1.68bn. Net interest income was up 60% YoY but non-interest income slid 42% due to lower wealth management fee. Final dividend of S$0.40 was up from S$0.12 last year, and the lack of a DBS-like special dividend could mean the stock could be beaten up near-term.     For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Markets Today: BOJ stance in focus, PCE inflation report ahead – 24 February 2023 | Saxo Group (home.saxo)

USD/JPY is showing a volatility squeeze after some wild moves post-speech from BoJ Governor Nominee Kazuo Ueda. Bank of Japan Ueda considered the current monetary policy as appropriate for achieving the persistent 2% inflation target. Federal Reserve to continue policy tightening spell as upbeat US labor market could propel inflation ahead. USD/JPY is auctioning in a Rising Wedge which indicates a loss in the upside momentum and cements a bearish reversal. USD/JPY remained in vigorous action in the Asian session as Bank of Japan (BoJ) Governor Nominee Kazuo Ueda delivered his first speech after his selection. The asset displayed wild gyrations in the 70-pips range and returned to its mean. The major has turned sideways as a volatility expansion is generally followed by a contraction in the same. At the time of writing, the pair is demonstrating a back-and-forth action around 134.70 and is expected to continue to remain sideways till the release of the United States Personal Consumption Expenditure (PCE) Price Index for fresh impetus. The US Dollar Index (DXY) is struggling to find a decisive move as investors have shifted to the sidelines ahead of the US PCE data. S&P500 futures have turned volatile amid dubious gestures from the Chinese government toward the ongoing Russia-Ukraine war. The war situation between Russia and Ukraine has entered in the second year and the street is expecting some bold moves from Russia, which could accelerate geopolitical tensions further. Earlier, the United States and Germany warned Beijing not to deliver weapons to Russia, as reported by DER SPIEGEL. The warning from the US and Germany came after the headlines of negotiations between China and Russia for the purchase of 100 strike drones by Moscow. Bank of Japan Ueda cites current monetary policy as appropriate The street was keenly awaiting the speech from BoJ Ueda as the Japanese administration promised that the government will consider an exit from the decade-long expansionary monetary policy with the novel Bank of Japan’s leadership. Bank of Japan Ueda cleared that the decade-high inflation is backed by higher import prices and has nothing to do with the domestic demand and labor cost index, which are extremely weak. Bank of Japan Ueda cited the current policy easing as appropriate to achieve pre-pandemic growth levels. Apart from that, the Bank of Japan Ueda cited that the central bank will look for normalization of the stimulant monetary policy after confidently achieving the 2% inflation target. The BoJ Kuroda successor refrained from discussing specifics of the Yield Conversion Control (YCC) for now. Investors should be aware that the Bank of Japan stretched the YCC on the Japanese Government Bonds (JGBs) to 0.5% from above and below zero in its December monetary policy. Context of a pause in Federal Reserve’s policy tightening spell looks over After a quarter of sheer inflation softening in the United States, the street started anticipating that the Federal Reserve (Fed) would pause the rate hike cycle for a while and would allow the current monetary policy to tame the stubborn inflation. However, the US inflation turned out to be extremely persistent and started showing its true colors. The US Consumer Price Index (CPI) looks set to rebound after a declining spell led by the tight labor market and a solid revival in consumer spending. The upbeat labor market is characterized by declining jobless claims, multi-decade lowest Unemployment Rate, and rising demand for fresh talent if we sideline some lay-off announcements by giant techies. USD/JPY technical outlook USD/JPY is auctioning in a Rising Wedge chart pattern that indicates a loss in the upside momentum on an hourly scale. The aforementioned chart pattern results in a bearish reversal after a breakdown. The asset is struggling to reclaim an auction above the 50-period Exponential Moving Average (EMA) at 134.75. Meanwhile, the Relative Strength Index has surrendered oscillation in the bullish range of 60.00-80.00. A confident break into the bearish range of 20.00-40.00 will result in activation of the downside momentum.

S stocks had a wobbling trading session yesterday. The S&P500 tipped a toe below its 50-DMA yesterday, near 3980, then rebounded to close the session around 0.50% higher, above the 4000 psychological mark. Nasdaq 100 saw support into the 12000 psychological mark and gained almost 1% into the close. The 14% jump in Nvidia certainly helped improve the overall market mood, whereas the US economic data was mixed and was not supposed to pour water on the equity bears or improve sentiment regarding the Federal Reserve (Fed) hawks. The latest GDP update from the US revealed that the US economy expanded 2.7% in the Q4, instead of 2.9% penciled in by analyst. A softer economic growth could have been encouraging for easing inflation and softening the Fed's hand. BUT NO, because the GDP price index – another gauge of inflation which was released along with the GDP update, showed that inflation in the Q4 eased but eased much less than expected – as a perfect reflection of the CPI and PPI data released last week. The cocktail of slower-than-expected growth and higher-than-expected inflation is the worst possible outcome, and we could see the latter reflected in the corporate earnings. The S&P500 companies now all reported their results and earnings fell 1% in the latest quarter. At first glance, this is not a good number, but these earnings are compared to the blockbuster post-pandemic numbers, and despite a fall, they remain high. The question is, how far they will fall. It will depend on several factors, including how aggressive the Fed will continue tightening policy. How aggressive the Fed will continue tightening policy will depend on how sticky inflation is. We have one more important data point to watch before the week ends... and that's the US PCE index, the Fed's favourite gauge of inflation. Given the previous inflation data, we know that inflation has certainly eased, but not as much as expected. If there is not a big surprise, there should be no bloody market reaction to a slightly higher than expected PCE index. The S&P500 could close the week above the 50-DMA, and Nasdaq above its major 38.2% Fibonacci retracement. There is one more thing that probably helps equities hold their ground, and that's the easing US yields. I believe that the US yields have been easing since a couple of days due to the rising geopolitical tensions between the US and China – after China screamed loud and clear their support to Russia this week. These rising tensions certainly increase the safe haven flows to the US treasuries and interferes with the hawkish Fed pricing. As such, the US 2 and 10-year yields are softer compared to a peak earlier this week. European stocks up, euro down on record inflation!? The European stocks gained and the euro fell on Thursday, even though the latest inflation data from the eurozone revealed that the core inflation advanced to a record high. The rising inflation is normally a boost for the European Central Bank (ECB) hawks, who increase the bets that the ECB will raise the rates more forcefully. The latter should weigh on equity valuations and support the euro. But no. The contrary is happening because the major driving force of the market is the Fed and the dollar. So, the EURUSD fell as low as 1.0577 yesterday, while the European stocks were upbeat. The DAX index for example is now at pre-war levels, whereas the latest data is less than encouraging for the German economy. The European exports are recovering to the pre-pandemic levels, but the German exports are clearly lagging behind the zone's average. Spain and Italy are doing much better than their German peers. Why? Because the energy crisis has taken a toll on German manufacturing, whereas the post-pandemic reopening benefit Spanish and Italian tourism. As a result, the headline data is strong, but the underlying factors warn that the Eurozone growth is perhaps vulnerable. Sticky inflation and hawkish ECB are major risks to the actual European equity rally. 41-year high, Mr. Ueda! Speaking of inflation, the data released this morning showed that inflation in Japan rose to 4.3%, a 41-year high, and gave a rapid boost to the yen, sending the USDJPY down to the 134 mark. But we know that the Bank of Japan (BoJ), under the leadership of its new head Ueda, is not necessarily concerned about the rising inflation. The BoJ prefers keeping rates below zero, for now, and that should continue playing in favour of USDJPY bulls, at a time when the Fed members continue showing the world how serious they are in taming inflation.  

Central bank watchers knew it would be a surprise if BOJ governor nominee Kazuo Ueda gave any substantial hints about how he will consider policy normalization.  Ueda reiterated that the BOJ’s current policy is appropriate. He noted that “Japan’s trend inflation is likely to rise gradually. But it will take some time for inflation to sustainably and stably achieve the BOJ’s 2% target. FX traders were not surprised that Ueda did not signal he was in a rush to tweak Yield Curve Control (YCC). Ueda has not made a decision at a policy meeting since 2005, so he will likely refrain from providing any hints that lock him into any monetary policy stances. The Japanese yen has rallied quite a bit on expectations that Governor Kuroda’s replacement would likely be quicker in abandoning YCC and eventually ending negative rates. Every BOJ watcher read Ueda’s opinion piece that said the BOJ must consider an exit strategy from its ultra-loose monetary policy and review its extraordinary stimulus.  Traders are now realizing that Ueda is unlikely to provide any tightening of monetary policy signs anytime soon, especially before a policy review. The yen won’t be rallying on tightening bets ahead of Kuroda’s last dance (March 10th meeting) and with incoming Governor Ueda’s first policy meeting in April. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  The policy stance of Bank of Japan’s governor nominee Kazuo Ueda, became much clearer with the parliamentary hearings kicking off today. He assured continuity of the current easy monetary policy with a steadfast focus on achieving 2% inflation sustainably. However he was cognizant of the side effects of yield curve control, and flexible to responding to market pressures with tweaks as needed. This comes against market’s strong anticipation of a hawkish tilt. The highly awaited event of the week was the parliamentary hearing of new Bank of Japan governor nominee Kazuo Ueda in the lower house. That went ahead without creating much sparks, with Ueda broadly sticking to the outgoing Governor Kuroda’s script initially, but later qualifying that with remarks that suggested he will remain flexible and open to policy normalization. As we highlighted earlier, Ueda has been out of touch with BOJ policy making since 2005 and will likely take it slow to even consider policy normalization at some stage. His neutral comments today, coming against market’s hawkish expectations and together with the rising global yields, suggest yen could embark on a weakening trend again once we are past this volatility. Japanese equities have responded positively, and continue to look promising. Inflation goal unlikely to be changed Markets have continued to believe that PM Kishida’s choice for the next BOJ governor to be someone from outside the bank or the Ministry of Finance has meant that people from within the circles didn’t want the job. This has reaffirmed the view that policy is moving towards an exit and boosted expectations that the joint statement from Ueda and the government could alter the 2% inflation goal. That seems unlikely for now. Ueda’s comments clearly echoed Kuroda-san’s view that the current inflationary pressures in Japan are import-driven and unsustainable. While he continued to emphasise the importance of wage growth, he also said that a number of factors will be key to determine price pressures and it will take time to achieve the 2% target in a sustainable and stable manner. As such he continued to emphasize that the key goal for the BOJ is to achieve the 2% inflation sustainably, while fiscal policy can be used to mitigate supply-side sources of inflation. Source: Bloomberg, Saxo Policy tweaks rather than normalization Ueda was not as closed to considering policy normalization as Kuroda. He said that it is his responsibility to ensure that normalization is carried out at the right time if the 2% inflation goal is reached. This means if inflation proves sticky, then the review of the yield curve control is now more likely that it ever was under Kuroda. However, given Ueda’s view that inflationary pressures are currently unsustainable, normalization remains unlikely for now. Ueda still accepted that there are side effects of yield curve control, and remained open to considering policy tweaks. What tweaks may be considered? Ueda stopped short of hinting at just what policy tweaks may be considered, but he remained open to considering tweaks like shortening the long-term interest rate target to 5-year or 7-year from 10-year currently, or even widening the band. This was a contrast to his comment ten days back, where he stated that gradually raising the ceiling creates waves of speculation as market participants just position for the next yield target. While expectations of an abrupt exit may have cooled, market’s hawkish expectations can continue. Other options to embark on policy normalization if inflation proves more than transitory will be ‘creative’. He hinted at moves such as raising interest rates on financial institutions' reserves parked with the central bank rather than selling bonds. Communication with the markets Markets can however expect somewhat improved communication from Ueda, both domestically but also in terms of coordination with foreign central banks which will be key if the YCC policy is abandoned at some point in the next 5 years given its massive global implications. This should reduce speculative positions and bring the safe haven status of yen back in focus.     Source: Macro Insights: Bank of Japan’s new governor Ueda – continuity with flexibility | Saxo Group (home.saxo)

US stocks had a wobbling trading session yesterday. US equities gained, then lost, then rebounded to close the session in the green. Nvidia The 14% jump in Nvidia certainly helped improve the overall market mood, whereas the US economic data was mixed and was not supposed to pour water on the equity bears or improve sentiment regarding the Federal Reserve (Fed) hawks.  US economy The latest GDP update from the US revealed that the US economy expanded slower than expected, while prices rose faster-than-expected. We have one more important data point to watch before the week ends… and that’s the US PCE index, the Fed’s favourite gauge of inflation. Given the previous inflation data, we know that inflation has certainly eased, but not as much as expected. Eurozone Across the Atlantic Ocean, the European stocks gained and the euro fell on Thursday, even though the latest inflation data from the eurozone revealed that the core inflation advanced to a record high. Japan While the data released this morning showed that inflation in Japan rose to 4.3%, a 41-year high, and gave a rapid boost to the yen, sending the USDJPY down to the 134 mark. Watch the full episode to find out more! 0:00 Intro 0:35 Mixed reaction to mixed data 3:55 Watch US PCE index today! 5:40 European stocks up, euro down after record core CPI. Why?! 7:38 Japanese inflation hits 41-year high 8:25 Turkey cuts rate despite inflation threat 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. #USD #EUR #JPY #GDP #inflation #data #Turkey #rate #decision #TRY #EuroStoxx #DAX #BIST #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 release of data on Japan's inflation increase and Kazuo Ueda's speech, the new president of the Japanese Central Bank, caused the dollar-yen pair to fall below the base of the 134th figure during Friday's Asian trading session. Ueda's controversial messages Despite the southern momentum, Ueda's inconsistent statements prevented the USD/JPY bears from building on their profits. On the one hand, he asserted that the monetary policy's existing parameters "remain reasonable" and commendable. Ueda did, however, maintain the flexibility for adjustment should inflation continue to show upward dynamics. Such contradictory signals stopped the downward momentum, and the USD/JPY pair thereafter moved back to the 135th figure's margins. Nevertheless, notwithstanding the sellers of the pair's ambiguity, it can be assumed that the Bank of Japan will continue to support the yen over the long term. It is clear that Ueda wants to keep things the same, but his rhetorical style also suggests that he may be open to change in the future. Speaking before the Japanese parliament, Kazuo Ueda asserted that rising import costs for raw materials, rather than strong consumer demand, are mostly to blame for the country's inflationary acceleration. He also stated that the future of the national economy is "very uncertain." One of Ueda's words worked in the yen's favor. According to him, the Central Bank may think about normalizing monetary policy if trend inflation "substantially increases" and the Bank of Japan target can be achieved over the long term. One way to read the expressed phrase is as a warning to the markets to be wary. Nonetheless, Ueda argued that the Central Bank should take its time making the right decisions and that, for the time being, it "should maintain ultra-low interest rates to support a fragile economy." In other words, Kazuo Ueda made it apparent that he currently does not disagree with the course of action taken by the Bank of Japan's current governor. If adjustments are needed in the future, they will be made gradually, consistently, and smoothly; there won't be any sudden 180-degree turns. It should be highlighted that Kazuo Ueda still retains the option of normalizing the monetary policy's settings, in contrast to Kuroda. This is a crucial aspect that will come up later (likely in the second half of the year), especially if Japan's inflation rate gains momentum. The current state of affairs is consistent with this scenario, at least as far as Japanese inflation is concerned, as today's announcement eloquently attests. Report on Japan's rising inflation The scenario is as follows. The consumer price index as a whole increased by 4.3% in January, which is the fastest pace of growth since December 1981. The 40-year record was also updated by the core CPI, which includes energy prices but excludes fresh food. Excluding food and energy costs, the consumer price index increased by 3.2% from the previous year in October. Nearly every aspect of the aforementioned report performed better than expected in the green zone. It is important to note that for the past ten months, inflation has been higher than the Bank of Japan's target rate of two percent. According to the release's structure, prices for food, clothing, furniture, and household products all increased in Japan last month, while prices for medical care, education, and transportation services decreased. The price of utilities increased by 15% all at once, with gas and electricity rising by 20% and roughly 25%, respectively. It is important to note that several major Japanese organizations and businesses have recently started actively raising pay in light of the recently released inflation report. Particularly industry giants like Toyota and Honda. The day before yesterday, representatives of Toyota said that the firm will abide by the union's requests regarding pay and bonuses: wages would increase "at the fastest pace in the last two decades." Honda, a manufacturer of cars, followed suit and declared that it will adhere to all pertinent union obligations. The business announced the biggest pay boost since 1990, a 5% compensation increase. Conclusions The inflation report remained obscured by Kazuo Ueda's conflicting signals. Certainly, Japan's inflation is still on the rise, but Haruhiko Kuroda's replacement made it plain that he would not "jump into war" right once after assuming office (i.e. in early April). At the same time, he acknowledged that the Japanese regulator might need to change its normalization strategy, but it is still too early to discuss this in detail. This stance exerted pressure on the yen, which struggled to maintain its position when paired with the dollar. I believe that the USD/JPY pair will soon follow the dollar, which is anticipating the most significant inflation report regarding the expansion of the underlying PCE index (to be published at the start of the American session on Friday). Making trading decisions on the pair after its publication is thus advised. The key price target in this situation will be 136.50, which corresponds to the upper line of the Bollinger Bands indicator and the upper limit of the Kumo cloud on the D1 timeframe.   Relevance up to 09:00 2023-02-25 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336024

