Recession is a threat, as suggested by the inverted yield curve, and some recent earnings reports, including Target today, reflect the various headwinds hitting the economy. Geopolitical risks from Ukraine are lingering too.
- USDIndex steady 106.25 after ranging from 105.34 to 107.10. (Ηeavy data calendar saw stronger than expected retail sales, weaker than forecast industrial production, with a further big drop in the NAHB) Yields closed lower with 10-year down 13 bps at 3.669%, after a high of 3.84%. The 30-year was 12.5 bps lower at 3.837%. The curve inversion deepened further to -68 bps, not seen since early 1981.
- Fed’s Waller: “more comfortable considering stepping down to a 50 bp hike” but he added he will not be making that decision until he sees more data. Waller has been one of the most hawkish on the FOMC, so these remarks are significant. Fed Daly repeated a pause in hikes is off the table for now and reiterated Chair Powell’s comment that it is not even a point of discussion currently, in a CNBC interview.
- EUR – choppy at 20-day SMA. Bloomberg source story effectively confirmed that the ECB will slow its tightening cycle and deliver a 50 bp move in December.
- JPY – holding below 140, but there is speculation that the correction in the Dollar is running out of steam.
- AUDUSD holds gains above 0.6700 – Australia’s unemployment rate unexpectedly declined to 3.4%, employment lifted to a record high and part-time employment declined. More signs of a tight labour market that will add to inflation concerns, especially after higher-than-expected data on wage growth yesterday.
- Stocks –Wall Street ended in the red with weakness concentrated in the US100 and the US500 following a very poor earnings report from Target. Nikkei and ASX closed narrowly mixed. PBOC warned that inflation may go higher as demand picks up, with Hong Kong tech stocks most hit by comments that dented hopes of further sizeable support from the central bank and Beijing officials for the economy. GER40 and UK100 are up 0.4% and 0.1% respectively.
- USOil – Energy weighed on the USOIL prices fell -1.88% to $85.29.
- Gold – drifted to $1760 on USD strength and pick up of Treasury yields.
Today: UK Autumn Statement, US Housing Stats & Building Permits.
Biggest FX Mover @Palladium -0.90% (06:30 GMT) drifted to 2017 but rebounded this morning. MAs aligning flattened, MACD lines remain negative & RSI at 44 indicating that bearish bias holds. H1 ATR 11.64, Daily ATR 100.72.
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Andria Pichidi
Market Analyst
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