Articles
The bar is higher for the Fed to actually move the market – TDS
351273 October 31, 2023 23:56 FXStreet Market News
The focus this week turns to the Fed. Economists at TD Securities see the bar rising for the Fed to generate a hawkish market reaction.
Fed to deliver more of the same
We expect the Fed to maintain a tightening bias, likely aiming to show the market that policy could be tightened further if needed.
The market is trying to unpack the nuances between the Fed’s rhetoric, data trends and surprises, and the aggressive tightening of financial conditions. There is a bit of a tug and war between these indicators, especially as some of the recent sell-off in longer-dated USTs doesn’t jibe with the data, Fed repricing or macro setup. Instead, it likely reflects a mismatch of supply and demand. That’s not fundamentally supportive of the USD, especially if breaks the growth cycle.
Full ArticleWhile we expect the Fed to deliver more of the same, it’s unclear how much further gains the USD will achieve unless the Fed appears more willing to open the door to more hikes.
Gold Price Forecast: XAU/USD’s upswing may not continue – Commerzbank
351272 October 31, 2023 23:35 FXStreet Market News
Gold price exceeded the $2,000 mark again for the first time in five months and a half on Friday. Economists at Commerzbank analyze the yellow metal’s outlook.
Gold to lose momentum if the tailwind lent by buying by speculative investors abates
The increase in the Gold price is likely to lose momentum if the tailwind lent by buying by speculative investors abates. Furthermore, it is possible that the Fed might have to raise its key rate again after all, contrary to what the market currently expects.
The US economy saw third-quarter growth of nearly 5% in annualised terms – the strongest growth rate in seven quarters. At the press conference following the Fed meeting, Fed Chair Powell will probably leave the door open to another rate hike in December. What is more, it remains to be seen whether Friday’s data will indicate the cooling that is hoped for in the US labour market. If this fails to materialise yet again, a Fed rate hike in December could become more likely again.
It is true that interest rate expectations have had less of an influence on the Gold price of late, but that doesn’t necessarily mean that this will continue to apply in the coming weeks.
Full ArticleWe would warn against assuming that the upswing in Gold that we have seen in recent weeks will simply continue, as it has been due to exceptional circumstances.
Canadian GDP is a clear sign that rates will need to come down next year – CIBC
351271 October 31, 2023 23:33 Forexlive Latest News Market News
Today’s advanced reading on GDP suggested a flat reading for Q3 following a slight contraction in Q2. That’s much softer than the Bank of Canada’s forecast for +0.8% GDP growth
Goods-producing industries have been in decline for five consecutive months, with agriculture notably down due to dry conditions in Western Canada and CIBC warns that could understate strength in the economy.
Overall though, they think the Bank of Canada is done hiking and will increasingly tilt towards rate cuts.
While Q3’s weakness can be partly chalked up to the decline in agricultural production and
fire/strike disruptions early in the quarter, the underlying trend of consumer spending also appears very weak with retail
sales declining and the post-pandemic recovery in accommodation and food services stalling. The fact that this weakness is
happening at a time when population growth has been so strong, and before the majority of homeowners have yet to be
exposed to higher interest rates, is a clear signal that rates will have to come down next year to avoid an even worse
outcome (we currently expect the first move lower in Q2 next year).
USD/CAD hit a one-year high today and I suspect it has much further to go.
USDCAD daily
United States 52-Week Bill Auction declined to 5.135% from previous 5.185%
351270 October 31, 2023 23:33 FXStreet Market News
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If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
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Full Article
USD/JPY: A reversal of widening yield differentials with the US should support the Yen – Standard Chartered
351269 October 31, 2023 23:26 FXStreet Market News
The Bank of Japan (BoJ) tweaked its yield curve control policy (YCC). USD/JPY rallied after the BoJ’s policy announcement. Economists at Standard Chartered analyze Yen’s outlook.