The dollar index rose to seven-week highs on Friday as investors braced for an extended hold on higher US interest rates after a series of strong economic data in the US. Investors await data on the US Personal Consumer Expenditure (PCE) Price Index. The annual core PCE price index, the Fed's preferred measure of inflation, is projected to fall to 4.3% in January from 4.4% in December. The core consumer price index (CPI) fell to 5.6% y/y in January from 5.7% in December. A modest fall in core PCE inflation should not come as a big surprise at this point. The PCE Core Price Index is expected to increase by 0.4% m/m. In the event that the monthly value exceeds the market consensus, the US dollar may gain strength. It is worth noting, however, that markets are already fully pricing in two more Fed rate hikes of 25 basis points in March and May. USD/JPY USD/JPY started the day with a decline towards 134.20. Then the yen pair moved upwards. USD/JPY hit 135.00 and is now trading at 135.3850 The Japanese yen may fall further after the new governor of the Bank of Japan, Kazuo Ueda, signaled that very loose monetary policy should be maintained. Ueda's comments after his approval in the lower house of Japan's parliament did not produce any clear hawkish signal that could fuel a resurgence of speculative demand for the yen in the near term. EUR/USD EUR/USD traded above 1.06 in the Asian session, mostly in the 1.0605-1.0610 range. In the European session, the EUR/USD pair lost momentum and returned to levels below 1.06. Currently, the pair is trading just below 1.06 at 1.0580. The euro started the European session weaker after worse than expected data on German GDP. GDP data showed that the German economy contracted (-0.4%) in the fourth quarter of 2022 and brought recession talk back. Moreover, a weaker-than-expected rise in monthly core PCE inflation could trigger a USD correction and help the EUR/USD rebound ahead of the weekend. Read next: Visa Success At The Expense Of Small Businesses| FXMAG.COM GBP/USD The cable pair in the Asian session and in the beginning of the European session traded around 1.2020. The GBP/USD pair lost momentum and fell below 1.20, at 1.1987. British consumers have become more optimistic about their personal finances and economic outlook, but their sentiment is much lower than it was before the COVID-19 pandemic, research firm GfK said on Friday. Improved consumer sentiment does not always translate to improved spending, as evidenced by the flat retail sales reading for February from the Confederation of British Industry on Thursday. However, energy prices are finally backing down from last year's highs and the UK economy is not looking as bad as expected just a few weeks ago, according to this week's Purchasing Management Index (PMI) business activity survey that showed an unexpected rebound in early February. AUD/USD The pair of the Australian in the Asian session stayed above 0.6819, but with the start of the European session it began to fall below 0.68. Currently the Aussie Pair is trading below 0.6870 The Australian yen gained in value after the alleged head of Japan's central bank maintained the status quo on monetary policy and was apparently in no rush to end its massive stimulus programme.. Source: investing.com, finance.yahoo.com

The Japanese yen is slightly weaker on Friday. In the European session, USD/JPY is trading just above the 135 line. Ueda pledges to continue easy policy Incoming Bank of Japan Governor Kazuo Ueda appeared at a parliamentary hearing on Friday and the markets were all ears. The buzz-word from Ueda was ‘continuity’, which really wasn’t a surprise. Ueda has already said that the current policy is appropriate and he maintained this stance at the hearing. Ueda said that ultra-low rates are needed while the economy is fragile and ruled out fighting inflation by tightening policy. With inflation running at 4%, above the BoJ’s target of 2%, there is pressure on Ueda to abandon or at least adjust the Bank’s yield control policy (YCC), which is being criticised for distorting market functions. Ueda treated this hot potato with caution. He acknowledged that the YCC had caused side effects but said that the BoJ should evaluate whether recent steps such as widening the band around the yield target would ease these problems. The takeaway from Ueda’s testimony is that he is in no hurry to shift central bank policy. Still, there is strong pressure on Ueda to address YCC, which is damaging the bond markets. Investors should not discount the possibility that Governor Kuroda could widen the target yield band at the March meeting in order to relieve pressure on Ueda. If Kuroda doesn’t act, the bond markets could respond with massive selling before Ueda takes the helm of the BoJ in April. The inflation pressures facing the BOJ were underscored by National Core CPI for January, which rose from 4.0% to 4.2%. This was just shy of the 4.3% estimate, but still the highest reading since 1981. The BoJ has insisted that inflation is temporary (remember that line from the ECB and the Fed?), and is hoping that the government’s massive stimulus package, which includes subsidies for electricity, will help bring down inflation.  Read next: Visa Success At The Expense Of Small Businesses| FXMAG.COM USD/JPY Technical USD/JPY is testing resistance at 134.85. Above, there is resistance at 135.75 1.3350 and 131.90 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  Source: Yen edges lower after BoJ's Ueda testimony - MarketPulseMarketPulse

OANDA Senior Market Analyst Ed Moya reviews the latest market news with Jonny Hart. They discussed the market reaction after the Fed’s preferred inflation index accelerated, incoming BOJ Governor Ueda’s testimony, cryptos, Coinbase earnings and the week ahead.     This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Disinflation trends are struggling and now Wall Street will look to see if improving manufacturing and service activity will further fuel pricing pressures. On Monday, durable goods data for January is expected to show higher borrowing costs are hurting manufacturers. Wall Street will also get a couple of Fed regional surveys from Dallas and Richmond.  Traders will pay close attention to Wednesday’s ISM manufacturing report and Friday’s Services Index.   Central bank speak will be closely monitored, especially new Fed member Goolsbee’s comments on Tuesday.  Jefferson will speak on inflation and the dual mandate on Monday, while Waller will talk about the outlook on Thursday. On Friday, we will hear from Logan, Bostic, and Bowman.   US President Biden will also host German Chancellor Scholz at the White House. Traders will look to see if they announce any new efforts to support Ukraine or sanctions against Russia.   Earnings season continues with key updates from Bayer, Berkshire Hathaway, Broadcom, Budweiser Brewing Co. Apac, Costco Wholesale, CRH, Dell Technologies, Dollar Tree, HP, Kroger, Kuehne + Nagel International, Lowe’s, Merck, National Bank of Canada, Occidental Petroleum, Salesforce, Toronto-Dominion Bank,  VMware, and Workday. Eurozone Next week offers a number of economic data points, the most notable of which will be the flash HICP readings. While headline inflation has been falling, core remains at the peak and policymakers are unlikely to ease off the brake until they’re seeing progress on this front. Forecasts suggest it’s still a little early for that. Markets are still pricing in a 50 basis point hike at the meeting in March although there’s an almost equal chance of 75, based on current rates. Which brings us nicely to the central bank speak, kicking off with President Lagarde who’s due to appear at the G20 conference over the weekend.  UK  It’s all a bit calm next week, with central bank appearances the most notable thing on the calendar. That includes Governor Bailey on Wednesday and Chief Economist Pill on Thursday. With 25 basis points almost entirely priced in for March and the committee clearly a little divided on the correct path going forward, I’m not sure what they could say that would cause much of a shock at this point. Russia Unemployment is expected to have jumped to 4% in January, from 3.7% the month before. Meanwhile PMIs on manufacturing and services on Wednesday and Friday, respectively, will be eyed. South Africa A quiet week in store with unemployment the only notable release. Turkey The CBRT cut rates last week by an unusually modest 50 basis points, taking the repo rate to 8.5%. Inflation remains extraordinarily high, with the official rate released by the Turkish Statistical Institute, sitting at 57.68%. The February reading will be released on Friday, while GDP data is due on Tuesday.   Switzerland A selection of data points will be eyed this upcoming week which should give an up-to-date view on the state of the economy. The week will start with GDP data on Tuesday for the fourth quarter, alongside the KOF indicator for February. This will be followed by retail sales for January and the manufacturing PMI for February on Wednesday.  China The official manufacturing and non-manufacturing PMIs for January will be released on Wednesday, in what will otherwise be a relatively quiet week. Of course, all eyes are on the transition and how quickly and strongly the economy will bounce back, with stimulus measures over the next couple of months likely to turbo-charge the recovery. India GDP and PMI data eyed next week, with the economy seen performing strongly again in the third quarter and surveys indicating ongoing optimism.  Australia & New Zealand The RBNZ’s first interest rate meeting of the year last week was in line with market expectations of another 50 basis point hike. The central bank minutes mentioned that a potential recession in the second quarter of this year might occur, putting pressure on the New Zealand dollar. Focus this week will be on Australian retail sales data for January and GDP for the fourth quarter, and New Zealand retail sales for the fourth quarter. Japan According to Japanese lawmakers, BOJ Governor nominee Kazuo Ueda is to speak in the upper house on 27 February, and deputy governor nominees are to appear in the upper house on 28 February. Ueda will attend the hearing at the National Diet and give a speech, which may have an impact on Japanese markets.  Retail Sales and the Tokyo core CPI will be in focus next week. Singapore Retail sales and the February PMI survey are the only releases of note. Economic Calendar Saturday, Feb. 25 Economic Events Berkshire Hathaway reports earnings   G-20 finance ministers and central bank governors conclude meetings Sunday, Feb. 26 Economic Events German Chancellor Scholz meets with Indian PM Modi Japan’s ruling LDP holds its annual convention Monday, Feb. 27 Economic Data/Events US durable goods Eurozone economic confidence, consumer confidence Hong Kong trade Israel unemployment Japan BOJ outright bond purchases Mexico trade US Congress returns after a recess US Treasury Secretary Yellen talks with President Zelenskiy ECB chief economist Lane speaks on “Macro-Financial Stability in the EU” ECB’s de Cos speaks at EIB event in Luxembourg BOE’s Broadbent speaks at a digital technologies conference in London Tuesday, Feb. 28 Economic Data/Events US wholesale inventories, Conference Board consumer confidence Australia current account, retail sales Canada GDP Finland GDP France CPI, GDP India GDP Japan industrial production, retail sales Mexico international reserves Singapore unemployment South Africa unemployment, trade balance Sweden GDP Switzerland GDP Thailand trade Turkey GDP Chevron investor day Mayoral election in Chicago New Fed member Goolsbee speaks at Ivy Tech Community College BOE chief economist Huw Pill makes closing remarks at digital technologies conference BOE’s Mann and ECB’s Vujcic speak at the EIB forum in Luxembourg Earnings from Target Wednesday, March 1 Economic Data/Events US construction spending, ISM Manufacturing, light vehicle sales Australia GDP China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI European Manufacturing PMIs: Eurozone, Germany, France, and the UK Germany CPI, unemployment India Manufacturing PMI New Zealand building permits Russia unemployment Start of the annual Conservative Political Action Conference (CPAC) Bundesbank publishes annual report BOJ’s Nakagawa speaks in Fukushima BOE Governor Bailey speaks at a conference focused on the cost of living crisis ECB’s Villeroy speaks at the French National Assembly’s finance committee ECB’s Visco speaks in Frankfurt Earnings reports from Dollar Tree, Kohl’s, Salesforce, and Lowe’s   Thursday, March 2 Economic Data/Events Australia building approvals Brazil GDP Eurozone CPI, unemployment Hong Kong retail sales Hungary GDP Italy CPI, unemployment Japan capital spending Mexico unemployment South Korea industrial production Spain unemployment Sri Lanka rate decision US initial jobless claims Bloomberg Intelligence’s Market Structure event in New York. Speakers include Securities and Exchange Commission Chair Gary Gensler and NYSE COO Michael Blaugrund The due date for the DOJ’s amicus brief with its view on Donald Trump’s claim that he should get absolute immunity against civil lawsuits seeking to hold him liable for the Jan. 6, 2021 attack on the US Capitol ECB publishes accounts of February policy meeting Bank of Japan board member Hajime Takata gives speech in Kanagawa BOE chief economist Huw Pill speaks on the economic outlook Retail earnings continue with Macy’s, Costco, and Nordstrom all reporting Friday, March 3 Economic Data/Events US President Biden and German Chancellor Scholz meet at the White House China Caixin services PMI Czech Republic GDP Eurozone Services PMI, PPI France industrial production Italy GDP Japan unemployment, Tokyo CPI Singapore retail sales ECB’s Vasle and Muller speak on inflation Italian PM Meloni visits Abu Dhabi BOE’s Hauser speaks at a workshop on market dysfunction hosted by the Initiative on Global Markets in Chicago Sovereign Rating Updates Austria (Fitch) Czech Republic (Fitch) Hungary (Moody’s) European Union (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.  

Summary:  The U.S. ISM survey and China’s PMI reports are the key data to watch this week. After the hot employment and inflation data from the U.S., investors are searching for additional data to discern the competing scenarios of recession, soft-landing, and no-landing (i.e. strong growth). Investors are also in need of signs of economic recovery from China or additional positive policy signals from the Chinese authorities to sustain the U-turn in sentiment towards Chinese equities since November last year which has started to fade somewhat. Ueda, the new BOJ chief’s rhetoric on policy continuity will be put to test with this week’s Tokyo CPI due on Friday. US ISM surveys to be the next test for yields and US dollar The recent data out of the US has shown firm inflation and growth dynamics, prompting an upward repricing of the Fed’s path and bringing yields to critical levels. The 2-year yields in the US have touched their highest levels since 2007, and 10-year yields are in close sight of the key 4% zone which can spell further risk aversion. The ISM surveys this week will be key to watch for further direction, with the manufacturing survey out on Wednesday and services out on Friday. The consensus is for the manufacturing ISM to improve to 48.0 in February from 47.4 in January, but still remain in contraction (below 50). The ISM services index saw a surge to 55.2 in January after a drop to 49.2 in December, partially a reflection of winter weather trends. Gains are likely to moderate, and consensus expects 54.5. Also on watch will be the US durable goods orders for January, as mentioned in the Weekly Watch.   China PMIs are expected to show further recovery in the economy Also Wednesday - China’s PMI surveys are expected to show the recovery is progressing in February. We expect good news - with the services sector driving growth and manufacturing picking up slightly. These will be important signals - as monthly activity data won’t next be available until mid-March. The official NBS Manufacturing PMI, according to survey from Bloomberg, is expected to bounce further into expansion at 50.7 in February from 50.1 in January and the Non-manufacturing PMI is forecasted to climb to 55.0 from 54.4. Despite the sluggishness in exports, Caixin China PMI is expected to return to the expansionary territory at 50.8 in in February, from 49.2 in January. The Emerging Industries PMI jumped to 62.5 in February from 50.9 in January added to the favourable forecasts for the NBS and Caixin PMIs. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. Australian Economic news on tap to potentially pressure the ailing Aussie dollar Australian GDP data on Wednesday will likely show fourth-quarter economic growth slowed down to pace of 2.7% YoY - quashed by higher inflation and interest rates. And monthly CPI should show inflation is cooling. In these instances, that would theoretically pressure the Aussie dollar lower, while the US dollar is continuing to move up - so that’s something to watch. Softer Eurozone flash February CPI may not be a big relief, ECB minutes on tap as well Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed. Core measure on focus in Japan’s Tokyo CPI release The new Bank of Japan chief Kazuo Ueda’s testimonies in the parliament hinted at an unchanged monetary policy in the near-term, and a steadfast focus on achieving 2% inflation sustainably. Ueda remains in Kuroda’s camp on inflation, saying that the current inflationary pressures are mostly import-driven and inflation is expected to peak soon. This rhetoric will be put to test with this week’s Tokyo CPI due on Friday. Consensus expects the headline CPI to soften to 3.3% YoY from 4.4% YoY last month, perhaps signalling that nationwide numbers could ease as well. However, the core-core measure (ex-fresh food and energy) is likely to be firmer at 3.1% YoY in February from 3.0% previously. Energy companies will be a focus - after so far delivering the strongest earnings this season and last year Energy companies have again reported the best earnings growth this US and Australian corporate reporting season - with increased profits and dividends. Occidental Petroleum’s outlook will be a focus on Monday as well as Canadian Natural Resources - when they report later this week. Occidental is expected to report its highest-ever fourth-quarter net income – with the US energy giant to benefit from high energy prices amid tight supplies. The oil and gas giant generated about $2.8 billion in free cash flow in the period after years of austerity and debt reduction, according to Bloomberg consensus. Investors will closely monitor its 2023 spending and capital-returns outlook with adjust EPS of $1.79 expected. Occidental's shares are down 6.6% this year. For what Australia’s oil and gas giant - Woodside Energy reported on Monday see our daily team note – Markets Today. Also, keep in mind, we expect the oil price to stay around $80 this quarter and move up to $90 next quarter. Brewers will be interesting to watch amid the reopening trade Budweiser Brewing Co (1876 HK) which is a distributor is Asia - is due to release results on Wednesday with Q4 revenue to get a lifeline from the FIFA World Cup trading- but income is still expected to dive. However, the world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) may gain more attention when it reports on Thursday, as option volume rose 8% last week in BUD, with the market expecting EPS to grow from 1.94 to 3.01. For more on Brewers click here. EVs also in focus – Tesla Investor Day and Li Auto and NIO report earnings China reopening theme also continues to be on test with the Asian reporting season underway, and this week brings earnings reports from two key EV manufacturers. Li Auto (02015:xhkg/LI:xnas) reported on Monday before China open while Nio (09866:xhkg/NIO:xnas) reports on Wednesday. It will be key to watch how Tesla’s steep discounts and the end of government subsidy impacts the outlooks for these two Chinese EV manufacturers which got off to a slow start this year, and whether the decline in lithium prices lifts the outlook higher. Tesla (TSLA:xnas) will hold an Investor Day event on March 1 in what could be one of the key days of the year for the electric vehicle giant. Nio, Li Auto and XPeng (09868:xhkg/XPEV:xnys) also report February deliveries this week, and China’s EV and battery giant BYD (01211:xhkg/BYD:xnys) should release February sales by Friday.   Tech earnings to watch in the tech space: Salesforce, Snowflake, and Coupang In a note last Friday, Peter Garnry,  Saxo’s Head of Equity Strategy draws investors attention to Salesforce (CRM:xnys), Snowflake (SNOW:xnys), and Coupang (CPNG:xnys) announcing this week. Activist investors have entered Salesforce, a cloud-based enterprise software provider, over the past year and the pressure is going up on management to drastically improve profitability which is already being reflected in analyst estimates. Analysts expect revenue growth of 9.2% y/y down from 26% y/y a year and EBITDA of $2.67bn up from $1.02bn a year ago; Salesforce reports FY23 Q4 earnings (ending 31 Jan) on Thursday after the market close. Snowflake was one of the hottest IPOs before the interest rate shock cooled the stock to being more ordinary. The cloud infrastructure company is expected to report FY23 Q4 (ending 31 Jan) earnings on Thursday after the US market close with analysts expecting revenue growth of 50% y/y down 102% y/y a year ago and EBITDA of $25mn up from $-146mn a year ago. The third company to watch is Coupang because of its e-commerce exposure to South Korea which could potentially provide some colour consumer spending patterns in one of Asia’s most cyclical economies. If China’s reopening is progressing well then it should spill over into a more positive outlook for South Korea. Coupang reports earnings on Tuesday after the US market close with analysts expecting revenue growth of 7% y/y down from 34% y/y a year ago and EBITDA of $197mn up from $-248mn a year ago. The CCP’s Central Committee convenes the Second Plenum The 20th Central Committee of the Chinese Communist Party is holding the second plenum from 26 to 28 February to decide on the recommendation list of candidates for top government posts to be sent to the National People’s Congress to finalize during the latter’s meeting commencing from 5 March. Investors will watch closely the personnel arrangement on the state administration side, especially who will be put in the top positions in various financial policy-setting and regulatory authorities amid market chatter of the Party’s plan to pursue a major shake-up of the financial system. Macro data on watch this week Monday 27 FebruaryUS                   Durable goods orders (Jan)Eurozone         Consumer confidence/economic confidence/industrial confidence (Feb) Tuesday 28 FebruaryUS                   Chicago PMI (Feb)Japan              Industrial production (Jan)Japan              Retail sales (Jan)Japan              Housing starts (Jan)India                Real GDP (Q4) Wednesday 1 MarchUS                   ISM manufacturing Index (Feb)Germany          Unemployment (Feb)Germany          CPI (EU harmonized; Feb flash)Australia          Real GDP (Q4)Australia          CPI (Jan)South Korea    Exports (Feb) Thursday 2 MarchUS                   Non-farm productivity (Q4, final)US                   Unit labor costs (Q4, final)Eurozone         CPI (harmonized, Feb flash)Eurozone         Unemployment (Jan)Eurozone         ECB Policy Meeting Minutes (Feb)Japan              Consumer confidence (Feb)South Korea     Industrial production (Jan) Friday 3 MarchUS                   ISM Services (Feb)Eurozone         PPI (Jan)France             Industrial production (Jan)Japan              Tokyo-area CPI (Feb)Japan              Unemployment rate (Jan)Singapore        Retail sales (Jan) Company earnings to watch Monday 27 Feb: Woodside Energy, Alcon, Occidental Petroleum, Workday, Li Auto, Zoom Video Tuesday 28 Feb: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday 1 Mar: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday 2 Mar: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies   For Saxo’s live economic and news calendar click here.  

