JASPER’S MARKET SQUAWK 13-09-2023
Markets in Risk-Off Mode Ahead of CPI Data
Global equities were under pressure on Tuesday, with the US and Asia turning red. The dollar was muted ahead of Wednesday’s CPI on yield curve flattening, whereas crude shot higher after OPEC’s monthly report.
Chart: XWTI
Key Factors for Today
- Markets Brace for CPI Data as Equities Turn Red While Dollar’s Flat
- UK Wage Growth Put More Pressure on BOE, Weighing Pound Down
- OPEC Monthly Report Boosts Crude to 10-Month Highs Shy of $90/bbl
- ECB Policy Outcome Uncertain, with Eurodollar Reflecting that Speculation
- Potential Government Shutdown Dampens Risk Appetite, Tech Stocks Slide
UK Wage Growth Pressures BOE and British Pound
The UK lost 207K jobs in July, well over the 66K expected, with the unemployment rate ticking up to 4.3% from 4.2%. However, the higher-than-expected growth in average wages is seen putting pressure on the BOE to keep raising rates after its upcoming meeting. The tighter policy outlook has raised concerns about the stability of the UK’s economy, weighing on the pound. Cable closed somewhat unchanged but 0.17% lower and close to the regional support of $1.2445. Breaking past $1.2530 may expose $1.2565.
OPEC Monthly Report Pushes WTI to 10-Month Highs
OPEC’s monthly report revealed that the oil production cartel trimmed its demand outlook by 0.1M bbl/day for this year but disclosed a sharp drop in global inventories, forecasting that they will drop by 3.3M bbl/day in the next quarter. The report also showed a shortfall of 1.8M bbl/day last quarter, helping boost WTI 1.75% higher on Tuesday to leave $87/bbl behind and bring $90/bbl in focus. Meanwhile, the EIA raised its forecast for global demand growth by 0.5K bbl/day.
ECB Policy Outcome Printed in Futures and Eurodollar
Press reports suggested that members of the ECB’s policy-setting committee had “no inkling of the likely outcome of the meeting,” with futures markets pricing in a 50-50 chance of a 25-point rate hike at Thursday’s meeting. Eurodollar pretty much reflected that as it closed largely unchanged at $1.0753 after sliding some 0.41% during Tuesday’s session to $1.0706. The pair remains slightly under $1.08, which brings the round resistance into the spotlight.
Potential US Gov Shutdown Weighs on Risk Appetite, Tech
Media updates on budget negotiations in the US House of Representatives show an increasingly difficult situation for Speaker Keven McCarthy to pass a budget that would find support in the Senate, risking a potential government shutdown with few legislative session days before the end-of-month deadline. Nasdaq reversed the entire gains captured on Monday and back to 15290 on risk-off mood, opening up 15130 unless bulls can at least retake 15400.
On The Docket
- GB GDP MoM and 3-Month Average
- GB Manufacturing and Industrial Production
- EA Industrial Production
- US CPI Inflation Rate
- EIA Crude Oil Stocks Change
FX 1-Day Relative Performance (USD)
- Aussie and Kiwi 0.26% and 0.09% in red
- Euro 0.06% lower, while Pound up by 0.02%
- Yen 0.21% in red, Franc also down by 0.04%
- Canadian dollar weaker by 0.02%
- Gold 0.07% down, while Silver cratered 0.78%
- Crude and Brent 0.28% and 0.25% higher
- Natural gas down by mere -0.04%