Bout of JPY weakness between now and the next meeting in December should be fleeting
The likely bout of JPY weakness between now and the next meeting in December should be fleeting, especially if the authorities formalise the removal of YCC by then and start contemplating the end of NIRP in 2024. Said differently, a reversal of widening yield differentials with the US should support the JPY, although timing it remains tricky.
The BoJ’s forecasts paint a more nuanced picture for the economy. While it lifted growth and core-core inflation forecasts for FY23, it downgraded its FY24 growth forecast to 1% (July estimate: 1.2%) and raised the core-core forecast marginally to 1.9% (1.7%). That the core-core inflation forecast is just shy of 2% suggests that the BoJ needs a tad more convincing of progress on ending the multi-decade deflationary woes.
Full ArticleGoing forward, we would watch for verbal messaging from the BoJ on growth and inflation prospects as a prelude to further policy normalisation down the line.
Oil edges higher, eyes on Venezuela after opposition primary suspended
351268 October 31, 2023 23:17 Forexlive Latest News Market News
Earlier this month, the US granted Venezuela sanctions relief in exchange for holding fair elections this year.
That plan appears to be unravelling quickly as yesterday Venezuela’s electoral court said it is suspending opposition primaries days after President Nicolas Maduro called the vote a fraud.
To be fair, the 93% primary vote for María Corina Machado is suspiciously high on 2.5 million votes and the voting sheets have already been destroyed.
Given the actions from Maduro, I don’t see how the US sanctions can be removed for long, especially with such a flagrant violation of promises. WTI crude oil is up 61-cents to $82.92 today.
WTI crude daily
Looking ahead, the October lows need to hold for the bulls to remain in control. The numbers so far in Q4 haven’t been quite as tight as hoped for but it’s early and Chinese data is volatile.
Full Article
Euro turns negative and challenges the 1.0600 region
351267 October 31, 2023 23:12 FXStreet Market News
EUR/USD: Fundamental factors suggest that the Euro’s tenacity will be brief – Rabobank
351266 October 31, 2023 23:12 FXStreet Market News
EUR/USD has pushed higher this week. Economists at Rabobank analyze the pair’s outlook.
EUR/USD seen at 1.02 on a three-month view
Since fundamentals do not appear to justify the current buoyancy of the EUR, we expect that it is a function of position adjustment related to the strong sell-off in EUR/USD in recent months.
The current shake out in EUR/USD may be necessary but, in view of the softness of German economic numbers, we expect another move lower in the EUR on a three-month view.
Full ArticleWe maintain a three-month forecast of EUR/USD 1.02.
Colombia National Jobless Rate in line with expectations (9.3%) in September
351265 October 31, 2023 23:09 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Full Article
The earnings rebound may take time to revive the fortunes of the equity market – UBS
351264 October 31, 2023 23:02 FXStreet Market News
US earnings revival looks unlikely to lead to equity rebound yet, economists at UBS report.
Earnings are set to return to growth
The percentage of companies beating earnings estimates is in line with historical averages (around 73%), and earnings are beating forecasts, in aggregate, by nearly 8%. We continue to expect S&P 500 EPS growth of 3-4% in the third quarter.
Our 2023 and 2024 S&P 500 earnings per share estimates are $220 (0% year-over-year growth) and $240 (9% YoY growth), respectively.
The earnings rebound may take time to revive the fortunes of the equity market, especially against a backdrop of elevated valuations. Rising yields have caused a further deterioration in the equity risk premium – making stocks look less attractive relative to high quality fixed income.
Full ArticleWe still expect the improving outlook for earnings to boost stocks over the coming year, with our base case for the S&P 500 to reach 4,700 by the end of 2024.
ADP Jobs Preview: A rebound that could not matter
351261 October 31, 2023 23:02 FXStreet Market News
- US private sector job creation is expected to rebound to 150,000 in October.
- The previous ADP report came below expectations, recording a gain of 89,000 jobs, marking the slowest growth since January 2021.
- The US Dollar remains firm, supported by US data, but unable to make new highs.