Summary:  US PCE inflation data on Friday spooked the market as the Fed terminal rate for this year was taken higher still, with discussion of the risk of larger hikes even afoot. Both the US S&P 500 Index and Nasdaq 100 touched their 200-day moving averages intraday on Friday as yields jumped. This week’s focus still on geopolitical developments, faltering confidence in the China re-opening narrative and US Feb. ISM Surveys Wednesday and Friday, with the key US employment figures not up until next week. What is our trading focus? US equities (US500.I and USNAS100.I): bonds will continue to dictate where equities go US equities continued their decline on Friday with S&P 500 futures declined 1.1% to the lowest close since around mid-January as US inflation figures (PCE deflator) surprised to the upside. As we have explained in recent equity notes the equity market will be driven by the talk about structural inflation over the coming months and how that discussion recalibrates long-term US bond yields to higher levels. In late April and May when the Q1 earnings are released the discussion about margin compression will heat up again, so there are plenty of downside risks still in equities in 2023. Hang Seng Index (HSI.I) and CSI300 (000300.I) slid amid economic, policy, and geopolitical uncertainties Hang Seng Index and CSI300 extended their declines with both indices falling around 0.4-0.5%. Investors trimmed positions as sentiment was dampened by resurge of tension between the U.S. and China over Russia and Ukraine and the lack of substantive recovery in the Chinese economy aside from credit expansion and survey data. China’s central bank emphasized in its Q4 Report on the Execution of Monetary Policy that the monetary policy must be stable and not bring about excessive liquidity that induces excessive investment, a surge in debts, and asset bubbles. Investors interpreted that as a signal to lower the expectations of the market on aggressive monetary easing. The CCP’s central committee is holding a meeting from 26-28 February to decide on the recommendation list of candidates for top government posts to be sent to the National People’s Congress to finalize during the latter’s meeting commencing from 5 March. FX: Japanese yen touched YTD lows, GBP in focus with Brexit talks The dollar strength was back in focus as hot core January PCE inflation data on Friday took the repricing of the Fed’s path higher once again. With 2-year yields surging to their fresh highs, along with BOJ governor nominee Kazuo Ueda’s continued push for a loose monetary policy coming against market’s hawkish expectations, the Japanese yen plunged to its lowest levels this year, with USDJPY testing 136.50 overnight. Also worth watch will be AUDUSD which plunged in close sights of 0.67 as risk sentiment and commodity prices are taking a beating. Elsewhere, UK PM Sunak is making headlines with reports saying that he may have won big concessions in the looming Brexit deal, with reports suggesting that an agreement between the UK and European Union on Northern Ireland appears to be very close. UK PM Sunak and EU head Ursula Von Der Leyen will hold talks mid-day on Monday. These are being described as 'final talks'. This will be followed by a news conference and Sunak’s statement to the parliament. GBPUSD dropped below 1.20 with the 200DMA at 1.1928 in focus. Crude oil remains anchored near lower end of range Crude oil remains anchored near the lower end of its the established range that has prevailed since the end of 2022, in Brent between $80 and $89, and WTI between $82 and $73. Overall, the sentiment across markets, including commodities, suffered another blow last week after traders and investors in response to another hot US inflation data increased forecasts for US interest rates. Higher rates may hurt economic growth and with that fuel demand from consumers. China meanwhile remains on a recovery track but for now it has only prevented an even deeper selloff in crude oil. A disruption in oil supply to Poland via the Druzhba pipeline from Russia, a day after Poland delivered its first Leopard tanks to Ukraine, is having a limited impact. Speculators meanwhile hold an elevated long position in Brent according to COT data released on Friday (see below). In focus this week, the annual International Energy Week which kicks off in London on Tuesday. Gold (XAUUSD) slumps towards next area of support The US dollar reached a multi-week peak in the aftermath of hot US data and together with higher yields have weighed on the yellow metal, with gold risking further weakness towards the 200DMA at $1776 amid a tough macro environment. US ISM PMIs in focus this week, along with more Fed speakers, as a guide to high how interest rates could go. Silver (XAGUSD) fell harder, down 2.5% on Friday and closing with a weekly loss of 4.5%, breaking below the 200DMA at $21. The gold-silver ratio meanwhile has spiked to 87.80 high, a 16% underperformance relative to gold since mid-December. Copper trades below $4 support With the US PCE data further aggravating concerns on Fed’s rate hike path and bringing the 2-year yields to fresh highs, base metals plummeted. Copper prices plunged to a seven-week low below the key $4 support with the next key support being the 200DMA at $3.77, the break above which triggered January’s surge. Incongruent signs of a pickup in Chinese demand also continue to underpin, and the PMI reports this week will be key to signal whether activity levels are picking up. However, with supply over time potentially struggling to keep up with demand, we view the current weakness as temporary and part of the general loss of confidence that has hit markets this month. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) jump after hot core PCE inflation data The hot core US January PCE inflation data released on Friday (more below) shocked US yields to new cycle highs, with the 2-year treasury benchmark yield reaching above 4.8% for the first time since 2007 as the market moved to completely price in at least a 25bp hike each at the March, May, and June FOMC meeting plus about a 25% chance that the hike in March is 50bps, bringing the terminal rate to 5.4. The Jun-Dec 2023 spread narrowed 11bps to -11.5bps, almost entirely eliminating expectations for rate cuts in the second half of 2023. Ten-year yields poked toward the recent cycle highs just shy of 4.00% and the 2-10 yield slope closed the week at a new multi-decade inversion record of –89 basis points (an intraday spike on Feb. 15 saw it briefly below –90 bps). What is going on? Hot US PCE brings Fed terminal rate expectations up to 5.4% The PCE deflator for January came in hotter-than-expected, and together with upward revisions to the previous month’s prints these sent a strong hawkish signal to the markets reinforcing the Fed’s higher-for-longer message. The Core PCE rose 4.7% Y/Y, accelerating from the upwardly revised 4.6% and above the expected 4.3%. The M/M rose 0.6%, hotter than the expected and upwardly revised prior of 0.4%. This brought an upward repricing of the Fed path, with increasing calls for 50 bps at the March meeting and the terminal rate now priced in at 5.4% (82+ bps of further hiking from current level) and the end-2023 expectation at –12 bps relative to peak rates, Fed members remain cautious on the path of inflation Fed voter Jefferson spoke about labor market strength on Friday, saying that ongoing imbalance between supply/demand for labour suggests high inflation may come down only slowly and said the argument that policymakers should accept that disinflation will be costly is well-reasoned. Bullard (non-voter) was on the wires again as well, and reaffirmed the need to move quickly to shield credibility. Collins, also a non-voter, said that recent US data affirms the case for more rate hikes. Mester (non-voter) said the Fed has to do "a little more" on rate hikes saying the new inflation data affirms the case for more rate hikes to get inflation back to target. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. COT data shows unwavering support for higher Brent prices The ICE Futures Europe exchange released four weeks' worth of delayed COT data on Friday with reporting now up to date following the January cyber-attack on ION Trading UK, which caused delays in trades being reported. The US CFTC meanwhile released one COT report for the week ending January 31 with data unlikely to be up to date for another three weeks. ICE Brent data showed unwavering support for higher prices with funds holding a net long of 277k lots, a 16-month high and the weakest gross short position at 28k since 2011. The ICE gasoil (diesel) net long meanwhile dropped to 33.7k lots and lowest since November 2020. The futures contract (FPH3) trades near a one-year low with refinery margins under pressure as Middle East and Asian shipments replace supply from Russia. Food price inflation continues to ease One year on from the Russian attack on Ukraine which triggered a surge in wheat, corn and edible oils we a seeing prices continuing to deflate. Global wheat prices remain under pressure from a flood of Russian supplies forcing EU and US sellers to lower prices to stay competitive. In Chicago the soon to expire March wheat contract trades near a 17-month low, down 48% from the March 2022 panic peak while Paris Milling wheat has declined by 38%. The focus is turning to the outlook for global wheat crops this year. According to Bloomberg, US farmers are likely to plant more than analysts expect, and nearly all of France’s soft-wheat crop is in good to very good shape. Traders are also watching talks on the Ukraine grain-export deal, which is up for renewal in March. Berkshire Hathaway Q4 operating earnings miss estimates Warren Buffett’s holding company Berkshire Hathaway announced over the weekend operating earnings of $6.7bn vs est. $7.3bn driven by weaker results in its railroad and insurance businesses due to higher input costs for materials and labour. Berkshire Hathaway is still striking a positive outlook on the US economy. Warren Buffett also talks about the repurchases saying that they are not all bad if they are bought below the fair value. Woodside Energy reported profits triple in 2022 Following the theme of strong energy company earnings reports Woodside’s bottom line profits rose 228% fuelled by the rise of oil and gas prices, but also as Woodside output rose over 70%, after it acquired BHP’s oil and gas business. Woodside reported a larger final dividend of $1.44 per share, up from $1.05 a year ago. Its full year dividends payout stands at $4.8bn. On top of that, Woodside is now seeking opportunities to expand again narrowing in on potential buying assets in the Gulf of Mexico. Woodside’s record profit results follow a set of strong numbers from oil and gas producers including Shell, BP and Santos. This also sets the tone for energy companies in 2023. Woodside Energy shares ended 1.5% higher on Monday in Australia. Keep an eye on US and London listed Woodside.  Read next: Pfizer Is In The Early Stages Of An Acquisition Of Biotech Company Seagen, Twitter's Staff Has Shrunk Since Elon Musk Took Over| FXMAG.COM What are we watching next? China Government Work Report is delivered on 5 March This year’s Government Work Report will be delivered on 5 March. This will provide more details on policy action for urbanization and the property market. There will likely be two main points of interest: affordability (measures to increase accessibility to mortgage loans) and rural construction (focus on rural land transfers and reduction of complexity in regulation). With further stimulus measures in sight, we are confident that China will probably announce a higher GDP target at the upcoming National People’s Congress – meaning 5.5 %. US ISM surveys to be the next test for yields and US dollar The recent data out of the US has shown firm inflation and growth dynamics, prompting an upward repricing of the Fed’s path and bringing yields to critical levels. The ISM surveys this week will be key to watch for further direction, with the manufacturing survey out on Wednesday and services out on Friday. The consensus is for the manufacturing ISM to improve to 48.0 in February from 47.4 in January, but still in contraction (below 50) for a fourth consecutive month. The ISM services index saw a surge to 55.2 in January after a drop to 49.2 in December, partially a reflection of winter weather trends. Gains are likely to moderate, and consensus expects 54.5. EVs in focus – Tesla Investor Day and Li Auto and NIO report earnings China reopening theme is under strain, with the Asian reporting season underway, and this week brings earnings reports from two large EV manufacturers. Li Auto (02015:xhkg/LI:xnas) reported on Monday before China open while Nio (09866:xhkg/NIO:xnas) reports on Wednesday. It will be key to watch how Tesla’s steep discounts and the end of government subsidies impacts the outlooks for these two Chinese EV manufacturers which got off to a slow start this year, and whether the decline in lithium prices lifts the outlook higher. Tesla (TSLA:xnas) will hold an Investor Day event on March 1 in what could be one of the key days of the year for the electric vehicle giant. Nio, Li Auto and XPeng (09868:xhkg/XPEV:xnys) also report February deliveries this week, and China’s EV and battery giant BYD (01211:xhkg/BYD:xnys) should release February sales by Friday. Occidental earnings preview Oil and gas companies have again reported the best earnings growth this US and Australian corporate reporting season - with increased profits and higher dividends from Shell, BP and Santos. Occidental Petroleum’s outlook will be a focus today, as well as Canadian Natural Resources results later in the week. Occidental is expected to report its highest-ever Q4 net income, with the US energy giant set to benefit from high energy prices amid tight supplies. The oil and gas giant generated about $2.8bn in free cash flow in the period after years of austerity and debt reduction, according to Bloomberg consensus. Investors will closely monitor its 2023 spending and capital-returns outlook with adjusted EPS of $1.79 expected. Occidental's shares are down 6.6% this year. Earnings to watch Today’s key US earnings releases are Occidental Petroleum, Li Auto, and Zoom Video with a preview of Occidental Petroleum in the section above. Zoom Video will be watched as many retail investors still have a big interest in this pandemic winning company with analysts expecting FY23 Q4 (ending 31 Jan) up 3% y/y and EBITDA of $353mn up from $278mn a year ago. Li Auto is also in focus as the electric vehicle adoption continues to accelerate with Chinese production expected to expand more rapidly in 2023 as the zero-Covid policy has ended. Analysts expect Li Auto revenue growth of 66% y/y. The three other key earnings we are watching this are Salesforce, Snowflake, and Coupang which we highlight in our earnings watch note from last Friday. Monday: Woodside Energy, Alcon, Occidental Petroleum, Workday, Li Auto, Zoom Video Tuesday: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 1000 – Eurozone Feb. Confidence Surveys 1330 – US Jan. Preliminary Durable Goods Orders  1530 – US Feb. Dallas Fed Manufacturing Activity 1530 – US Fed’s Jefferson (Voter) to speak 1700 – ECB Chief Economist Lane to speak 2350 – Japan Jan. Industrial Production 0000 – New Zealand Feb. ANZ Business Confidence 0030 – Australia Jan. Retail Sales Source:Financial Markets Today: Quick Take – February 27, 2023 | Saxo Group (home.saxo)

