FUNDAMENTAL NEWS AND TECHNICAL ANALYSIS REPORT – 10 JANUARY 2023

10 Jan 2023

Dollar at 7-month low vs euro on slower Fed rate hike expectations

Asian stock market closes in green on Monday. The Shanghai Composite is up 0.21% at 3176.08. Overall, the Singapore MSCI is down 0.65% at 294.89. Over in Hong Kong, the Hang Seng Index is up 0.43% at 21388.34. In Japan, the Nikkei 225 is up 0.78 at 25973.85. While the Topix index is up 0.27% at 1875.76 South Korea’s Kospi is up 0.5% at 2350.19. Australia S&P/ASX 200 down 0.28% at 7151.30.

Top News of the Day:

The U.S. dollar slid to a seven-month low against the euro as traders bet recent economic data would prompt the Federal Reserve to slow the pace of interest rate hikes, while riskier currencies benefited from China reopening its borders.

The euro was up 0.96% at $1.0747 at 2:50 p.m. EST (1950 GMT), its highest level versus the greenback since June 9, adding to Friday’s 1.17% increase.

Sterling surged 0.87% to $1.21975 against the dollar, building on Friday’s 1.5% rally, while the Swiss franc jumped 0.82% to $0.92, its strongest since early March.

The moves continued the trend lower for the dollar, which in the final three months of 2022 posted its biggest quarterly loss in 12 years. That was driven mainly by investors’ belief that the Fed will not raise rates beyond 5%, from its current range of 4.25%-4.50%, as inflation and growth cool.

Fed fund futures show investors believe the most likely outcome for the Fed’s February meeting is for a 25 basis- point increase.

The Fed raised interest rates by 50 basis points last month after delivering four consecutive 75 basis-point hikes last year, but said it was likely to keep interest rates higher for longer to tame inflation.

Market Summary as per 09/01/2023:

European equities Monday closing. The DAX futures contract in Germany traded up 1.25% at 14792.83, CAC 40 futures up 0.68% at 6907.36. UK 100 futures contract in the U.K. up 0.33 at 7724.94

In the U.S. on Wall Street, the Dow Jones Industrial Average Closed down 0.34% at 33517.65. The S&P 500 down 0.08% at 3892.09 and the Nasdaq 100 up 0.63% at 10635.65, NYSE closes 0.16% down at 15514.44.

Top Market News Today:

In the Forex market, GBPUSD down 0.25% at 1.2152. The USDJPY up 0.19% at 132.12, The USDCHF up 0.09 at 0.9218. EURUSD up 0.02% at 1.07130. EUR/GBP up 0.23% at 0.8827. The USD/CNY up 0.24% at 6.7861 at the time of writing.

In the Commodity market U.S. Gold futures up at 0.02% $1,871.90. Elsewhere, Silver futures down 0.28% at $23.55 per ounce, Platinum down 0.19% at $1074.00 per ounce, and Palladium up 0.42% at $1779.00.

Brent Crude Oil down 0.46% at $79.26 per barrel.

In the Cryptocurrency Markets, Bitcoin at 17201.00 up at 0.13%, Ethereum up 0.30% at 1323.98, Litecoin at 81.12 down 0.58%, at the time of writing.

Top Market Segment to Watch Out for Today:

GOLD– Gold prices hovered near seven-month highs on Tuesday as markets awaited more cues on U.S. monetary policy from an upcoming speech by Federal Reserve Chair Jerome Powell, as well as key inflation data.

Bullion prices logged strong gains in recent sessions, amid increasing optimism over a potential slowdown in U.S. interest rate hikes. Inflation readings for November, as well as signs of cooling in the jobs market, seemed to suggest that price pressures in the world’s largest economy had peaked, necessitating a less hawkish stance from the Fed.

Economic News:

US: – Federal Reserve policymakers say fresh inflation data out later this week will help them decide whether they can slow the pace of interest rate hikes at their upcoming meeting, to just a quarter-point increase instead of the larger jumps they used for most of 2022.

If U.S. consumer price data released on Thursday confirms the cooling seen in most recent monthly jobs report, Atlanta Fed Bank President Raphael Bostic told reporters on Monday that he would have to take a quarter point increase “more seriously and to move in that direction.”

“Eventually I want us to get to 25” basis point rate hikes, he said. “The specific timing of that is going to be a function of the data that comes in.”

Asked in a Wall Street Journal interview early on Monday about her preferred rate-hike size for the Jan. 31 to Feb.1 meeting, San Francisco Fed President Mary Daly said both 25 and 50 basis point rate hikes are “on the table” for her.

She, like Bostic, expects the Fed policy rate – now at 4.25% to 4.5% – to need to rise to a 5% to 5.25% range to do the job on inflation.

Getting there in “gradual steps does give you the ability to respond to incoming information” and take account of the delayed effect of higher borrowing costs on the broad economy, Daly said.

But at the same time, “I want to be data dependent, not wall off a 50-basis point increase,” she said, adding that she will pay close attention to any signs in this week’s consumer price index report for improvement in the most persistent part of the inflation picture, the price of core services excluding shelter.

After nearly a year of aggressive rate hikes designed to slow the economy and bring soaring inflation to heel, Fed policymakers say they are encouraged by the recent slowing in jobs and wage growth that could signal cooler inflation ahead.

Euro Zone: –

Britain’s labor market cooled further in December, according to a survey of recruiters published on Tuesday that may ease some of the Bank of England’s concerns about the risks of longer-term inflation pressure.

The monthly index of vacancies, compiled by the Recruitment and Employment Confederation trade body and accountants KPMG, fell last month to 53.0, its lowest since February 2021 and down from 54.1 in November.

The survey, watched closely by the BoE, also showed an easing in wage pressures.

Starting salaries for permanent staff and pay rates for temporary workers grew at the slowest rate since April 2021, similar to their average level in a couple of years prior to the COVID-19 pandemic.

“A slowdown in permanent placements is not unusual in December, but this one comes as part of a wider softening trend in the permanent market,” said REC chief executive Neil Carberry.

“Recruiters tell us that this was enhanced by firms pushing hiring activity back into January in the face of high inflation and economic uncertainty.”

Britain’s economy looks set to contract in 2023, according to most economists polled by Reuters, and business surveys show cooling price pressures.

But the BoE is worried that double-digit inflation will become engrained in public psychology and it is likely to raise interest rates again next month.

The central bank’s chief economist, Huw Pill, said on Monday that there was a risk that domestically generated inflation would achieve its own self-sustaining momentum.

Top Economic Releases Today:

USD: Consumer Credit (Nov) Actual 27.96B, Forecast 25.00B, Previous 27.08B
USD: Fed Chair Powell Speaks at 19:30
EUR: ECB`s Schnabel Speaks at 15:40
JPY: Household Spending (YoY) (Nov) Actual –1.2%, Forecast 0.5%, Previous 1.2% at 05:00
JPY: Tokyo Core CPI (YoY) (Dec) Actual 4.0%, Forecast 3.8%, Previous 3.6% at 05:00