On Wednesday, at 12:15 GMT, Automatic Data Processing (ADP) will release its employment report for October. According to market consensus, US private payrolls are expected to increase by 150,000. If the actual reading aligns with this forecast, it would indicate a rebound from the gain of 89,000 recorded in September, which was the slowest growth seen since January 2021. In August, the increase in private payrolls was 180,000. The last two reports have shown a slowdown compared to previous months, with numbers below the average for 2023.
More employment data is scheduled for release during the week. The September JOLTS Job Openings report and the ISM Manufacturing Employment Index will follow the ADP report on Wednesday. On Thursday, the weekly Jobless Claims figures will be analyzed, and on Friday, the crucial official employment report will be released. Expectations for Nonfarm Payrolls are for an increase of 180,000 jobs, which, if met, would be the smallest increase since June 2023 and below the average of the past 30 months.
Overall, labor market indicators point to a softening market that remains tight, allowing the Federal Reserve (Fed) to raise interest rates further if it deems it necessary. The job market itself is not pressuring the Fed to tighten monetary policy. Data released on Tuesday showed that the Employment Cost Index (ECI) increased by 1.1% in the three months ending in September. While the number remains above pre-pandemic levels, it is trending lower. Wage inflation appears to be slowing down, but as it remains above the long-term trend, together with inflation above target, it keeps the Fed cautious and uncertain about tightening monetary policy further.
The Federal Reserve will announce its decision on Wednesday, and no change in interest rates is expected. The ADP number is unlikely to change that outcome, nor will the ISM report or the ECI. Therefore, the market impact of these figures could be limited but still create volatility ahead of the Federal Open Market Committee (FOMC) statement.
Last month, the ADP report triggered a modest market reaction that did not last. Although figures came in below expectations, the US Dollar was not affected. Despite a softer labor market, the economy remains robust and, more importantly for the market, performs stronger than its European neighbours and Japan.
Technical DXY: More consolidation on the cards
Less than a month ago, the day before the ADP September report, the US Dollar Index (DXY) peaked at 107.34, its highest level since November 2022. Then DXY underwent a correction, dropping as low as 105.35 (Oct 24 low). Overall, it is moving sideways, holding onto most of the gains from the July-October rally, hovering around 106.00.
US economic data and a deterioration in risk sentiment have contributed to keeping the correction limited. Domestic data not only came in above expectations but also showed surprising positive numbers, such as last week’s 4.9% Q3 GDP growth. US yields have pulled back but remain at levels not seen in years, supporting the Greenback. The expectation of longer-lasting higher interest rates, rather than more rate hikes, has been a crucial factor.
The US Dollar Index chart indicates more consolidation ahead, as it offers no clear directional signs. The 20-day Simple Moving Average (SMA) is trending south, while technical indicators show contradictory signals. The DXY has a key support level around 105.50, which is a horizontal level and also the 23.6% Fibonacci retracement of the 99.58 – 107.34 rally. A consolidation below that level would suggest further losses. On the upside, a decisive break above 106.70 is needed to put the DXY on the road to retest the cycle highs.
EUR/USD: The growth/inflation mix is a key headache for the Euro – HSBC
351260 October 31, 2023 22:49 FXStreet Market News
The Euro could face the double whammy of stagflation fears against a “safe-haven” USD over the near term, economists at HSBC report.
Not all fundamentals are against the EUR
The main headache for the EUR is the unpleasant growth/inflation mix, that the Eurozone economy faces.
The Eurozone activity data disappointments continue to mount, while US activity data still surprise on the upside. We think that stagflation fears in the Eurozone vs growth resilience in the US would probably point to lower EUR/USD over the near term.
If geopolitical tensions rise further in the Middle East, the EUR could also face downward pressure against a ‘safe-haven’ USD.
Full ArticleOn a positive note, the EUR’s structural allure is supported by the improvement in the Eurozone’s current account, together with supportive financial flows, compared to the US’s sizeable twin deficits.