India reports 4Q22 GDP data later tonight followed by US consumer confidence.  Source: shutterstock Macro and market outlook Global Markets: US stocks opened higher on Monday, but then lost ground for much of the rest of the session leaving them with only small gains at the close. The S&P 500 rose 0.31% and the NASDAQ rose 0.63%. Chinese stocks had an even less inspired day. The CSI 300 lost 0.42% while the Hang Seng Index was down 0.33%. The re-opening story doesn’t seem to be providing much uplift currently. US Treasury yields drifted a little lower. The 10Y bond yield fell 2.9bp to 3.914%, while the 2Y dropped 3.5bp to 4.778%. The EUR rallied against the USD in late trading, finding its way back above 1.06. The AUD has not followed suit, yet, and sits at 0.674, about the same as this time yesterday. Likewise, the JPY, which remains roughly unchanged at about 136. The GBP, in contrast, has climbed back to 1.2067. This difference in G-10 performance may be linked to the EU-UK agreement on the Northern Ireland protocol yesterday though this was well flagged and seems a bit of a stretch. Central bank speakers likewise were out on the newswires from both the Fed (Jefferson and Mester) and ECB (Vujcic), though no new ground was broken, with both sides sticking to the story of persisting with tightening until the inflation battle is won. Vujcic speaks again today, along with Philip Lane (Macro-Financial Stability). The bulk of the Asian FX pack lost ground to the USD yesterday with the KRW and PHP leading the pack weaker. There were small gains from the CNY which now sits at 6.9441. G-7 Macro: US Durable goods orders out yesterday are always a bit of a struggle to disentangle, but the 3m moving average of the capital goods orders and shipments are one way of tackling the noise inherent in the series. Both series indicate a slight softening from December, in keeping with senior loan officers’ surveys of tightening lending standards and weaker borrowing demand. This is worth watching. In contrast, pending home sales for January picked up 8.1% MoM against expectations for only a 1.0% gain. Another seasonal anomaly? US house price data along with inventories and the Conference Board consumer confidence surveys form the main items of interest in the day ahead along with some preliminary French inflation figures. India: At 8pm SGT tonight, India releases 4Q22 GDP results. The consensus is for a 4.7%YoY outcome. We favour a slightly smaller growth rate, but one that would nevertheless, cement a 6%+ growth outcome for the full year. Solid momentum despite the external backdrop is likely to help India secure another 6%+ growth outcome in 2023.    Japan: Monthly activity data for January was mixed. Industrial production (IP) was weaker than expected while retail sales came in stronger. Industrial production declined for the first time in three months in January, weighing on the country’s recovery momentum. Production fell 4.9% MoM in January (vs +0.3% in December, -2.9% market consensus). January export data had already suggested the weak IP in January which is partially related to China’s lunar new year holidays and we expect a rebound in February. But the inventory ratio continued to rise (2.5% vs 1.5% in December), suggesting that the inventory cycle is not helpful for a meaningful pick up in production anytime soon. Meanwhile, retail sales rose a solid 1.9% MoM sa in January (vs 1.1% in December, 0.4% market consensus).  Apparel (7.7%) and motor vehicles (8.1%) rose the most. As we have previously argued, Japan’s economy should recover in the current quarter, mainly led by services and consumption while production remains sluggish. What to look out for: Indian GDP Japan retail sales and industrial production (28 February) Australia retail sales (28 February) Singapore unemployment (28 February) Thailand trade balance (28 February) India GDP (28 February) US wholesale inventories and Conference board consumer confidence (28 February) South Korea trade balance (1 March) Australia GDP (1 March) Japan Jibun PMI (1 March) Regional PMI manufacturing (1 March) China PMI and Caixin PMI (1 March) Indonesia CPI inflation (1 March) US ISM (1 March) South Korea industrial production (2 March) Hong Kong retail sales (2 March) US initial jobless claims (2 March) Japan Tokyo CPI inflation and Jibun PMI services (3 March) China Caixin PMI services (3 March) Singapore retail sales (3 March) US ISM services (3 March) Read this article on THINK TagsEmerging Markets Asian macroeconomics Asia Pacific Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

GBP/JPY holds lower ground near the intraday bottom, snaps two-day uptrend. Doubts over Brexit deal’s capacity to gain British Parliamentary approval probe the earlier hopes of overcoming month-long political deadlock. Yields grind higher amid month-end positioning mixed sentiment. Unimpressive Japan data, incoming BoJ policymakers’ defense of easy money policy keep buyers hopeful. GBP/JPY pares the monthly gain as it retreats from the seven-week high to 164.15 during early Tuesday. In addition to the month-end consolidation, receding optimism over the recently agreed EU-UK Brexit deal also seems to tease the sellers of the cross-currency pair. The initial agreement between UK Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen over Northern Ireland Protocol (NIP) is yet to gain parliamentary approval and hence doubts about the same probe GBP/JPY buyers. On the same line is the news shared by BBC News saying, the leader of the Democratic Unionist Party (DUP) has said he and his colleagues will take their time to examine the new Brexit deal for Northern Ireland. Daily Express news also challenges the Brexit optimism by saying, “Boris Johnson has privately urged the DUP to be cautious about backing Rishi Sunak's Brexit deal.” Alternatively, odds favoring the continued existence of the Bank of Japan’s (BoJ) easy money policy challenge the GBP/JPY bears. That said, the incoming Bank of Japan (BoJ) Deputy Governor Shinichi Uchida testified before the Japanese parliament’s Upper House while defending the central bank’s easy money policy. In doing so, Uchida rules out hopes of altering the 2.0% inflation target, as well as hopes of bolstering the Yield Curve Control (YCC) policy. Earlier in the day, BoJ Deputy Governor Masazumi Wakatabe said, “Central banks must remain on guard against the potential dangers of secular stagnation and low inflation as price rises driven by cost-push factors do not last long,” per Reuters. It should be noted that the mixed Japan data and yields fail to offer clear directions to the pair traders. That said, Japan’s Industrial Production shrunk 4.6% in January versus -2.6% expected and 0.3% prior growth. However, the Retail Trade grew 1.9% MoM on a seasonally adjusted basis from 1.1% prior and -0.2% market forecasts. Against this backdrop, the US 10-year and two-year Treasury bond yields regain upside momentum around 3.93% and 4.80% respectively, despite being lackluster of late. Further, the S&P 500 Futures also trace Wall Street’s gains by the press time. Looking ahead, Brexit headlines and BoJ updates are key to watch for the GBP/JPY pair traders for clear directions. Technical analysis The monthly bullish channel keeps GBP/JPY buyers hopeful even as the overbought RSI hints at a pullback toward the 200-DMA support of 163.40.

The U.S. dollar resumed its rally on Tuesday after dipping against sterling and the euro a day earlier, putting it back on track for its first monthly gain since September. The greenback's rally gathered momentum in recent weeks as upbeat economic data led to mounting expectations that the U.S. Federal Reserve will have to raise interest rates more than initially expected. The US economic report will include the Conference Board's Consumer Confidence Survey for February. In January, the annual expected consumer inflation component of this survey rose to 6.8% from 6.6% in December. The latest inflation data for January showed that price pressure remained higher than expected. If consumers' inflation expectations continue to rise, the US dollar could gain strength in the second half of the day. USD/JPY In the Asian session, the yen traded in the range of 136.20-136.30, but in the Asian session there was a sharp increase and at the time of writing USD/JPY is trading at 136.6930. Recent comments from new BOJ vice-president Shinichi Uchida and current BOJ governor candidate Kazuo Ueda had a dovish tone during testimony before the upper house of the Japanese parliament. Ueda confirmed his intention to stick to "abenomics" and defend the central bank's monetary policy stance. Japanese data released overnight were mixed as industrial production was weaker than expected and retail sales rose. Industrial production recorded the first decline in 3 months, when production fell in January by 4.9%MoM. Retail sales rose by a solid 1.9% m/m, with clothing and motor vehicles having the largest share. Manufacturing in Japan remains an area of ​​concern; however, consumption looks good and is indeed on track to recover. EUR/USD The euro pair fell in the morning session from levels above 1.06 to levels around 1.0585. In the European session, the EUR/USD pair rose significantly above 1.0620. At the time of writing, the EUR/USD pair is trading around 1.0615. However, deteriorating market sentiment seems to be limiting the pair's gains for now as the focus shifts to the Conference Board's US consumer confidence survey. The consumer price index (CPI) in France rose to 7.2% y/y in flash estimates in February from 7% in January. Similarly, the annual CPI in Spain rose to 6.1% from 5.9% in the same period. After stronger-than-expected inflation figures from major eurozone economies, markets are almost fully pricing in the European Central Bank's (ECB) final interest rate at 4%, down from 3.75% last week, with hawkish ECB betting helping the euro hold its ground. GBP/USD The cable pair in the Asian session maintained a downward trend and in its decline headed to the level of 1.2028. The European session provided a positive impulse for GBP/USD and the pair rose above 1.2090. The pound pair managed to break above the 1.21 level but failed to hold and is currently trading below that level at 1.2098. Meanwhile, British Prime Minister Rishi Sunak announced late Monday that he had reached an agreement with the European Union to replace the Northern Ireland Protocol with the Windsor Framework. While it's too early to tell whether these developments could have a lasting impact on sterling's valuation and the Bank of England's (BOE) policy outlook, the initial market reaction helped the pair to gain momentum. UK Prime Minister Sunak also noted that MPs would vote on the new deal and that they would respect the results of the vote. Later in the session, several BOE decision makers will give speeches. AUD/USD In the Asian session, the Australian pair recorded a significant drop from the 0.6750 levels to the 0.6710 levels. In the European session, the AUD/USD pair is rising again and trading around 0.6730. Source: investing.com, finance.yahoo.com, dailyfx.com

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

USD/JPY struggles to capitalize on a modest uptick on Wednesday and remains below the YTD top. The BoJ’s dovish outlook, weaker Japanese PMI undermine the JPY and continue to lend support. Hawkish Fed expectations, elevated US bond yields act as a tailwind for the USD and favour bulls. The USD/JPY pair edges higher following the previous day's two-way price swings and trades with a mild positive bias through the early European session. The pair is currently placed below mid-136.00s and remains well within the striking distance of its highest level since December 20 touched on Tuesday. A combination of factors undermines the Japanese Yen (JPY), which, in turn, acts as a tailwind for the USD/JPY pair amid the underlying bullish sentiment surrounding the US Dollar. Data released earlier this Wednesday showed that Japan's manufacturing sector remained in contraction territory in February. This comes on the back of dovish comments from the incoming Bank of Japan (BoJ) Governor Kazuo Ueda and Deputy Governor nominee Shinichi Uchida, stressing the need to maintain the ultra-loose monetary policy. This, along with signs of stability in the equity markets weigh on the safe-haven JPY. The USD, on the other hand, remains pinned near a multi-week high amid firming expectations for further policy tightening by the Fed and lends additional support to the USD/JPY pair. In fact, the markets now seem convinced that the US central bank will have to raise interest rates for longer to tame stubbornly high inflation. This remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the Greenback. That said, indications that the Fed's rate hikes were beginning to have their intended effect of cooling the economy seem to cap any meaningful gains for the buck. Investors remain worried about economic headwinds stemming from rapidly rising borrowing costs. The fears were fueled by Tuesday's disappointing release of the Conference Board's US Consumer Confidence Index, which fell to 102.9 in February from 106 in the previous month. Furthermore, the Chicago PMI business survey for February also came in weaker-than-expected and dropped to 43.6 in February, marking the sixth straight month in contraction territory. The Richmond Fed also released its survey of manufacturing activity for February and reported a decline to -16 from -11 in January 2023. The aforementioned mixed fundamental backdrop is holding back traders from placing aggressive bets and keeping a lid on any meaningful gains for the USD/JPY pair, at least for the time being. Market participants now look to the US economic docket, featuring the release of ISM Manufacturing PMI later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Apart from this, traders will take cues from the broader risk sentiment to grab short-term opportunities around the major.

The dollar-yen pair continues to besiege the 137th figure, despite the general weakening of the greenback. The Japanese currency is under pressure from the dovish rhetoric of the Bank of Japan, whose leadership will change next month. A few months ago, many traders and currency strategists pinned their hopes on Haruhiko Kuroda's successor, especially as the favorites of the pre-election race were economists with hawkish views. But the choice of the Japanese authorities fell on Kazuo Ueda, who instantly dashed the hopes of the hawks. Judging by his statements (and those of his future deputies), the Bank of Japan will follow the course set by Kuroda, at least for the foreseeable future. The dollar is in disgrace, but the yen looks even weaker The USD/JPY pair has been trading in a 136.00–136.90 range this week, with an apparent upward bias. During the last three days, sellers tried to pull the pair down to the base of the 136th figure, but in each case buyers took the initiative and returned the pair to the 137th price level. On the one hand, there is a common flat, a sideways price movement. But on the other hand, such price fluctuations took place at the background of the general weakening of the dollar. Several macroeconomic reports came out in the "red zone" in the USA, and risk appetite increased in the market after strong data from China (PMIs surprised traders with considerable growth). While in the U.S., the ISM manufacturing PMI was in the negative territory, only rising to 47.7 (vs. the forecast of 48.5). In particular, the employment index declined to 49.1 (from the previous reading of 50.6). The day before this release, the U.S. consumer confidence indicator was also in the red zone, coming out at 102.9 (the downward dynamic has been recorded for the second month in a row). The Richmond Fed Manufacturing Index was also disappointing, falling to -16 points. Nevertheless, despite the greenback's poor condition, buyers of USD/JPY kept the pair from plunging and returned it to the 137th figure. This shows that the yen looks unattractive in the eyes of the traders, even against the limping dollar. Such "unattractiveness" is primarily due to the rhetoric of Ueda and his future deputies, who will head the central bank in April. Inflation rises, rhetoric stays the same At the end of last month, key data on inflation growth in Japan were released. The general consumer price index in January rose by 4.3%, the strongest growth rate of the indicator since December 1981. The core CPI, which does not include fresh food but includes energy prices, also hit a 40-year high. Almost all components of the report came out in the green zone, exceeding the forecast levels. Inflation has been above the 2% target of the Bank of Japan for the past ten months. Kazuo Ueda commented on this release "in the spirit of Haruhiko Kuroda." He said that he intends to continue a large-scale program of monetary policy easing of the central bank. In his view, the rise in consumer inflation is mainly due to higher import prices, not higher demand. "Therefore, the Bank of Japan should maintain ultra-loose monetary policy," Ueda stressed. He expressed confidence that price growth factors would "probably slow down soon" and inflation would fall below 2% by the end of this year. The new governor of the Bank of Japan also stressed that "at the moment," the advantages of the current monetary policy outweigh its disadvantages. Ueda's future deputies voiced the same position. To be fair, Kuroda's successor hypothetically allowed monetary policy to be calibrated, but he said the necessary adjustments "would vary depending on changes in the economy." At the same time, he added that it is too early to talk about how and when the central bank will change its policy. This dovish rhetoric has allowed USD/JPY buyers to ignore the weakening greenback as the pair continues to show an upward mood. Conclusions The current fundamental background for the USD/JPY pair contributes to the development of the upward trend. The yen is currently unable to withstand the greenback, even in the face of a decline in the U.S. dollar index. The technical indicator also speaks about the attractiveness of longs. The pair on the daily chart is trading between the middle and upper lines of the Bollinger Bands indicator, which indicates the priority of the upward movement. In addition, the price is above all lines of the Ichimoku indicator, including above the Kumo cloud. The nearest upward target is 137.00 (upper line of the Bollinger Bands indicator on the 4-hour chart). The main target is slightly higher, at 137.70, which is also the upper line of the Bollinger Bands indicator, but already on the D1 timeframe.   Relevance up to 11:00 2023-03-03 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336551

Summary:  Despite U.S. bond yields continuing to climb and the 10-year going above 4% in yield, U.S. stocks managed to rebound nearly 1% on Fed Bostic comments. Hong Kong and China stocks slid and gave back some of the gains from the previous session in the absence of notable headlines ahead of the “two sessions” meeting starting this weekend. The US dollar gained broadly against major currencies. Crude oil continued to climb with WTI crude finishing Thursday at USD78.2.   What’s happening in markets? Nasdaq 100 and S&P 500 rebounded on Fedspeak The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) clawed back early losses after dovish comments were made by the Fed’s Raphael Bostic  - seeing the indices gain 0.9% and 0.8% respectively. All sectors in the S&P 500 except consumer discretionary and financial advanced. Salesforce (CRM:xnys) shares rose 11.5% on a Q4 earnings beat and upbeat guidance – making it the top gainer in the S&P500. Kroger (KR:xnys) rose 5.4% after the grocery chain reported sales and earnings beat. Tesla (TSLA:xnas) fell 5.9% as investors were somewhat disappointed with the EV giant’s Investor Day held on the prior day. US Treasury curve bear steepened, 10-year yield at 4.06% US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) sold off across the curve in the morning following an upward revision of Q4 unit labour costs to 3.2% from the previously reported 1.1% and initial jobless claims continued to come in below 200K. After Atlanta Fed Bostic’s comments in favour of a 25bp hike at the March meeting and the Fed could pause by mid to late summer saw yields on the 2-year paring much of the loss from an intra-day high yield of 4.94% to finish at 4.89%. Yields on the belly of the curve however remained 6bps higher by the time of closing, with the 5-year yield at 4.31% and 10-year at 4.06%. The Treasury Department announced the auction of USD40 billion of 3-year notes, USD32 billion of 10-year notes, and USD18 billion of 30-year bonds next week. Hong Kong’s Hang Seng Index and China’s CSI300 retreated after yesterday’s sharp gains Hang Sang Index (HSI.I) dropped 0.9% and CSI300 (000300.I) slid 0.2% on Thursday after rising sharply the day before. China Internet names led the decline with Alibaba (09988:xhkg) falling 4.7% without notable news. Bilibili (09626:xhkg) plunged 7.8%.  After the Hong Kong market close, the online entertainment platform reported Q4 earnings beating the consensus estimate. Nio (09866:xhkg) tumbled 13.2% on a Q4 margin miss and a weaker-than-expected Q1 2023 guidance. Container liners outperformed, with Orient Overseas (00316:xhkg) rising 6.7% and COSCO Shipping (01919:xhkg) up 4.1% on an improved outlook of China’s exports. In A-shares, telcos and communication equipment makers advanced, following the news that the Ministry of Industry and Technology said that China will accelerate the rolling of 6G infrastructure. Australian equities (ASXSP200.I) trade lower for the fourth week  - markets prices out rate cuts – PMIs rise   So far this week - Monday to Friday the market is trading lower - marking its fourth straight week of losses. It comes as the Australian share market prices out rate cuts this year – and looks ahead to the RBA interest rates decision and commentary next week - with another 25bp hike expected. Today - hotter Australian and manufacturing prints showed PMIs rose back to expansionary phase, pushing Australian bond yields higher, up 6 bps to 3.92% - that’s near YTD highs of 4%, which is a cautionary signal given this is a better return than the average yield for the Australian share market.    FX: GBP edges below 1.2000 on dovish Bailey The US dollar was broadly in gains on Thursday as yields continued to surge higher despite supposedly dovish comments from Fed member Bostic. SEK was the underperformer on the G10 board amid risks of a deepening recession in Sweden. GBPUSD continued to tumble further below the 1.20 handle after dovish comments from BOE governor Bailey this week attempting to engineer a pause in market expectations. EURUSD also gave up some of its post-regional CPI gains to inch below 1.06. AUDUSD still in close sights of 0.67 as risk sentiment deteriorates while pickup in metals prices remains unconvincing for now. Crude oil volatility continues Oil fluctuated with traders weighing up a revival in demand from China, vied with inflation fears and OPEC boosting supplies. OPEC increased supplies by 120,000 b/d to 29.24 million a day in February – with Nigeria accounting for two-thirds of the increase - with its output hitting a one-year high. Meanwhile Russian seaborne diesel exports stranded at sea hit new records. This comes all while nations such as Turkey are trimming purchases of Russian crude. What to consider? Fed officials hinting at a higher dot plot The biggest headlines today are referring to Fed member Bostic’s (non-voter) comments as dovish, while he said he is firmly in favour of a 25bps hike path (to reduce the possibility of a hard outcome) and even said we could be in a position to pause by mid-to-late summer which appears to be exactly in-line with current market expectations. If his comments suggest 25bps rate hikes each at the March, May and June meetings, we still may end up in the 5.25-5.50% terminal rate which is higher than what the December dot plot suggested. Waller (voter) also hinted at an upwards shift in the dot plot, more clearly so, saying that Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if the incoming job and inflation data does not pull back from strong readings for January. US labor market strength sustains, focus shifting to ISM services US initial jobless claims fell by 2k to 190k last week from 192k prior and 195k expected, continuing to signal a tight labor market. Unit labor costs climbed an annualized 3.2% in the fourth quarter from the initial 1.1% read, well above expectations for a rise to 1.6%. Increased labor costs keep concerns of a wage-price spiral alive, and will likely keep the Fed on its toes in tightening policy. ISM services for February will be on watch later today, and is expected to ease to 54.5 from a big jump to 55.2 last month, but still remain comfortably in expansion. Attention will also be on the prices paid component after a similar component from the manufacturing print this week created jitters and services prices are likely to be more sticky. Worrying inflation prints in the Eurozone Yesterday, the eurozone core inflation rose to 5.60% year-over-year in February with both core goods (6.8%) and services (4.8%) reaching new record highs. This is much higher than expected (5.3%). We pay more attention to core inflation as it can show how entrenched inflation is. As a matter of that, it appears the inflation headache will remain an issue for most of the year. All the country prints which were released earlier this week came in above expectations: Germany 9.3% vs 9.0% exp. France 7.2% vs 7.0% exp. Spain 6.1% vs 5.7% exp. In these circumstances, talks about a potential monetary policy pause are ill-timed. From a monetary policy perspective, we think the ECB is unlikely to slow the pace of tightening until we see the first signs of underlying inflation peaking. Expect at least two other 50 basis point hikes in March and in May (there is no meeting in April). The market consensus forecasts that another 25 basis point hike could happen in June. It will depend on the evolution of inflation, of course. China and Australian trade relations are improving – adding to our optimist view that the commodity bull run could resume in Q2 China and Australia resumed diplomatic and economic discussions to stabilize and improve bilateral relations. It comes as China’s Foreign Minister Qin Gang met with counterpart Penny Wong at the G-20 summit in India. This is supporting commodity prices today – with the Iron Ore (SCOA) price trading higher for the fourth session following on from stronger-than-expected Chinese manufacturing data - showing overall Chinese orders are back at 2017 levels. Despite this the Aussie dollar vs the USD (AUDUSD) is little changed on the day and week at 0.6729 after losing 0.5% on Thursday. Downside is still in play with the Aussie trading below the d Qantas hires 8,500 workers – underscoring the aviation industry’s growth trajectory Qantas Airways (QAN) plans to hire 8,500 more workers in the next decade - which is about the same number it cut during in the pandemic. This highlights the aviation’s growth trajectory less than a year after the crisis. The hires include pilots, cabin crew and airport staff – with about 300 new aircraft arriving in the next 10 years – and Qantas also planning to open an engineering academy to help maintain its feet. For more on the travel sector, refer to Saxo’s Asia Pacific Travel equity theme basket.  We are in the early inning of the comeback of European equities European equities have previously outperformed US equities over long periods of time, but the relentless bull market in US technology stocks over the past 13 years has erased our memory of European equities being an interesting market. But since October last year, European equities have significantly outperformed US equities and clients are most interested than ever. In an article yesterday, Peter Garnry, Saxo’s Head of Equity Strategy, provides an overview of how Europe's equity market is constructed and how it differs from the US equities, and also why they are more interesting for investors amid the comeback of the physical world. His three main points are: Europe lost the digital technology race to the US with a 13-year-long period of significant underperformance, but since October 2022 things have turned around and maybe we are in the early inning of Europe’s comeback. European equities have 20 super-sectors and the diversification of European equities is much better compared to US equities. European equities are cheaper relative to US equities and they have recently improved their operating margins while US equities have seen a significant margin compression. China’s Caixin Services PMI is expected to rise to 54.5 Caixin Services PMI is expected to confirm the continuous expansion of activities in the services sector as indicated in the official NBS PMI survey. According to Bloomberg, Caixin Services PMI is expected to rise to 54.5 in February from 52.9 in January. China’s “Two Sessions” meeting commences this weekend China is holding the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, which together are known as the “Two Sessions, this weekend. Premier Li will deliver the Government Work Report on 5 March, in which the focus will be on the GDP growth target for 2023. The weighted average of provincial GDP targets released was around 5.6% and economists are expecting a national target of between 5% and 5.5% for 2023. Investors will also pay attention to the fiscal deficit target and quota for bond financing. In addition, investors will pay close attention to the leadership reshuffle at the State Council and other top government bodies. It is widely expected that Li Qiang will be the new Premier and He Lifeng will be one of the Vice Premiers and given the portfolio of economic and financial affairs. Japan’s Tokyo CPI for February hinting at sticky prices Japan’s Tokyo-CPI for February came in at 3.4% YoY for the headline, softer than last month’s 4.4% but still hotter than the 3.3% expected. The slower print is partially a result of PM Kishida’s latest stimulus announcement to support utilities prices which included a 20% discount on household electricity rates. Core CPI at 3.3% YoY matched estimates while the core-core measure (ex-fresh food and energy) was a notch higher at 3.2% YoY vs. 3.1% expected. Inflation continues to be sticky and above the BOJ’s 2% target although the incoming Governor Ueda is unlikely to rush into any monetary policy moves at this point. Bilibili earnings beat, non-GAAP net loss narrowed as operating margin improved Q4 Revenues in Bilibili rose 6% Y/Y to RMB6.14 billion, slightly higher than the RMB6.12 billion expected. Non-GAAP net loss came in at RMB1.31 billion, better than the consensus of RMB 1.43 billion and 20.6% smaller than in Q4 last year. Mobile games revenue falling 12% Y/Y and advertisement revenue falling 5% Y/Y  were weaker than expected. Revenues from E-Commerce and others grew 13% Y/Y and those from Value-added Services rose 24%, both above consensus estimates. The number of monthly active users increased 20% Y/Y to 326 million. India’s Adani Group gets foreign interest as prices drop After a drop of over $100 billion in market value, Adani group stocks got a respite with US boutique investment firm GQG Partners purchasing shares worth $1.87 billion in four Adani group companies. The deal shows investor interest may be returning to Adani after record drops in its share prices, and any further interest from foreign investors could potentially put a floor to near-term pressures for the conglomerate. This week, the group told bondholders it had secured a $3bn credit line from investors including a sovereign wealth fund.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 3, 2023 | Saxo Group (home.saxo)

USD/JPY is looking to recapture the 137.00 resistance despite the risk appetite having improved. Modest dovish commentary from Federal Reserve Waller has triggered volatility in the USD Index. Bank of Japan might infuse more liquidity to fade the impact of a fresh decline in the Tokyo inflation. USD/JPY is struggling to shift its auction above the 38.2% Fibo retracement plotted at 136.85. USD/JPY is juggling in a limited range around 136.60 in the Asian session. The asset has rebounded from 136.50 and is aiming to recapture the immediate resistance of 137.00 as the Tokyo Inflation has softened dramatically for the first time after a nine-month period escalation. Lower food and energy prices have trimmed the headline Consumer Price Index (CPI) while the core inflation that strips off the impact of food and oil steadily improved. The US Dollar Index (DXY) is on the verge of delivering a downside break below 104.80 amid an absence of recovery signals. The downside pressure in the USD Index has built amid modest dovish commentary from Federal Reserve (Fed) Governor Christopher Waller. Fed Waller cited February’s inflation recovery as a one-time blip and the price pressures will resume their downtrend from next month. S&P500 futures have recovered the majority of losses recorded in the Asian session, portraying a decent recovery in the risk appetite of the market participants. The demand for US government bonds has recovered marginally amid ease in the risk aversion theme. This has pushed the 10-year US Treasury yields below 4.05%. Upbeat US Services PMI could fuel hawkish Fed bets Anxiety among the market participants is gradually escalating ahead of the release of the United States Institute of Supply Management (ISM) Services PMI data. The economic data is seen lower at 54.5 from the former release of 55.2. The New Orders Index which conveys the forward demand is expected to decline to 58.5 from the prior figure of 60.4. Earlier, the US Manufacturing PMI displayed a fourth-time contraction, however, the New Orders Index was exceptionally higher. A surprise rise in the Services New Orders Index along with the already upbeat Manufacturing demand outlook will clear that the overall forward demand is in an expansionary mode and could propel the Consumer Price Index (CPI), which will bolster expectations of more rates from the Federal Reserve. Atlanta Fed Bank President Raphael Bostic said on Thursday that the central bank could be in a position to pause the current tightening cycle by mid-to-late summer. He favors a 25 basis points (bps) rate hike in March but has left room opened for more hawkish rate outlook if inflation and labor market data come in stronger. Tokyo Inflation surprisingly decline Bank of Japan (BoJ) policymakers are spending sleepless nights, designing strategies for achieving a stable 2% inflation. The central bank is infusing stimulus into the Japanese economy to fuel wages and domestic demand. Japan’s inflation was fueling constantly, however, a recent decline has alarmed the Bank of Japan policymakers. The annual headline CPI has dropped to 3.4% from the consensus of 4.1% and the prior release of 4.4%. Contrary to that, the core CPI that excludes the impact of energy and food prices have improved to 3.2% from 3.1% as expected and the former release of 3.0%. It seems like the inflationary pressures have been exceptionally battered by the recent fall in food and energy prices. Reuters reported that “The pace of inflation slowed due in part to the government's energy subsidies to ease the pain on households from soaring electricity bills.” Commentary from Bank of Japan Governor Nominee Kazuo Ueda on a fresh decline in the Tokyo CPI will be keenly watched. Meanwhile, Japanese Prime Minister Fumio Kishida has ordered the ruling party to draft additional measures to counter price hikes, as reported by the Kyodo news agency. The agenda behind that would be supporting households to offset the impact of items such as food and energy, which are highly inflated. On the economic front, a poll by Reuters reported Japan's economy is likely to grow a tad faster than initially estimated in the fourth quarter. Revised Gross Domestic Product (GDP), scheduled for March 9, might grow at 0.8% annualized in October-December, versus an initial estimate of 0.6%. USD/JPY technical outlook USD/JPY is making efforts in overstepping the 38.2% Fibonacci retracement (placed from October 21 high at 151.94 to January 16 low at 127.22) at 136.85. A bear cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at 133.27, adds to the downside filters. The Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates that the bullish momentum is already active.

Inflation has cooled sharply in Japan, mainly due to the government's energy subsidy programme. The labour market has tightened further led by the service industry. Meanwhile, the central bank's new governor Kazuo Ueda won't rush to exit easing monetary policy   New Bank of Japan governor Kazuo Ueda 3.4% Tokyo CPI inflation %YoY Higher than expected 2.4% Jobless rate   Lower than expected Tokyo inflation dropped sharply in February Tokyo inflation dropped to 3.4% year-on-year in February from 4.4% in January, mostly due to the government subsidy programme which discounted energy fees. Energy prices rose 5.3% in February, much slower than the 26.0% rise in January. Looking ahead, inflation is expected to decelerate further in March due to the high base last year. This downward trend of inflation will buy time for new Bank of Japan governor Kazuo Ueda to not have to make any urgent policy changes.  Labour market conditions tightened further in February The unemployment rate stood at 2.4% in January (vs 2.5% in December), the lowest since the pre-pandemic level in February 2020. The jobs-to-applications ratio fell to 1.35 (vs 1.36 in December), marking the first decline since August 2020. We believe that the employment situation is improving, especially in the service industry such as accommodation and restaurant services, thanks to the recovery of tourism demand due to the government's travel voucher – essentially a gift card given to Japanese residents to use on domestic travel – and the return of foreign tourists. But, manufacturing jobs will likely decline as exports are expected to be sluggish for a while. Also, although some companies face labour shortages, they are reluctant to hire for new positions because their margins have been squeezed with higher input costs. If inflation continues to slow, then it could have a positive impact on future hiring. If this happens, the sustainable inflation that the Bank of Japan has been hoping for may be achievable.  Labour market continues to improve Source: CEIC Service PMI rose more than expected to 54 in February Service PMI continued to expand in February, staying above the neutral 50 level for a sixth consecutive month. New orders and overseas demand grew on the back of the receding impact of Covid-19 and increasing demand in the hospitality and travel industries. The employment index has also returned above 50, which is reflected in today's solid labour market report. However, manufacturing PMI declined to 47.7 in February (vs 48.9 in January), partially offsetting the gains in services. We believe that the service-led recovery will continue in the current quarter while manufacturing is expected to remain sluggish for the time being.   Service PMI rose in March Source: CEIC Bank of Japan (BoJ) watch After carefully reviewing Ueda’s remarks at the two-day parliamentary hearing, we have updated our BoJ forecast. First, we think that the possibility of policy review under the new governorship has decreased as he has repeatedly emphasised that he is not pursuing the need to revise the joint statement with the government in 2013. However, we still believe that the possibility of delaying the request for review until after next year should remain open, as the revision can provide the BoJ with more flexibility to carry out its policy instruments. Meanwhile, he stressed that it is appropriate to continue with monetary easing thus we think he won’t rush to make policy adjustments at his inaugural meeting in April, but will take the first step towards normalisation as early as June. By June, he will know the results of the spring salary negotiations and have enough time to monitor the impact of the December policy adjustment. But, wage pick-up and improvement in the labour market should be strong enough to convince him to make his first move. In that sense, today’s data delivered mixed signals for the inflation outlook. The improved labour report provides a positive signal for the labour market and sustainable inflation, but the quick drop in inflation shows that the higher-than-usual inflation is mostly driven by cost-push factors. Thus, for the coming months, the Bank of Japan will monitor how fast inflation slows and how tight labour conditions can support sustainable inflation and adjust its policy accordingly.    It's worth noting that the outgoing BoJ governor Haruhiko Kuroda is well known for delivering surprises to the market, so he may give up the yield curve control policy without leaving it to his successor. But, we still think that Kuroda will leave the decision to the new governor by standing pat at the upcoming March meeting. Read this article on THINK TagsUnemployment rate Japan PMI Japan inflation Bank of Japan 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 is not alone in seeing an unwelcome acceleration in inflation in January – a number of Asian economies have seen something similar. But for many of Asia's economies, this is likely to be the peak, or if not, close to it   In this article It has been a bad start to the year for inflation in Asia A mixed bag of reasons for stubborn inflation Policy prognosis equally mixed   Shutterstock It has been a bad start to the year for inflation in Asia As well as the unwelcome resilience of inflation in the US and Europe, a number of Asian economies have provided upside misses to consensus inflation forecasts in the last month or two.  The biggest upset was in Australia, where monthly inflation rates in December jumped up to 8.4% year-on-year from 7.3% previously, a gain of more than a full percentage point. This has proved short-lived, with the January inflation figures already retreating back to 7.4%. There were also big increases in inflation in India and the Philippines.  Besides the reversal in Australian inflation, most other economies in the region have seen at least some small increase in the inflation rate between December 2022 and January 2023, and only in Thailand were the declines also particularly substantial with the year-on-year inflation rate dropping to 5.02% from 5.89%.  Inflation is still rising in most Asian economies CEIC, ING A mixed bag of reasons for stubborn inflation Exactly why inflation across most of the region staged a further increase in January seems to differ from economy to economy. Doing a lot of the damage to the Australian numbers in December was an eye-popping 30% increase in the costs of holidays – as reopening collided with seasonal holidays. That dropped out again in January, but it doesn't tell us much about the months ahead.  In India, food, as is often the case, was the main culprit. Rising wheat prices coupled with smaller declines in vegetable prices than in the previous month were responsible for much of the increase in the year-on-year rate, though base effects also played their role.    Japan's inflation, as the Bank of Japan has been keen to point out as it sticks to its ultra-easy monetary policy, remains largely driven by supply-side factors. Exclude food and energy, and the core rate is only 1.9% YoY even as headline inflation rose to 4.2% in January from 4.0% in December. The Philippines is a slightly different story, with contributions from almost all categories, presenting Bangko Sentral ng Pilipinas (BSP) – the central bank of the Philippines – with more of a price-taming headache than many of its Asian peers. And inflation rates also continued to push higher in Vietnam, Taiwan, South Korea and Singapore in January.   Policy prognosis equally mixed With a mixed bag of reasons for the persistence of inflation across the region, there is no single policy remedy or likely outcome as we head further into the year. For some economies, the January figures do look like the last hurrah of earlier price increases. And with last year's price levels strongly affected from February onwards by the Russian invasion of Ukraine, year-on-year comparisons should help to bring year-on-year inflation rates down, absent any further positive price-level shocks, which against the backdrop of tense geopolitics and increasingly frequent climate change-related extreme weather events, is not a caveat you can lightly make these days. Certainly, there are some economies in Asia where the inflation-taming struggle is not yet won, and the backdrop of a Federal Reserve also hard at work squeezing inflation out of the US economy will keep central banks of the more inflation-challenged economies in tightening mode.  For others, it has felt for a few months now that the worst of the inflation crisis has passed. And while it may not be the right time to start talking about an Asian pivot, if inflation rates do begin to ease lower over the middle of the year, the monetary tightening already put in place across the region could begin to look not only adequate but perhaps a little excessive, raising the prospect of some paring of rates further down the line. For now, though, such thoughts are not even on the long-range radar, though it would probably only take a month of benign price data to bring such thoughts back into view.    TagsAsian rates Asian inflation Asian economics   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

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

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

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

Summary:  Equity markets surged higher on Friday as the treasury market suddenly found solid support on Friday, taking the US 10-year yield back below 4.00%. At the weekend, China set a “modest” growth target of around 5% at key meetings. The week ahead is thick with central bank action, starting with the RBA on Tuesday, with Fed Chair Powell testimony up tomorrow and Wednesday, and Friday’s Bank of Japan meeting the likely highlight of the week, as it is Governor Kuroda’s last meeting. What is our trading focus? US equities (US500.I and USNAS100.I): strong rally as bond yields decline US equities rallied strongly on Friday with S&P 500 futures gaining 1.7% pushing above the 4,000 level closing at 4,050 with the momentum extending this morning. The rally in US equities came on the back of a ISM report showing the US economy is still humming along. US bond yields declined on Friday together with a weaker USD helping lift sentiment in equities which was an odd move given that inflation expectations were rising last week. This week we have Fed President Powell’s speech that could impact equities (read our preview below). In S&P 500 futures the 4,100 is a key upside level to watch if momentum extends. Hang Seng Index and CSI 300 oscillated on a modest Government Work Report The Hang Seng Index and CSI 300 Index oscillated after China set out a modest GDP growth target for 2023 and signalled a measured approach to fiscal and monetary policies as well as balanced support to the housing sector with avoiding systemic risks as a key priority. Lenovo (00992:xhkg) rising over 4% and reaching a new high, was the biggest gainer. The PC and server maker gained following its arch-rival in the server business, Inspur (000977:xsec) might be having difficulties in getting US parts after Inspur’s parent being put on the US ‘entity list’. FX: GBP recovers post-Bailey losses The USD was broadly weaker last week after a run higher in February on expectations that most of the Fed’s tightening is priced in and yields are potentially reaching close to their peaks. This week brings a test of this rhetoric with Chair Powell’s testimony and the US jobs report scheduled for release. GBPUSD once again found support at 1.1920 despite a dovish turn by BOE Gov Bailey last week, and returned to 1.2040. AUDUSD worth a watch again this week with support at 0.67 being eyed as the RBA meets Tuesday and China’s lower growth expectations may weigh. USDJPY has reversed back below 136 as yields gains ease, but if US yields continue their run higher and/or Governor Kuroda stays overly dovish at his final Bank of Japan meeting this week then a return to 137+ remains likely. Crude oil whipsaws with no clear direction yet to emerge  Crude oil prices faced strong two-way action on Friday with an initial move lower by over 2% on a WSJ report, later denied, saying the UAE is debating internally whether to leave OPEC, before finishing on a strong note on short covering after across market risk appetite improved and traders looked to China’s policy meetings over the weekend for support.  Overnight, however, crude declined after China, the world’s top oil imported, announced cautious growth targets and avoided any larger stimulus measures. Crude oil remains stuck within narrowing ranges, Brent between $81 and $89 with focus returning to the US and speeches from Powell to policy makers on Capital Hill Tuesday and Wednesday, as well as Friday’s job report.    Gold supported by drop in US real yields Gold rallied strongly last week after the market started pricing in higher long-term inflation, thereby challenging the FOMC’s own targets. While support was provided by US ten-year yields dropping back below 4% on Friday to end the week close to unchanged, it was developments in Breakeven (inflation) up 14 bps on the week and real yields, down 13 bps that helped support gold’s recovery. The close back above the 21-DMA on Friday, now at $1844, signaling a return of positive momentum, the strength of which may still be challenged this week with Powell speeches and Friday's job report the focus. For the current recovery, to attract support from technical buyers, prices as a minimum need to break $1864, and silver $22 to signal an end to the recent period of weakness. Copper takes China’s cautious growth target on the chin Copper trades close to unchanged after China set a cautious economic growth target with no major new stimulus measures being announced. With the focus primarily on supporting and stabilizing the economy, the metal could still be challenged in the short term by long liquidation from bulls having bet too heavily on the recovery story and increased spending towards infrastructure projects. Especially considering the recent buildup in inventories monitored by futures exchanges in London and not least in Shanghai. We maintain our long-held bullish outlook for copper and industrial metals in general but with China not providing growth stimulus, the short-term outlook may equally depend on whether other large economies can avoid a recession. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) rallied with the 10-year yield reversing to below 4% After spending one day above 4% on Thursday, yields on the 10-year Treasury notes reversed and returned to below 4% and settled at 3.95% to close the week on Friday. Headlines were light. The decline in the ISM Services Index in February was smaller than expected and initially saw the short-end lower in prices and higher in yields before the losses faded and reversed as strong bids emerged in the long ends in the afternoon. The 2-10-year spread bull flattened 7bps to -91. What is going on? China’s 2023 GDP growth target at “around 5%” China sets a real GDP growth target of "around 5%" for 2023 in the Government Work Report to the National People's Congress. This target is at the lower end of expectations ranging from 5% to 5.5% going into the meeting. Other key macroeconomic targets include adding 12 million jobs to urban area employment for 2023, a consumer inflation target of 3%, and a fiscal deficit target of 3% of nominal GDP. The report emphasizes the importance of boosting domestic aggregate demand, particularly household consumption, and aims to deepen the reform of state-owned enterprises. For more details, see our note here. COT reporting on Brent and (delayed) gold Hedge funds raised bullish bets on Brent crude oil by 9.4k lots to near a 15-month high at 286k lots in the week to February 28. The cost of holding a short position in Brent, reflected through the current backwardation, supported a continued collapse in the gross short to a 12-year low at 22k lots.  While the ICE Europe Exchange is up to date in its reporting, the US CFTC is still catching up following a January 31 cyberattack on ION Cleared Derivatives, a third-party software and service provider for derivative trading. The latest report covered the week to February 7, when gold reached $1975 before crashing to $1885, triggering a 29% drop in the net long to 79k. The CFTC is expected to be up to data around mid-March. US ISM services stays strong The headline ISM services cooled less than expected in February, falling to 55.1 from 55.2 in January, better than the expected 54.5. The prices paid component, which raised concerns again about the disinflation rhetoric from the manufacturing ISM report last week, cooled only slightly to 65.8 from 67.8 in January, showing sticky services prices. Employment rose to 54 from 50.0, matching the highest since March 2022 and therefore showing more signs of a tight labour market. New orders accelerated to 62.6 from 60.4 but business activity slowed to 56.3 from 60.4. Fed members continue to sound hawkish, eyes on Powell Fed member Mary Daly (non-voter in 2023) was on the wires over the weekend, and sounded hawkish as she raised the prospects of an upward shift in the Fed’s dot plot as well. She said that inflation is still high, and the Fed has to think about 'continuous tightening', signalling higher rates and remaining at elevated levels for a longer period of time, if inflation stays hot. Another member Barkin (non-voter in 2023) also clearly said that there will be no rate cuts this year. Focus will be on data in the runup to the Fed’s March meeting, but Chair Powell’s testimony before the Congress and the February jobs report this week will be key for the markets, as noted below.. Japan unions pushing for record wage increase The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) says its survey of 2000+ unions in the country shows an average pay rise request of 4.49% this year. This is the highest since 1998's 4.36% and is much higher than the 2.97% sought in 2022. The Bank of Japan continues to highlight that wage growth is key for achieving sustained demand-pull inflation. Japan's "shunto" spring wage talks will be key to watch this month as any larger than expected increase in wages will fuel more tightening expectations for the Bank of Japan, having a profound impact on global liquidity as well. What are we watching next? Busy agenda this week for central banks, topped by BoJ on Friday It’s a busy week for central bank messaging this week. First up is the RBA, which we expect will hike the policy rate another 25-basis points to 3.60%. This is not fully priced into market expectations, and the market has priced a total of 52 basis points of tightening over the next three meetings, including tonight’s.  The terminal rate is currently priced near 4.15%. On Wednesday, the BoC will discuss the pace of monetary policy, but at its last meeting signaled that it would like to pause the hike cycle to assess the economy, given the steep pace of policy tightening. We expect interest rates will remain unchanged at 4.5% after eight consecutive hikes. In the US, Fed Chair Powell will testify before Senate and House panels on Tuesday and Wednesday, respectively, on the economy and monetary policy. He will face hours of questioning and political posturing from Congress members. Finally, the most anticipated central bank meeting of the week will be Friday’s Bank of JA France general strike against pension reform France will face a rolling general strike against the pension reform starting tomorrow. The strike is likely to be prolonged for at least 10 days according to the trade unions. This could push the country’s GDP into contraction this quarter. Union representatives at EDF warned of the risk of reduced power output from France’s nuclear power plants due to the strike. US February labor market data up on Friday The US Feb. Nonfarm payrolls change report for February will be released on Friday. In January, US job creation increased at a very strong pace (507k). Consensus expectation look for a return to trend in February (consensus at +200k). The February unemployment rate is expected to marginally increase to 3.5% from the multi-decade low of 3.4% posted in January. Overall, the U.S. labor market is still very resilient, in a very good shape. This is unlikely to influence the Fed’s monetary policy decisions in the short-term. Earnings to watch This week’s most important earnings releases are listed below with the most market attention going to earnings from Adidas, CATL, and JD.com. Adidas has a huge inventory of Yeezy sneakers following the abrupt end to the partnership with Ye that caused a massive writedown in the previous quarter and investors have generally lost short-term trust in Adidas following a string of bad results. Analysts expect Adidas to report Q4 revenue of €5.2bn up 1% y/y and EBITDA of €-419mn. CATL is the world’s largest battery maker and is firing on all cylinders with analysts expecting Q4 revenue growth of 87% y/y and EPS of CNY 2.65 down 11% y/y as the company has not passed on all input costs to its EV customers after a significant surge in lithium carbonate prices last year. Monday: Trip.com Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 0930 – UK Feb. Construction PMI 1000 – ECB Chief Economist Lane to speak 1000 – Eurozone Jan. Retail Sales 1500 – Canada Feb. Ivey PMI 1500 – US Jan. Factory Orders 2330 – Japan Jan. Labor Cash Earnings 0030 – Australia Jan. Trade Balance 0330 – Australia RBA Cash Rate Target announcement    Source: Global Market Quick Take: Europe – March 6, 2023 | Saxo Group (home.saxo)

The US dollar weakened on Monday as investors awaited testimony from Federal Reserve Chairman Jerome Powell ahead of February's employment report later in the week, which is likely to influence how much more the US central bank raises interest rates. After making massive hikes last year, the Fed raised rates by 25 basis points in its last two meetings, but a plethora of resilient economic data fueled market fears that the central bank might return to an aggressive path. USD/JPY The yen pair started the week at 136.0380 but failed to stay above 136.00 and fell to 135.3890. After this fall, the USD/JPY pair rebounded, but at the beginning of the European session it fell again. Also after the second drop, the pair rebounded and managed to break above 136.00, but failed to hold. USD/JPY is trading below 136.00 at 135.94. The Japanese yen strengthened above 136 to the dollar amid general dollar weakness as investors cautiously awaited Tuesday and Wednesday's congressional testimony from Federal Reserve Chairman Jerome Powell. Meanwhile, the yen remains more than 6% below its January highs as Ueda, nominated governor of the Bank of Japan, doubled down on the bank's ultra-easy monetary policy. During the second parliamentary hearing of the approval process, Ueda stated that the benefits of the BJ stimulus outweigh the negative effects for the current economic scenario, adding that a move to more restrictive policies would only be necessary if inflation increased significantly. Ahead this week, the Bank of Japan’s (BoJ) monetary policy decision will be made on Friday although the market is not expecting any changes there. EUR/USD The EUR/USD pair started trading at 1.0628 and initially traded in the range 1.0625-1.0630. The euro pair then rose to levels around 1.0650, then to above 1.0660. This increase in the European session did not last and the pair dropped to levels around 1.0625. The euro may end the month slightly higher against the dollar, supported by signals from the European Central Bank about further interest rate hikes. ECB officials continue to point to a 50bps rate hike at its March 16 meeting as a deal done, with the market pricing in another 150bps hike by year-end GBP/USD The cable pair started trading at 1.2032 and held in the range of 1.2025-1.2040 in the Asian session. In the European session, the GBP/USD pair, as well as the EUR/USD pair, fell below 1.20, but rebounded and at the time of writing is at 1.2008. Sterling trading could be stable this week as it's hard to find a catalyst to break the currency out of recent ranges. Any further progress on the UK-EU deal to review post-Brexit trade arrangements in Northern Ireland is unlikely to be worth much more than pound sterling. AUD/USD The Australian pair started the week with a dip to the 0.6757 level and then fell to the 0.6743 level. After this decline, the AUD/USD pair rose to 0.6770 but failed to maintain momentum. The last hours of the Asian session for the Australian were in the range of 0.6750-0.6760. With the start of the European session, the AUD/USD pair began a decline, and at the time of writing it reached the level of 0.6728. The Australian dollar lost some of its gains Monday morning after the Chinese National People's Congress (NPC) released more conservative 2023 GDP forecasts. The forecast is currently at 5%, as opposed to the expected range of 5.5-6%, which could be disappointing for commodity-exporting countries like Australia, but a lower base could allow for a better chance of an upside surprise. Looking ahead, the Reserve Bank of Australia (RBA) will be in the spotlight tomorrow morning with its interest rate decision. The consensus is in favor of another 25 bp rate hike, which will be the 10th rate hike in a row by the central bank. This could cause the Australian dollar to find some support against the US dollar Source: investing.com, finance.yahoo.com

USD/JPY is oscillating around 136.00, downside looks favored amid the risk-on mood. An upbeat market mood has pushed the 10-year US Treasury yields below 3.96%. The BoJ is expected to remain dovish as current inflationary pressures in Japan are the outcome of international forces. The USD/JPY pair is displaying a back-and-firth action around 136.00 in the early European session. The asset has turned sideways as investors are awaiting fresh triggers for further guidance. Right from Federal Reserve (Fed) chair Jerome Powell’s testimony to the interest rate decision by the Bank of Japan (BoJ) and the United States Employment report, plenty of events will be held this week. Meanwhile, S&P500 futures have picked some bids after a choppy Monday, portraying a cheerful market mood. The US Dollar Index (DXY) is demonstrating signs of recovery after printing a day low at 104.16. The USD Index bulls could retreat amid the risk appetite theme, underpinned by the market participants. An upbeat market mood has also improved demand for US government bonds and has pushed the 10-year US Treasury yields below 3.96%. Two-day Fed Powell’s testimony before Congress will provide meaningful cues. The street is having mixed responses toward commentary as one school of thought expects a hawkish commentary amid higher inflationary pressures while the other school of thought sees a neutral stance as many things bank upon February’s data. Going ahead, if United States inflation continues to persist, the Unemployment Rate remains at lower levels, and consumer spending remains resilient, Fed Powell would have no other option than to push rates higher. On the Tokyo front, the interest rate decision by the BoJ will remain in action. The BoJ is expected to remain dovish as current inflationary pressures in Japan are the outcome of international forces as the economy is struggling to accelerate wages and domestic growth.  

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

Summary:  Today we look at a market that is holding its breath in anticipation of incoming US data to refresh the probabilities that the Fed feels forced to re-accelerate the pace of rate hikes at the March 22. But as well, all traders need to consider the Bank of Japan meeting risk up overnight tonight as a surprisingly large adjustment from Kuroda could set even global bond and equity markets on edge, not just the Japanese yen. We also look at interesting stories in equities, from the latest on ASML to CATL and other companies. Today's pod features Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Bank of Japan could cast a very long shadow over global markets | Saxo Group (home.saxo)

The Japanese yen is showing strength on Thursday. In the European session, USD/JPY is trading at 136.27, down 0.79%. Kuroda’s last hurrah After 10 years at the helm of the Bank of Japan, Governor Kuroda chairs his final policy meeting on Friday. Traditionally, BoJ governors have not made policy changes at their last meeting, and in all likelihood, Kuroda will not go out into the night with guns blazing. Still, Kuroda likes to keep the markets guessing and his tweak of the 10-year yield target range in December completely blindsided traders and jolted the financial markets. This has kept the markets on alert for Kuroda tweaking or even abandoning the BoJ’s yield curve control (YCC) policy. The bond market remains dysfunctional due to the YCC, even with the band widening in December. Governor-elect Ueda has stated that the current policy is appropriate, but this is to be expected at this sensitive time of changing the guard at the BoJ. Ueda will be under pressure right away to make changes to the YCC, and that could occur as soon as he takes over in April. Fed Chair Powell didn’t add anything new at a second day of testimony on Capitol Hill, but the markets have been scrambling since his hawkish comments to lawmakers a day earlier. Powell’s said that the Fed would accelerate the pace of interest rate increases if that was what the data dictated. The markets have fallen in line and have priced a 50-basis point hike at the March 22 meeting at 77% according to the CME Group, compared to 25% before Powell’s testimony on Tuesday. Powell’s hawkish stance has also fuelled expectations that the peak rate will be higher than expected. In December, the Fed projected a rate of 5.1%, but that is clearly out of date. The markets have priced in a peak rate of around 5.5% and Blackrock, the world’s largest asset manager sees rates peaking at 6%. Currently, the benchmark rate stands at 4.75%.   USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Summary:  Bank of Japan Governor Kuroda’s last meeting ended without any surprises as policy settings were left unchanged. While incoming data will be key to watch for what tweaks the next governor Ueda can bring, the near-term focus shifts to US data on non-farm payrolls and inflation, as well as the extent of fallout in the US banking sector as the market appears to be a panic mode after SVB’s hasty fundraising. Kuroda’s parting message lacked sparks The Bank of Japan kept its policy unchanged at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Although data and recent communication had hinted at no change in monetary policy, there were some apprehensions given Kuroda is famous for giving surprises to the market. However, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Growth and inflation dynamics do not support the case for immediate policy tweaks The BOJ still stays on the transitory camp for inflation, with today’s statement again highlighting that cheap energy and fading hit from import prices will slow inflation, although it adds that prices will pick up again due to rising wages and changing expectations. Ueda has also signalled a similar narrative, suggesting that he does not see Japan’s inflation as structural or sustainable. Recent data has also shown some softening in Tokyo CPI for February, mainly due to government subsidy measures to keep utility bills from going through the roof. Further measures from PM Kishida to ease cost of living pressures may continue to point towards easing inflation pressures, but wages are being pushed higher as well as companies announce wage hikes on political push, and the evolution of both wages and inflation will be key to watch to gauge how BOJ policy can change under the new Governor. Meanwhile, growth momentum is weakening and the BOJ policy sounded a caution on exports and production although the overall economic assessment was left unchanged. Still, the recent downside surprises in GDP growth, household spending and wage growth continue to suggest that it will be tough for the BOJ to pare stimulus in the near future. Market entering panic mode While the BOJ stayed short of invoking market fears, other global developments have been pointing towards a risk of crisis. Silvergate Capital Corp.’s abrupt shutdown and SVB Financial Group’s hasty fundraising have sent the US banks and the KBW Bank Index plummeting. This together with the expectation of faster tightening from the Federal Reserve and the deepest inversion of the Treasury yield curve is invoking concerns of a deep incoming recession. Source: Bloomberg, Saxo Key concerns stem from the reason SVB gave for needing to raise capital – startups pulling out cash deposits. This is mainly driven by venture-backed technology and health-care companies that went public last year, and questions are now being raised if SVB is just the tip of the iceberg as higher interest rates continue to push valuations lower presenting broader risks for lenders. The MSCI Asia Pacific Index dropped as much as 2% on Friday, dragged down by financial shares, keeping the risk-off sentiment alive. China reopening is also still in its early stages and data has been mixed, suggesting lack of catalysts to continue to drive a recovery, and Chinese stocks erased most of 2023 gains in light of the deteriorating risk sentiment. Japanese equities also slipped by 1.5% despite the ultra-loose monetary policy conditions being maintained. Overall sentiment appears fragile with equities plunging and rate hikes getting priced out as investors flock to bonds in a bid for safe havens. Yen direction unclear Domestically, the incoming growth and inflation data, including the outcome of the spring wage negotiations, remains key to watch to assess if Ueda could consider policy normalization, given that he exhibited an openness to being flexible in addition to his message on policy continuity at the testimony last month. Still the message on flexibility was more directed towards responding to market disorders, and there is unlikely to be a pressing need for policy tightening unless inflation takes an ugly turn again. This means the forthcoming data from the US, particularly the NFP jobs data and the February CPI, will be key to cement the case for a 50bps rate hike from the Fed this month and the primary driver for the Japanese yen in the short run. The base case remains for the data to remain hot, and even if we still get a 25bps rate hike in March, the possibility of the dot plot being revised upwards is high. This could push USDJPY towards the 140 mark. However, the added concerns over the US banking sector spurring broader risk aversion could bring the yen support in focus. Depending on how far the SVB fallout extends, the yen’s safe haven bid could return and USDJPY could fall. Japanese stocks could remain interesting as monetary policy stays loose, provided the deterioration in global risk sentiment is contained.   Source: Macro Insights: Bank of Japan on hold – yen at the mercy of US data and risk sentiment | Saxo Group (home.saxo)

USD/JPY has turned sideways around 136.65 as investors await US NFP for further guidance. BoJ Kuroda continued expansionary monetary policy as the domestic demand and wages have failed to spur inflation. The RSI (14) is gathering strength for shifting into the bullish range of 60.00-80.00. The USD/JPY pair is displaying a volatility contraction around 136.65 after sheer volatility inspired by the continuation of an ultra-easy monetary policy by the Bank of Japan (BoJ). BoJ Governor Haruhiko Kuroda continued expansionary monetary policy as the domestic demand and wages have failed to spurt inflation in the Japanese economy. The US Dollar Index (DXY) is gathering strength in extending its recovery above the immediate resistance of 105.35. The USD Index has been extremely quiet as investors are awaiting the release of the United States Nonfarm Payrolls (NFP) data. S&P500 futures are continuously accelerating losses as fears of aggressive interest rates by the Federal Reserve (Fed) are skyrocketing. Meanwhile, the demand for US government bonds is soaring, which has trimmed the 10-year US Treasury yields further below 3.82%. On an hourly scale, USD/JPY has rebounded firmly from the upward-sloping trendline plotted from March 06 low at 135.37. The asset has extended its recovery above the critical resistance of 136.45, which has turned into support for the US Dollar bulls. The recovery move in the USD/JPY looks full of strength as the asset has scaled above the 20-and 50-period Exponential Moving Averages (EMAs) at 136.40 and 136.55 respectively. Meanwhile, the Relative Strength Index (RSI) (14) is making efforts in shifting into the bullish range of 60.00-80.00. An occurrence of the same will trigger the upside momentum. Going forward, a break above the intraday high at 137.00 will drive the asset toward March 08 high at 137.90 followed by November 28 high at 139.43. Alternatively, a downside move below the intraday low at 135.82 will drag the asset toward March 01 low at 135.26. A slippage below the latter will expose the asset to February 24 low at 134.06. USD/JPY hourly chart  

Summary:  Financial market turbulence returned on Thursday after steep losses in two small US lenders, SVB Financial and Silvergate Capital Corp triggered a 7.7% sell off in the KBW Bank Index which includes major US banks. The S&P 500 fell to the lowest since January 19 while bond yields reversed sharply lower to surrender most of the gains triggered by Fed Chair Powell’s combatant statements on Capitol Hill earlier in the week. Lower yields saw the dollar trade softer while the loss of risk appetite sent crude oil and industrial metals lower. Before the banking woes took center stage, stocks had gained after a bigger than expected jump in weekly jobless claims raised speculation about a soft US job report due later today. What is our trading focus? US equities (US500.I and USNAS100.I): a warning shot has been fired The equity market has moved into risk-off mode following the 60% plunge in SVB Financial (indicated down again pre-market) as the bank has been forced to sell a considerable amount of its bond holdings causing big losses and the need raise more equity and hybrid capital. The S&P 500 Banks Index plunged 6.5% with JPMorgan Chase down 5.4%. We have seen a more muted reaction in the VIX Index only increasing to 22.6 which is a low figure given the risks coming into the market. Bill Ackman, a hedge fund manager, has said that the US government should consider bailing out SVB Financial as the bank is important the Silicon Valley ecosystem and for funding of start-ups in the US. The discussions about zero-days to expiry options (0DTE) and to what extent they can cause a big intraday move in the market will be tested today if the US jobs report fails to calm the market. Chinese equities (HK50.I and 02846:xhkg): tumbled on cautious consumer and tech war Hang Seng Index plunged 2.6% and CSI300 shed 1%. Investors were selling China internet and consumer names following downbeat comments from JD.COM on Chinese consumers.  The management of the Chinese e-commerce giant said that the sentiment of Chinese consumers is still fragile and consumers have become more prudent on discretionary items. In addition, reopening might also divert some of the online purchasing to offline consumption such as dining and traveling. JD.Com (09618:xhkg) tumbled 11.2%. Meanwhile, Hang Seng TECH Index dropped 3.2%. EV stocks fell sharply, led by an 8.7% decline of BYD (01211:xhkg). The tech war on semiconductors may extend from advanced equipment to materials. Investors are concerned that Japan may impose restrictions on the export of essential chemicals such as photoresist to China. The U.S. banking stock turmoil overnight in the U.S. also weighed on sentiment. FX: USD modestly weaker as risk sentiment weakens, JPY sold on unchanged BOJ The rise in jobless claims as well as the broader risk off arising from the SVB scare on Thursday saw yields dipping lower, taking the dollar off the recent highs as well but the decline remained modest with the USD coming in favor on the safe haven bid as well. Swiss franc also got a safe haven bid, and USDCHF plunged below 0.93 bringing the 50DMA at 0.9269 in focus. Bank of Japan’s unchanged monetary policy saw the JPY being the underperformer in the Asian session on Friday, but USDJPY could not pierce above 137. GBPUSD rose back above 1.19 ahead of UK data dump today likely to show that a recession has been delayed, but focus will shift to NFP later as the key USD driver in the very near-term. USDCAD continued to surge to fresh highs as Fed-BOC divergence widened and oil prices remained weak. The choppiness in crude oil prices continued Crude oil is heading for a weekly loss following another choppy session on Thursday which in the end took its cue from another loss of risk appetite as stress emerged in the US banking sector. Brent trades back below $81 after breaking below the trendline going back to the December low. While the signs of a pickup in Chinese demand remain mixed, the market has also been spooked by Powell’s combatant mood on Capitol Hill earlier in the week where he basically said recession was a price worth paying to get inflation under control. Gold finds support as stock market weakness drives bond yields sharply lower Gold caught a bid on Thursday in response to the high US jobless claims number and later a steep drop in US bond yields as the US banking sector slumped. The terminal US Fed fund rate dropped back to 1.5% while the market priced in a 1.25% rate cut in the following 12 months, developments that highlights the potential for US rates not being raised to the extend Fed chair Powell led the market to believe earlier in the week. Focus now turns to today’s job report after Fed Chair Powell in his testimony said the strength and duration of future rate hikes would be data dependent. Gold is once again testing the 21-day moving average resistance at $1835 ahead of at $1858 while support in the $1800 remains firm. Yields drop on financial market turbulence and spike in jobless claims A bounce in initial jobless claims to 211K (consensus 195K) from 190K kicked off the short-covering in the front end ahead of the employment report, due later today. The buying intensified later in the US on safe haven buying after the banking sector suffered its biggest drop since June 2020, with stocks in troubled Silvergate Capital and SVB Financial both tumbling. Yields on the 2-year plunged from 5.08% to 4.78% while the 10-year yield trades down to 3.82% from above 4% earlier in the week. The 2-10-year yield curve steepened to –97bps from –111 bps earlier in the session. What is going on? SVB’s 60% slump highlights the venture capital and tech bubble is spilling over to banks Investors were spooked by Silicon Valley Bank announcing it taking emergency steps to shore up capital after suffering a $1.8 billion after-tax loss in the first quarter. SVB sold about $21 billion of securities from its portfolio and plans to raise $2.25 billion. Having ended the regular session down 60% at 106 it went on the drop another 22% to 83 in afterhours trading. This reflects the pain of higher interest rates and tighter liquidity on the venture capital start-up bubble and it triggered heavy selling across banking stocks with KBW Bank Index tumbling 7.7%, its biggest drop since June 2020. Also on Thursday, another California lender, Silvergate Capital Corp, down 80% this month, which is targeting cryptocurrency firms, such as FTX, announced its winding down operations, following the meltdown of its financial strength, after digital assets plunged. Oracle shares down on cloud miss The software and database maker reported FY23 Q3 revenue growth of 18% y/y and adjusted EPS of $0.71 down 17%, but the disappointment was mostly in the outlook and especially in Oracle’s cloud business as customers are reducing spending growth. Oracle shares were down 4% in extended trading. Bank of Japan’s Kuroda ends term without sparks The Bank of Japan kept its policy unchanged at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Although data and recent communication had hinted at no change in monetary policy, there were some apprehensions given Kuroda is famous for giving surprises to the market. However, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Jobless claims cool, focus now on NFP data today Initial claims rose 211k in the week of 4th March, above the 190k prior and the 195k expected. It was the first time that the jobless claims came above the 200k mark since January, and it was the highest claim YTD. The continued claims also rose to 1.718 mn from 1.649 mn, coming in above estimates as well. While this may have raised some concerns that the US labor market is softening, the print is still strong and eyes now turn to the February payrolls data out today in the US. Our full preview is here, which says that Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. A strong print could further cement the case for a 50bps rate hike this month. US-India ties expand into semiconductors The US and India are looking to sign an agreement to boost coordination of their chip industry to focus further on information sharing and policy dialogue, as India forges ahead to boost its presence in the global technology supply chain amid China’s crackdowns on the private sector and growing geopolitical issues. CATL delivers stronger than expected results underscoring surging EV demand CATL, the world's biggest battery maker and Tesla’s battery supplier, delivered results eclipsing estimates, amid stronger EV demand, while its results also cement CATL as the industry leader. Net income surged 93% y/y, to CNY 30.7bn vs est. CNY 28.8bn with both its power battery and energy storage division’s revenue growing far more than expected amid clean energy demand. What are we watching next? The Australia, UK and US alliance thrusts the Defence and Nuclear sectors into the spotlight US President Joe Biden will host a meeting with the UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese in San Diego on Monday, where they are expected to decide on how to move ahead with a multibillion submarine plan, which could involve Australia buying as many as five US Virginia class nuclear-powered submarines in the 2030s. They are also expected to deliberate on how to get other high-tech weaponry to Australia. This is all a part of the AUKUS alliance, which was formed 18 months ago, aimed at the countries sharing defence and military capabilities, to protect the Indo-Pacific region, and counter China. For the investor, it makes one reflect on the capital being spent in the industry, which may present as a potential investment opportunity to explore. So, we break down the next steps of the AUKUS alliance, where the vessels will be built, the potential financial outlay, the likely companies involved and Saxo’s Equity Defence and Nuclear theme equity baskets to watch. Read our article here. Earnings to watch Today’s key earnings releases are not market moving and thus the focus is on next week’s earnings with the most interesting earnings releases being Volkswagen, BMW, Adobe, and FedEx. Friday: Daimer Truck, AIA Group, DiDi Global Next week’s earnings releases: Tuesday: Foxconn, Volkswagen, Generali Wednesday: Constellation Software, BMW, E.ON, Ping An Insurance, Prudential, Inditex, Adobe, Lennar Thursday: Verbund, Rheinmetall, KE Holdings, Enel, FedEx, Dollar General Friday: Vonovia Economic calendar highlights for today (times GMT) 1330 – US Feb. Nonfarm Payrolls Change 1330 – US Feb. Unemployment Rate 1330 – US Feb Average Hourly Earnings 1330 – Canada Feb. Employment Data   Source: Global Market Quick Take: Europe – March 10, 2023 | Saxo Group (home.saxo)

Thursday could’ve been a calm trading session. Especially given that after a deluge of strong economic figures concerning inflation and jobs, the little uptick in the US weekly jobless claims to above 200’000 for the first time since January – and which sent the US short-term yields tumbling - could’ve given some piece of mind to investors and lead to a minor correction in equities before today’s all-important US jobs figures. But, no. A severe rout in banking stocks spoiled what could’ve been a calm session on Thursday. Silicon Valley Bank’s 60% plunge due to difficulties following sharp rise in interest rates fueled worries across the banking sector. And things could get worse before they get better. Today, the US jobs data is in focus. A strong set of figures could cement the expectation of 50bp hike from the Fed later this month and further weigh on equity valuations. Bank of Japan Elsewhere, the Bank of Japan (BoJ) kept its policy unchanged at Mr. Kuroda’s last meeting, the yen fell against the dollar. But the USD will be remain seated at the driver seat until the weekly closing bell as all the attention will be on the US jobs data! Watch the full episode to find out more! 0:00 Intro 0:33 US bank stocks tumble amid Silvergate, SVB turmoil 6:53 US jobs data is crucial for Fed rate expectations! 8:49 Kuroda waves eventless Good Bye! 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. #SVB #Silvergate #collapse #bank #selloff #US #NFP #jobs #data #Fed #rate #expectations #USD #BoJ #decision #JPY #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 dollar index was steady on Friday, a rare spot of calm in volatile global markets ahead of key U.S. payrolls data later in the day, while the yen weakened after the Bank of Japan kept stimulus settings steady. The focus for today is the publication of the non-farm payroll (NFP) in the US with forecasts of 205,000. USD/JPY With the beginning of the trade, USD/JPY traded later at 136.00, but quickly bounced back to 136.75. In the following hours of the Asian session, the prices of the yen pair were above 136.50. At the beginning of the European session, the pair's exchange rate fell to the level of 136.25, but this time it managed to recover. At the time of writing, USD/JPY is trading above 136.95 but still below 137.00. In his last meeting as the BOJ Governor Haruhiko Kuroda left policy settings steady, in line with expectations, given the Japanese central bank adjusted the yield band as recently as December. Incoming BOJ Governor Kazuo Ueda has said the central bank must maintain its current ultra-easy policy for now until there are signs that inflation has sustained above BOJ’s 2% target EUR/USD The euro pair trading on Friday is quite mixed. In the Asian session, the EUR/USD pair was held just after 1.06 and above 1.0585. In the European session, the euro was both above 1.0605 and below 1.0580. At the time of writing, the EUR/USD pair is below 1.0590. The euro rises against the dollar after heavy losses at tech-focused U.S. lender SVB Financial and could extend its gains on potentially softer U.S. jobs data later. The euro gained some support this Friday morning thanks to slightly weaker dollar and better than expected German CPI data. Although the actual numbers were printed as forecast, the figure of 8.7% underscores heightened and persistent inflationary pressures in Germany. As Germany is the largest economy in the Eurozone, the inflation release acts as a proxy for the wider region, reinforcing hawkish sentiment on the part of the European Central Bank (ECB). To close the trading session from a EURUSD perspective, ECB's Christine Lagarde is due to speak and may reiterate the need to suppress inflation after today's German data. GBP/USD The pair of the pound, contrary to the euro, trades calmly. In the zajastj session, the cable pair held around 1.1930, but was mostly below this level. With the European session, the GBP/USD pair began to grow. The GBP/USD pair managed to get close to the 1.20 level, but did not maintain momentum and at the moment of writing the text is trading after 1.1977. Sterling rose on Friday after Britain's economy was shown to have grown by more than expected in January, further allaying fears of a recession. The Office for National Statistics (ONS) said Britain's economy expanded 0.3% month-on-month, after a drop of 0.5% in December. AUD/USD The movement of the pair Aussie equals and z is mixed. At the beginning of the Asian session, the AUD/USD pair fell towards 0.6570 and then increased towards 0.66. In the following hours, the Australian pair remained in the range of 0.6585-0.6595. After a surge, AUD/USD has fallen again and is now trading below 0.6590 Source: investing.com, finance.yahoo.com

The Japanese yen is trading at 1.36.83 in the European session, down 0.52%. USD/JPY fell 0.90% on Thursday but has recovered much of those losses today. Kuroda exits with a whimper Bank of Japan Governor Kuroda didn’t fire any final shots at his final meeting today. The BoJ maintained interest rates at -0.1%, where they have been pegged since 2016, and didn’t make any changes to its to yield curve control (YCC) policy. Traditionally, BoJ governors do not make waves at their final meeting, but there was an outside chance that Kuroda might buck the trend. Kuroda has surprised the markets in the past, most notably when he widened the yield curve band in December and jolted the markets. This time, Kuroda stayed on the sidelines and the yen responded with losses as some investors were disappointed that he didn’t tweak the YCC. Kazuo Ueda takes over as BoJ Governor next month, and there is growing speculation that Ueda will change forward guidance and tweak or even abandon YCC, as distortions in the yield curve are damaging the bond markets. Ueda may not press the trigger when he chairs his first meeting in April but is expected to shift policy in the coming months. The US releases its February employment report, highlighted by nonfarm payrolls, later today. The blowout January reading of 517,000 is widely seen as a blip, although the labour market remains surprisingly resilient, despite the bite of rising interest rates. The estimate for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed’s hawkish stance and should be bullish for the greenback. The Fed will also be keeping a close eye on wage growth, in addition to nonfarm payrolls. Average hourly earnings are expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. Higher wages drive inflation higher and an acceleration in wage growth would complicate the Fed’s battle to curb inflation.   USD/JPY Technical 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The Bank of Japan kept all monetary policy parameters as they were in March, voicing dovish rhetoric. The regulator left the short-term interest rate on deposits of commercial banks at -0.1% per annum, the target yield of 10-year government bonds is about zero. In addition, the central bank has maintained the range within which the yield on 10-year government bonds can fluctuate—plus/minus 0.5%. We can say that the March meeting was of a "passing" nature, as the regulator voiced its usual rhetoric and retained all the parameters of monetary policy. But today was a notable event for the USD/JPY traders. The end of an era The fact is that today's meeting is the last under the leadership of Haruhiko Kuroda, who has led the central bank for the past 10 years. In such cases, they say "the end of an era"—and this is true, given that Kuroda consistently and throughout his entire term in office implemented a soft monetary policy. The Bank of Japan remains the only central bank in the world with negative interest rates. Loose monetary policy caused the Japanese currency to collapse to a 32-year low last year, forcing the Japanese authorities to intervene in support of the yen. Despite rising inflation in Japan, Kuroda remained true to his conviction to the end—for example, today, he again announced the readiness of the central bank to take further steps towards easing the monetary policy. At the same time, the head of the regulator stressed that the positive effects of soft monetary policy "far outweigh the side effects." During his press conference, Kuroda advised his successor to continue easing monetary policy "to encourage companies to raise wages." In fact, the main intrigue of the coming months lies precisely in this question: will Kuroda's successor maintain his course, or will he still decide on a gradual calibration? As you know, the Japanese parliament this week approved Kazuo Ueda as the next head of the central bank. He will head the Bank of Japan next month, on April 8, when Haruhiko Kuroda's term expires. The next meeting of the regulator's members (April 28) will be held under his leadership. Is Ueda a Kuroda 2.0? Ueda has repeatedly stated that he intends to continue to adhere to the large-scale monetary easing program of the Central Bank. In his opinion, the growth in consumer inflation is mainly due to rising import prices, not increased demand. He expressed confidence that price drivers "are likely to slow down soon" and inflation will fall below 2% by the end of this year. It's funny, but Ueda repeated word for word Kuroda's phrase that the advantages of the current monetary policy outweigh its disadvantages, at least for now. And yet, despite such a dovish mood, market participants are still preparing for the fact that the new head of the Japanese regulator will follow the path of policy normalization. Here it is necessary to emphasize one important nuance. Unlike Kuroda, Kazuo Ueda still allows the option of normalizing monetary policy parameters. On the one hand, Ueda repeated several times the thesis that today he does not question the policy pursued by the current head of the Bank of Japan. On the other hand, he noted that if trending inflation "strengthens significantly" and there is room for sustained achievement of the BOJ's target, the central bank may consider normalizing policy. At the same time, Ueda made it clear that if any changes are required in the future, these changes will be carried out slowly, consistently and smoothly: there will definitely be no sharp rate hikes in the spirit of the Fed. In general, the results of the March meeting of the Bank of Japan are rather symbolic – this is the last accord of Haruhiko Kuroda, who has been at the helm of the Central Bank since 2013. The market expectedly ignored Kuroda's rhetoric, who again repeated the usual theses. At the same time, we should not expect sharp movements and dramatic changes from Kuroda's successor, Kazuo Ueda. If he does decide to initiate any shifts in policy, it will not be until the second half of this year. Conclusions All this suggests that USD/JPY will follow the greenback for the foreseeable future, which, in turn, is gaining momentum against the hawkish statements of Fed Chairman Jerome Powell. The February Nonfarm Payrolls may strengthen the dollar's position, allowing buyers of USD/JPY to approach the borders of the 138th figure. From a technical point of view, the pair on the D1 timeframe is between the middle and upper lines of the Bollinger Bands indicator, above all the lines of the Ichimoku indicator, except for Tenkan-sen. The current fundamental background contributes to the development of the upward trend, but longs should be opened after buyers consolidate above the mentioned Tenkan-sen line, which corresponds to 136.60. The main target of the upward movement in the medium term is 138.00, which is the upper line of the Bollinger Bands on the daily chart.   Relevance up to 10:00 2023-03-11 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337265

Western Asset: We discuss our outlook for the Bank of Japan’s policy under the newly nominated leader, Kazuo Ueda, and what it could mean for monetary easing, inflation targeting, the bank’s balance sheet and more. A hearing on the Bank of Japan’s (BoJ) nominee for the next governor, Kazuo Ueda, was held in Japan’s House of Representatives on February 24, 2023. First, Mr. Ueda, a former member of the BoJ’s Board of Governors and an economist, expressed the same view on inflation as the current BoJ, specifically, that the current price increases are not “due to strong demand” and that “it will take time to achieve the 2% price target in a sustainable and stable manner.” This suggests that the inflation rate will likely fall below 2% by mid-year. Ueda then recommended that the BoJ continue its current super accommodative monetary policy as “a necessary and appropriate approach in light of the economic and price situation.” However, he also acknowledged the side effects of the policy and mentioned the possibility of a flexible review of the Yield Curve Control (YCC) program. On the other hand, if the 2% inflation target is achieved in a stable manner, the BoJ could reduce its purchases of Japanese government bonds (JGBs) without any sales of JGBs and take other steps to “exit” from the current framework. Based on Ueda’s comments, it seems that the BoJ under his leadership would continue monetary easing until the inflation target is achieved in a sustainable manner, while at the same time seeking a new framework that can accommodate future price hikes. To achieve this, it will first be necessary to sort out theoretically the current policy framework, which has become extremely complicated. Currently, the BoJ’s monetary policy can be described as “quantitative and qualitative monetary easing with YCC.” It combines quantitative targets, such as the amount of asset purchases and the monetary base along with interest rate operation targets, such as the short-term interest rate (the interest rate applied to the BoJ’s current account), and the long-term interest rate (the 10-year JGB rate). But, where did this complexity come from? In April 2013, when the BoJ introduced “quantitative and qualitative monetary easing” with the goal of achieving the 2% inflation target, the bank started its reflationary policy by changing the operating target for money market adjustments from the unsecured call rate to the monetary base. However, in September 2016, the BoJ changed the interest rate targets for money market operations from the monetary base to the interest rate targets for the BoJ’s current account and the 10-year JGB rate. While it would have been easier to understand if the BoJ had set only the interest rate on current accounts as the operating target for money market operations, the addition of the 10-year JGB rate to the operating target has complicated matters. This is because control of the 10-year JGB rate assumes that the BoJ will accept quantitative expansion of its balance sheet, such as purchases of long-term JGBs through fixed-interest rates operations with no upper limit on the amount of purchases. Furthermore, it is unclear whether the “overshooting commitment” regarding the 2% inflation target means the continuation of “quantitative and qualitative monetary easing with YCC” or the expansion of the monetary base. This mix is mainly due to the fact that the evaluation of monetary policy that revolves around the monetary base has remained ambiguous. In terms of pure policy evaluation, the policy of using the monetary base as the operating target of financial market adjustment was probably difficult to evaluate positively in terms of its effectiveness and sustainability. This is why we believe a shift to a policy based on YCC must have been made in September 2016. However, perhaps considering that the Abe administration at the time firmly believed in the reflationary policy, it dared to choose the coexistence or mixture of quantity and interest rates, rather than a change from quantity to interest rates. Such a choice, or revisionism based on infallibility, is probably the reason why the policy became unnecessarily complicated without theoretical consistency. In a 2012 paper titled “Japan’s Deflation and the Bank of Japan’s Experiences with Non-traditional Monetary Policy,” Ueda evaluates the BoJ’s quantitative easing and other non-traditional monetary policies during the period of 1998–2006. According to Ueda, the quantitative easing (QE) portion of policy can be divided into three categories: QE0, which is purely aimed at expanding the central bank’s balance sheet; QE1, which is the purchase of assets with an increased risk/liquidity premium; and QE2, which is the purchase of assets to encourage portfolio rebalancing through the purchase of long-term government bonds and other measures. He concludes that there is some evidence for forward guidance as well as for QE1 and QE2 (but QE1 is better than QE2 in terms of effectiveness). However, he cites no clear evidence for QE0. He also points out that the BoJ’s balance sheet reduction process since 2006 has been mainly driven by the reduction of short-term assets, but there was difficulty with asset reductions of long-term JGBs and equities. This suggests that future large purchases of such assets may make exit strategies more difficult. After Ueda wrote the paper in 2012, the policy framework became even more complex. An explicit inflation target was introduced in 2013, negative interest rates were first used in January 2016 and YCC began in September 2016. However, it is possible to divine the direction of future policy revisions based on the assessment in his paper. The policy tools he considers necessary include the following. First, the 2% price inflation will be retained as long as it remains a medium- to long-term target. Second, forward guidance, which he creates, will be actively utilized. Third, asset purchases to contain risk and liquidity premiums are also likely to be implemented. On the other hand, the largest potential problem for him is the QE0 portion mentioned earlier, i.e., excess reserves in the BoJ’s current account, which has grown to a huge size through the purchase of JGBs of all maturities and at low interest rates. Not only will the effects of monetary easing be difficult to confirm, but the interest payments on the BoJ’s excess reserves will be so large that they are likely to become a major obstacle to any tightening when rates need to be increased due to rising inflation. Our conclusion is that the new BoJ led by Ueda is likely to continue monetary easing by, for example, strengthening forward guidance by tying the “overshooting commitment” to the interest rate attached to the BoJ’s current account. On the other hand, the BoJ may consider (1) taking actions such as reducing excess reserves to enable an increase in the level of the interest rate on interest-earning assets in the event that monetary tightening is necessary and (2) discussing with the government (Accord) fiscal allowances for a deterioration in the BoJ’s balance sheet in the event of an interest rate hike in the future. Finally, although there are high market expectations for the elimination of YCC, we think that rather than a sudden elimination, it is likely that the bank will hasten to ease the degree of control to the extent that it can escape market pressures. Then it must decide how to handle YCC in the future within the larger context of reducing excess reserves. For now, the market views Ueda as dovish because it sees him taking over what Kuroda has done and maintaining a similar path. However, it seems likely that the BoJ will eventually move away from a framework based on the size of the monetary base using YCC. This direction, which currently seems to be underestimated by the market, should support the yen’s appreciation.